TALLINN - When Skype was sold to eBay in 2005 for a little over 2 billion euros, about over 100 million euros stayed to circulate around Estonia. The majority of those funds went into the new investment firm owned by former Skype engineers - Toivo Annus, Jaan Tallinn, Ahti Heinla and Priit Kasesalu - Ambient Sound Investments (ASI). With ASI, true Western venture capitalism got its sea legs going in Estonia, whereas before, only Allan Martinson had fit the definition of venture capitalist in the country, writes TestMarket.com.
In four years, ASI has provided more than 17.3 million euros of funding for more than 30 technology or Web companies. At the start of 2010, ASI still had over 50 million euros of liquid assets in its accounts, some of it in term deposits. In addition, the four men have millions of euros in personal funds. This is too much money, as it is not possible to invest all of it in Estonia.
About one-half of Estonia’s current technology or Internet businesses - the ones expected to run like gazelles or start a revolution - got their seed capital from ASI, run by the Skype engineers.
The best-known of these ambitious companies are Modesat and Guardtime. Modesat is developing a communications technology that will make it possible to introduce ultra-high-speed broadband Internet aboard jets and high-speed trains. The company is working with the world’s biggest telecom giants, such as Ericsson, Nokia, Siemens and others, and recently hired a former vice-president of Samsung as their director of technology.
The other company, Guardtime, has developed a time-stamping technology for secure digital data and is now trying to find an application for it. Asian investors, led by billionaire Li Ka-shing, and the Singaporean government recently invested close to 6.4 million euros into the company.
The name of Skype has been used to every possible effect to promote Estonia, and many know Estonia as the land of Skype. In the Wikipedia entry on Estonia, Skype is the only local IT company mentioned.
Heikki Haldre, the founder of virtual mannequin technology development firm Fits.me, says he once met a venture capitalist in the U.S. who said that Europe had produced only one credible IT company - Skype.
“I have basically quit talking about Estonia in the U.S.,” says Haldre. “When I am asked where I am from, I ask, Have you heard of Skype? Well, I come from the same country as Skype!”
Martti Paju, the sales director of Erply, which supplies hundreds of U.S. firms with business software, concurs: Skype is an important argument for introducing Estonia’s IT development abroad. But a much more practical way of doing this would be to take an Estonian ID card out of your wallet and say it can be used to elect parliament.
Skype, which put a squeeze on telephone companies around the world with its free phone calls, has become synonymous with “breakthrough products.” TechCrunch called Erply the “Skype of business software,” and Fits.me was called the “Skype of clothing retail.”
Someone once said that the biggest benefit of Skype will be revealed when various people start sloughing off the organization and looking for a new challenge. And that is what has happened. The former Skype personnel have founded tens of companies, primarily related to Internet services, some of which been successful.
Skype has had its biggest influence on the people in Estonia’s IT sector. One old hand in IT says Skype has clued people in on how the technology business works in the world, as well as how and at what rate organizations are established. Above all, Skype has shown the importance of networking and establishing contacts in the nerve centers of the world’s technology sector. “About ten years after I started going to conferences in the U.S. at the expense of my family budget, there was an understanding in Estonia that ‘wow, something cool is happening over there, across the ocean!’” says that same IT veteran.
Venture capitalist Yrjo Ojasaar says that the example of Skype is a good lesson for Estonian entrepreneurs as to how important it is to think globally. Skype Estonia’s CEO Sten Tamkivi goes from one seminar to the next, lobbying for solutions to several vexing problems. Skype, Playtech and Webmedia have, between the three of them, snapped up the majority of Estonia’s IT personnel and additional ones hard to come by.
Skype is also a leader in terms of being an employee-friendly company, supporting employee-founded extreme sports, kite-surfing, snowboarding, cooking and running clubs as well as semi-professional cyclists. In 2009, the value-added per employee at Skype was close to four times greater than in the average company in Estonia. The same indicator was twice as high as the average for the IT sector. That makes Skype a classic example of effective business management.
In addition, the company is a key taxpayer. Altogether, Skype has paid 12 million euros of social tax in the past five years, which is only 2.5 times less than Estonia’s largest telecom firm, the former monopoly Elion.
Last quarter Skype accounted for a quarter of Estonia’s computer and information service exports (one-sixth in 2005) and almost one percent of the total exports of Estonian services.
Skype employs one of six people working in the IT sector. The company has approximately 400 employees who earned an average of 2,237 euros per month after taxes. This is almost four times higher than the average salary in Estonia.