Last week, eBay announced that it has reached a settlement with Skype founders Niklas Zennstrom and Janus Friis, whose legal actions were complicating eBay’s sale of a majority stake in Skype to a private equity consortium. Under terms of the deal, Zennstrom and Friis will receive a 14% stake in Sykpe (still valued at $2.75 billion), with eBay holding 30% and the remainder going to Silver Lake Partners, the Canada Pension Plan Investment Board and VC firm Andreessen Horowitz. Original consortium partner Index Ventures is out.
PE Week Editor-at-Large Dan Primack spoke with Marc Andreessen, the eBay board member who is one-half of Andreessen Horowitz’s eponymous founding duo, to ask him five questions.
Q: You told TechCrunch this morning that the money for this deal was in escrow, and would have gotten done even without a settlement with the founders. Why would you have gone forward with all of those troubles hanging over your head?
A: Because there was another route to take, and a whole other side to this in terms of legal arguments we could have pursued. We were following those routes simultaneous to talking with the founders, and as it turns out we never had to file any lawsuits.
These were known issues going into the deal. One reason Skype was even available was because of these issues. Our view was that a settlement would be the preferred outcome, and we’re very happy with how it turned out. We were pretty sure this is what was going to happen, because it made the most sense.
Q: I recently spoke to a strategic buyer who looked at Skype, but said his company’s lawyers didn’t put their chance of winning the tech-related suits at better than 50/50, due to the vagaries of European patent law. Did you feel your odds were better?
A: We felt we had a great case. As you might imagine, this is a more complex situation than has been portrayed in the press, which has only shown one side.
The other thing is that there just aren’t many other companies that have this type of opportunity, or have grown this fast or gotten this competitive. The future is so big for Skype that we felt it was worth fighting through these issues.
Q: Index Ventures is no longer part of the buying group. What do you, collectively, lose by Index’s absence?
A: I don’t really know if I have a specific answer. Everybody contributes in their own way. From Ben [Horowitz] and my standpoint, our relationship with Danny [Rimer] and Mike [Volpi] continues to be very strong. In fact, I’m talking to them today on two other deals. I would have been great to have them involved, but the company is still going to do great.
Q: How about your relationship with Niklas and Janus?
A: We have not been in business with them before, so we don’t have any baggage at all. Our view is that they’re two super-creative founders. We’ve known lots of legendary founders, and they are all different and have things that make them unique. We include ourselves in that from past experiences. We view ourselves as a pro-founder firm, so we like the idea of founders being involved. It’s a net positive.
Q: This is your largest deal to date, and you’re most public. What has LP reaction been like, and how much have you communicated with them?
A: It’s also one of our first deals. We’ve talked to the LPs a lot during this process, including our advisory board. We’ve explained why we’re enthusiastic about it, and why it made sense to go through some of the drama.
One of the big pieces of input we got when raising the fund was to be responsible, but not conservative. We want to calibrate risks against big opportunities, and we think [Skype] is a very big opportunity.