An interview with Jaan Tallinn, co-founder and author of Skype
In 2013 an article on Affairs Today discussed whether Skype was on its way to replacing traditional phone operators. In this exclusive interview, Jaan Tallinn, one of the co-founders and authors of Skype, explains the secret behind Skype’s success and gives advice for those seeking an entrepreneurial career in the field of IT and Technology. Tallinn was part of the 5-man team credited with the creation of the p2p music-sharing site Kazaa. He is also one of the 7 original shareholders of Skype; the world’s most used Voice over IP (VOIP) operator. Today Jaan Tallinn works as a strategy advisor for Ambient Sound Investments, a unique venture capital firm, after having sold his stake in Skype to Ebay in 2005. He is also the co-founder and chairman of MetaMed Research as well as the co-founder of the Cambridge Centre for the Study of Existential Risk.
Affairs Today: Please tell us a little about yourself and your background.
Jaan Tallinn: I grew up in spartan conditions behind the Iron Curtain and spent my childhood in occupied Estonia. Once the Soviet ‘empire’ collapsed I became immediately involved in manufacturing 8-bit computers. A couple of my classmates and I started collaborating on 8-bit computers. We started a games production company called Bluemoon Software and produced a game called Kosmonaut that we managed to sell in Sweden. Doing business in Sweden, in Swedish currency was a big deal at the time given the disastrous economic environment in Estonia. We went on to spend a decade developing games. My life really has been a circuit of changes, mainly relative to computers becoming so powerful that they either made what I was doing redundant, or opened up new opportunities. Eventually the development of graphic cards made video game programming less useful, so we switched to Internet programming. After a couple of years we met Janus Friis and Niklas Zennström while working for an Internet portal called EveryDay.com. We later developed Skype alongside other projects.
AT: How did you first come up with idea of Skype?
JT: Our company was involved in several projects; some worked, and others didn’t. This gave us a comparative advantage because we already had the technology startup behind Kazaa. We had the idea of creating a WiFi-sharing network (internet service provider). Skype’s name comes from “sky peer to peer”. We wanted to call it “Skyper” but the domain name was taken, so we had to settle for ‘Skype’. One thing we felt would help popularise our new ISP was adding a Voice over IP (VOIP) service on top of it. In order to offer a VOIP service in our WiFi sharing network, we evaluated multiple existing VOIP programs, but found that none of them worked in a satisfactory manner.
The fact that we had so much difficulty with existing VOIP providers gave us the idea to develop a proper VOIP operator of our own. We shelved the WiFi-sharing project and seceded to work on the new VOIP idea instead. This would eventually become Skype.
AT: How did you manage to take that idea and turn it into the reality it is today?
JT: One thing that really helped us was that we had a team that had worked together for a decade. Skype was developed in only 8 months. This was very important. Many startups have the challenge of having the idea and then struggling to find a good team to back its development. Once we knew what we were going to make, it became quite straightforward.
Furthermore, Skype wasn’t our only project. We had some other successful projects too. If you try various things, every once in a while something does work, and that’s an important lesson. Because we had done Kazaa before Skype immediately made the news upon its release. Our previous experience helped us skip the ‘news threshold’. There are 5 countries in the world that take credit for inventing Skype (Sweden, Denmark, UK, Estonia, Luxembourg). Priit Kasesalu, Ahti Heinla, Toivo Annus, and I are Estonian and we are the ones who developed the program.
AT: There is a whole range of communication programs and apps out there. What is it that made Skype stand out and become the staple for almost every computer-user in the world? What sets it apart from its rivals?
JT: First of all, when Skype was launched, our success came from the fact that most VOIP providers didn’t work. There is a funny article that describes the long list of set up procedures and shows how difficult it was to set up a VOIP call. In the end of the day, you could pretty much only communicate with other programmers because it was so hard to set up. Back then competitors really weren’t strong. A couple of years later the competition became much stronger as Google and Microsoft both began their own VOIP projects. One of the reasons we decided to sell Skype to Ebay was because the competition was heating up and we knew that it would be very hard to keep up with companies like Microsoft and Google. Nonetheless, Skype has managed to survive because it has a major user network in place. There are now other offerings that are just as good as Skype, but the brand and massive network effect keep it going.
AT: Do you believe that Skype and potentially other communication apps are on their way to replacing traditional phone operators, particularly with regards to international calls? What is the future of VOIP?
JT: This isn’t a topic I looked into much. But it is possible, especially given the rates of international calls. If you look at the statistics, voice-only communications are declining as a fraction of overall communications. At the same time, Skype’s share of voice traffic, especially when it comes to international calls, is consistently increasing, not to mention video communication, which Skype dominates.
AT: Many believe that you have to come from a big, rich, or influential country such as the US, China, or the UK to achieve worldwide success. Stemming from Estonia, you are from one of the more ‘remote’ European countries. Do you believe it is harder for people from smaller countries, especially the former Soviet bloc, to make it in the business world?
JT: It is harder indeed, for two main reasons. First of all, it is much easier to create startups elsewhere in the world, especially in San Francisco. Finding engineers and a like-minded team is one of the secrets to success and that is a lot easier in Silicon Valley than in Europe. However, Eastern Europe is actually a lot better in this sense than Western Europe, with the exception of London. Eastern Europe and Estonia in particular have very large programmer-base. Still, outside Silicon Valley, it is very hard to find the right partners. The second problem is money. Outside Silicon Valley it is very hard to get the funding you need, which is especially hard in Eastern Europe. That’s why so many Estonian startups are registered in London.
AT: What can young, ambitious people from smaller countries do to succeed?
JT: Learning programming is incredibly important. These days you can create a technical startup and distribute it relatively easily. However, if it is a technical startup and you can’t program, it becomes very hard to develop it further. You have to, in principle, be able to do everything yourself. Furthermore, programming is the last job on the planet. Programmers are some of the last people to remain useful in an increasingly automated economy.
In terms of promoting your product, you need to be original. In Silicon Valley you can just go to parties and network to find partners and investors. Starting a company outside of Silicon Valley, you have to do thing that make more sense. You have to do something that really grabs people’ attention and has them willing to pay for it. Generally, in Silicon Valley you can get far with an idea. In Europe you need to build a business and a brand before you can hope to get investors.
AT: Estonia is one of Europe’s leading countries in Internet infrastructure, with much of business and politics taking place online. Why is this the case? Do you believe other countries will follow suit?
JT: That’s true; I used my smartphone to vote in the last national elections. There are several reasons behind Estonia’s technological development. Firstly, Estonia is small, so it is easier to convince people that you have a good idea that can realistically be executed. In the US, decision makers are in their position because of an intense political selection process. People on top are career politicians: they live politics, are great orators, and have optimized everything to get to where they are. In smaller countries, especially Estonia, people in the top positions have a more professional side; they are not just politicians, they usually have other backgrounds. For example, Estonia’s latest e-residency project was started by an entrepreneur in Estonia who currently works for the government. He sold his company and got involved in politics.
Positive feedback is also a major factor. Estonian officials get a lot of international recognition, which drives them in the field of IT and technological innovation. If you are a programmer in Estonia, your chances of ending up in government are much higher.
AT: If you had just one piece of advice for students and other young people who want to start their own business, what would it be?
JT: I have an entire talk called “so you want to be a technology developer”. From an ethical point of view my main advice would be to be careful. The more technology becomes developed, the more we need to be cautious of the side effects of it. Planetarily speaking, we need to neutralise the ‘existential threat’ that technology might cause.
From a personal career perspective, I would refer to a quote by the famous American venture capitalist Peter Thiel: “as an investor-entrepreneur, I’ve always tried to be contrarian, to go against the crowd, to identify opportunities in places where people are not looking”. If you think about it, many of the beliefs about the world you have are quite flawed; word of mouth often fails. If you want to succeed, you need to find some common belief that is actually not true, and then develop a new way of doing things. This is especially true in the field of technology. When we first worked on Skype, it was largely questioned because we didn’t use the Session Initiation Protocol (SIP). The belief at the time was that SIP was the future of VOIP. However, we investigated SIP and saw flaws in the standard. We decided we had the choice of following the standard and being on par with competition, but instead decided to go our own way and leapfrogged the competition.