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DOUBLING DOWN

Not enough unicorns left in Silicon Valley? Skype’s founder says to try Europe

Niklas Zennstrom in Paris
Reuters/Mal Langsdon
"Is that a unicorn I spy?"
  • Joon Ian Wong
By Joon Ian Wong

Technology Reporter

Published This article is more than 2 years old.

The sky-high valuations of some Silicon Valley darlings have been tumbling back to earth. On Jan. 14, Foursquare saw its value halved during its latest funding round. Red-hot companies like Dropbox and Snapchat have also seen their values marked down in recent months. Then there’s the Square public offering, which saw its valuation also take a hit.

So what should a tech investor do? Try Europe instead.

That’s what Skype co-founder Niklas Zennström thinks. Zennström runs Atomico, one of Europe’s biggest VC firms, with $850 million under management, and is expanding its focus on Europe. ”I can guarantee you… there will not be fewer companies in 2016 than there were in 2015,” Zennström told the Financial Times (paywall). “That’s a bet I’m ready to make.”

His latest plan is to rope in some of the entrepreneurs his firm bankrolled to scout for new deals and put up some of their own money. The coterie of founders he’s assembled include the people who started Supercell, audio accessories maker Jawbone, and e-retailer Made. The Finnish duo behind Supercell—which made the huge mobile gaming hit Clash of Clans—have perhaps the biggest global hit in that group, and the money to show for it. They stood to make $200 million each (paywall) when they sold just over half the company to SoftBank for $1.5 billion in 2013.

The idea is that a startup founder getting money from Atomico’s “entrepreneur partners” gets more than just capital. They also get crucial advice and guidance from people who’ve been in the trenches before. It’s the sort of “founder-led investment” Zennström himself has been doing with the proceeds of the $8.5-billion sale of Skype to Microsoft in 2011.

How does Zennström’s thesis hold up? Europe has 16 companies with valuations over $1 billion, according to CB Insights. That compares to 32 firms in China and 97 from the US.

Still, that didn’t stop GV, formerly known as Google Ventures, from closing its European fund 18 months after it launched, with $125 million to spend. The closure was part of a wider reorganization to focus on writing bigger cheques without a geographical constraint, the firm said at the time.

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