VC joy at $4bn Skype deal

The fast-growing internet start-up has proved a rare success for private equity firms investing in European technology start-ups.

Online auctioneer eBay has today finalised terms to buy Skype, a provider of free web-based telecommunications, for up to $4.1bn (€3.3 billion) in cash and shares.
 
eBay has agreed to pay $1.3 billion in cash and $1.3 billion in stock for the Luxembourg-based internet phone company, which provides free computer-to-computer telephone calls through a web connection. A further payout worth $1.5 billion has been promised provided performance targets are met.
 
The firm was founded by serial entrepreneurs Niklas Zennström from Sweden and Janus Friis, a Dane, who previously set up the controversial peer-to-peer file trading network Kazaa.
 
Selling Skype to eBay will be hugely lucrative to its founders as well as its private equity investors Draper Fisher Jurvetson, Index Ventures, Bessemer Venture Partners and Mangrove Capital Partners. According to Reuters, the consortium had invested around $24 million in the company by October 2004.
 
The Skype service is used predominantly in Europe and Asia, providing eBay with a large untapped audience outside of the North American market for free web phone calls allied to its online auctions. The service currently has 54 million members in 225 countries and is adding around 150,000 users a day.
 
Skype generated around $7 million in revenues in 2004. It anticipates it will receive around $60 million in revenues in 2005 and over $200 million in 2006.