Q: While on a panel at the World Forum for Foreign Direct Investment [held in Tallinn, Estonia, in June], you made an interesting comment about mistakes that investmentpromotion agencies make when pitching to technology companies. Can you elaborate?
A: It could be that there is a wrong assumption of what the criteria are when companies are picking their locations. We have oftenassumed that the number-one item is cost or closeness to a market. But if you look at the information and communication technologies industry, the cost of the superstars is similar no matter where you are, adjusted for some living expenses differences. And closeness to market – that notion doesn’t exist any more; if you’re building a global product, it is quite irrelevant. We talk about time zones or flight hours, not how many kilometres a site is from a certain city.
When you go into meetings with these people, they are really helpful and sincerely trying to lay it out for you, but they talk about their tax structures and investment support mechanisms first, whereas if you are really trying to get practical you want to ask: How many concerts do you have a year? How about theatres, art shows? Where do young and active people live and eat out? Plus all the questions around the education system: how much this market can provide local talent and increasingly how much this market can absorb global talent, both bureaucratically and in terms of society’s acceptance of foreign workers. It is possible to get the answers from investment agencies but these are not the questions they tend to lead with.
Q:What can investment locations do to stand out?
A: There was a good point brought out at this conference during a presentation by Nokia: for the majority of expansion decisions, the fastest and easiest way to enter a new market is acquisition – that means that the best thing a government can do is to support local start-ups so that they can grow and then get bought. It could be a much easier and more logical way of attracting foreign investment than trying to invite foreign companies to set up new operations. I think the huge challenge here is actually for Europe, because it is not a matter of which of the 27 countries in the EU [you choose], but of why you would establish a software company in Europe if you can do it in Silicon Valley
or maybe in Asia. What’s the story of Europe? I think this is a much more intriguing question than why Switzerland or Austria or wherever.
Q: And what is the story of Europe?
A: Good question! I think with Skype we are definitely swimming against a tide. If you try to count the software companies, the global success stories coming out of Europe over the past 10 years, there are not that many… [Figuring out why] is a really tough conversation. The way entrepreneurship works is that it happens only when enough people try.
Q: What can be done at the political level to create an environment such that more Skypes can emerge?
A: The biggest and most logical area where the government can help is the education system. When it comes to economic measures and
support functions, in most places it’s more about governments creating level playing fields and getting out of the way. Usually, the bureaucracy and the structures of direct support measures are too heavy for start-ups. They appreciate less intervention and lower taxation.
Q: What are the markets that Skype is looking to expand in?
A: We are operating in most countries in the world but we are spread quite thin locationwise. Usually, companies of our age and size are still in one building; we have eight offices. So we are not rushing to open offices across the world – we do that quite naturally... We’re not looking at the very narrow picture – which European countries to open offices in the next two years, etc – we’re looking at it in big-block regional terms.