Bessemer generates massive return through Skype sale to eBay

Bessemer Venture Partners reflects on Skype success.

On Monday, EBay announced that it had agreed to buy Skype Technologies, the Internet phone provider for $2.6 billion. EBay is hoping that through Skype, its 157 million traders will talk to each other for free and make it easier for them to swap everything from real estate to sporting memorabilia.

Skype, the Global Internet Communications Company has provided Internet users with free, unlimited, superior quality voice calls through internet connections. Skype users can speak to other users for free, call traditional telephone users for a small fee (SkypeOut), receive calls from traditional phones for a fee (SkypeIn) and receive voicemail messages for a fee.

In 2003, Bessemer Venture Partners led the A round financing at Skype. Bessemer, the oldest venture capital practice in the United States invested $1 to $2 million in August 2003. Since that period, more than 160 million copies of the free software have been downloaded. Skype continues to add 150,000 users a day.

EBay’s purchase of Skype will generate a return of more than 100 times for Bessemer Venture Partners. Robert Stavis, 42, a general partner at Bessemer who works in the firm’s Larchmont, New York office said, “We are delighted to have made the early investment in Skype. The rapid uptake of its services validated its business premise, and we are very optimistic about the future of the Skype brand within eBay.”

Stavis who remained close to Skype and its founders Niklas Zennström and Janus Friis went on to say, “We are thrilled to have backed a team of world-class repeat entrepreneurs like Janus and Niklas. Their vision and success in transforming the telecommunications industry nearly overnight has been nothing short of revolutionary. Skype fits into Bessemer’s century-long tradition of backing entrepreneurs who craft a vision to change the world and against all odds assemble the team and resources to succeed.”

Niklas Zennström and Janus Friis who had previously created KaZaA, the peer to peer file sharing exchange will run the company at EBay from their headquarters in Luxembourg.

Stavis went on to praise “The cooperation and hard work of our venture co-investors was important to Skype’s success as well. It has been gratifying to work with our early co-investors from the Luxembourg-based firms of Mangrove Capital Partners and Draper Luxembourg. We also appreciated the opportunity to work with Index Ventures and Draper Fisher Jurvetson after the company completed its B round.”

Bessemer Venture Partners (BVP) has offices in New York, Boston, Silicon Valley, Bangalore, Mumbai and Shanghai. They manage more than a billion dollars of venture funds and have been investing since 1911. Over 100 Bessemer companies have gone public including Maxim, Veritas and W.R. Grace.