Skype Alumni Court Battle: Starship Technologies & Wire Dispute

Lawsuit Filed Against Skype Co-founder Janus Friis

A long-standing collaborative relationship, responsible for the creation of platforms like Skype, Starship Technologies, and Wire, is now facing disruption due to a newly filed legal action.

Details of the Lawsuit

According to information obtained by TechCrunch, Mark Dyne, an early investor in Skype, has initiated a lawsuit against Janus Friis, the billionaire co-founder of Skype. The case was brought before the Superior Court of California in Los Angeles County, alleging unlawful conspiracy related to business transactions.

The legal proceedings are multifaceted, involving numerous claims and counterclaims. The central issue revolves around the nature of the relationship between Dyne, his investment partners, and Friis during the 2019 financial restructuring of Wire.

Control of Wire and Starship Technologies at Issue

The dispute centers on the control of Wire and the associated financial benefits derived from Starship Technologies. The outcome of this case will determine the distribution of these assets.

Dyne and his fellow investors contend that Friis acted unlawfully by removing one of them from a directorial position within the general partnership overseeing Wire. They further allege a conspiracy to diminish their stake in Starship Technologies.

Allegations and Counter-Allegations

The plaintiffs also address and refute claims made by Friis, asserting that they did not have any fiduciary obligations to him when they secured funding and reorganized Wire.

The lawsuit complaint, filed in July, states that “[Friis] unfortunately believes he is always entitled to have what he wants, can force others to do what he wants, and can re-write history (and agreements) whenever it suits his present purpose.”

Early Ventures and Skype's Trajectory

Janus Dyne held a significant position in the formative years of Skype, functioning as an initial investor and occupying the role of its first board member.

His involvement continued through Skype’s acquisition by eBay in 2005 for a sum exceeding $2.6 billion. Subsequently, he participated in the consortium that repurchased Skype from eBay in 2009.

Dyne maintained his board position until the eventual sale of Skype to Microsoft in 2011, demonstrating a long-term commitment to the platform’s development.

Collaborations with Janus Friis

Following the success of Skype, Dyne and Janus Friis engaged in numerous collaborative ventures.

Dyne provided investment and served on the board of Rdio, Friis’s music streaming service, which ultimately declared bankruptcy in 2015.

Mirroring Friis’s involvement, Dyne also acted as a director for the general partners of the Iconical investment funds. These funds contributed over $64.5 million to Wire between 2013 and 2018, as detailed in the legal proceedings.

The Development and Challenges of Wire

Wire, created by former engineers from Skype and Microsoft, provides secure communication features including end-to-end encrypted messaging, file sharing, and voice/video calls.

According to the lawsuit, Friis initially envisioned Wire as a successor to Skype, but his optimism waned as the platform struggled to achieve rapid growth and subsequently shifted its focus to enterprise solutions.

After five years, Wire had amassed a user base of approximately 150,000, none of whom generated revenue. The company was reportedly incurring expenses of $8 to $10 million annually, as stated in the lawsuit.

Allegations Regarding Friis’s Business Practices

The lawsuit alleges that “Friis has a pattern of disengaging from companies when they fail to meet his personal expectations for early success.”

Furthermore, the claim indicates Friis was deeply involved in the creative aspects of Starship Technologies, including the design of its robots, the company’s logo, and the software application.

A Pivotal Moment

Initially, the individuals involved maintained amicable relations. They were collaboratively engaged in a novel undertaking, designated as “Project X” within the legal documents, and in 2017, Friis contributed $500,000 to Dyne’s philanthropic organization.

As alleged in the lawsuit, a shift occurred in late 2018 when Friis halted the disbursement of funds from Wire’s loan agreement. He then sent a message to Dyne stating: “Ensuring we’re prepared to transfer all assets to a Foundation should other options prove unsuccessful.” The intention was for Wire to transition into free and open-source software, governed by a foundation establishing licensing terms.

Friis had envisioned a board comprised of himself, Wire’s CTO Alan Duric, and Jimmy Wales, the founder of Wikipedia. However, Dyne and his associates pursued an alternative strategy.

According to the lawsuit, with Wire facing imminent closure in early 2019, Dyne and his partners swiftly secured $8 million in Series A funding. This included contributions from themselves, Marbruck Investments, and Wire’s executive leadership.

The lawsuit indicates that Friis acknowledged this financing as “a miracle” achieved by Dyne. While Iconical funds would remain the largest shareholder, the transaction would effectively diminish Friis’s direct authority over the company.

Following this funding round, the lawsuit claims Friis disparaged Duric and promptly sought to disassociate himself from Wire. He allegedly neglected board meetings and ceased communication with Morten Brøgger, Wire’s CEO, for approximately eighteen months.

This situation reportedly altered earlier in the current year, coinciding with Wire’s $21 million Series B funding. The lawsuit asserts that in May, Friis mandated the relocation of Wire’s domicile to Germany. This action is characterized as “clearly part of Friis’s undisclosed plan to regain control of Wire.”

During a Zoom conference call in October, as detailed in the lawsuit, Friis contended that had the terms of the Wire transaction been transparent and he had received appropriate counsel, he would not have consented to it. He attributed blame to Dyne and his colleagues. Furthermore, he removed one of them from their directorial position and impeded the progress of meetings.

Dispute Surrounding Starship

The legal conflict extends beyond Wire, as detailed in the lawsuit. It asserts that Friis consistently expressed dissatisfaction with not holding a majority stake in the autonomous delivery company, Starship, which was initially established as a 50/50 partnership with fellow Skype veteran, Ahti Heinla.

The legal documents include a screenshot of a text message sent by Friis to Dyne, inquiring about the possibility of restructuring the ownership arrangement. Friis suggested a premium of $10-15 million could be readily paid to secure a solidified controlling interest.

The suit further claims that Friis colluded with one of his companies to falsely categorize Starship as a “controlled portfolio company” within one of the Iconical funds. This maneuver allegedly served to increase his personal stake, diminishing the value of Dyne and his partners’ holdings, potentially rendering their investment unmarketable.

According to the lawsuit, “Friis will say or do anything in order to suit his present fiction, no matter the cost to others.”

Requests for comment from Dyne have not yet received a response.

On Friday, Friis’s legal counsel submitted a motion to dismiss the lawsuit, arguing that the court lacks jurisdiction over Friis, a Danish national residing in London.

The motion stated that Dyne and his partner previously acknowledged the potential for substantial profit by aligning themselves with Friis. Over the years, while collecting significant fees and profit shares, they presented themselves as trustworthy fiduciaries managing Friis’s venture capital investments.

However, the motion contends that their primary focus was actually on furthering their own business interests at Friis’s expense.

Friis’s legal team also shared a statement with TechCrunch: “Dyne’s lawsuit is a reactive measure to scrutiny regarding his and his team’s actions… While we dispute the allegations as irresponsible, incomplete, and unfounded, they implicitly acknowledge a breach of fiduciary duty by Dyne and his team during their long-term advisory role.”

The statement continued, expressing confidence in addressing the issues through litigation.

Although still in its initial stages, the resolution of this legal battle is unlikely to immediately affect the day-to-day operations of either Starship, which has completed over 1.5 million autonomous deliveries and recently appointed Alastair Westgarth (formerly of Google Loon) as its CEO, or Wire, which successfully transitioned to serving enterprise clients and experienced growth during the pandemic.

Nevertheless, this marks the dissolution of a highly successful team responsible for creating some of the most innovative and impactful startups of the 21st century.