Tag Archives: Digital Sky Technologies

The Man Behind DST

Image representing Yuri Milner as depicted in ...

Image via CrunchBase

It has been seven months since we wrote about the Moscow Facebook connection. So, what actually happened before that, you may ask.

The famous Facebook investment deals were done by a fund named Digital Sky Technologies (DST), headed by one Yuri Milner, hailing from Russia and now residing in a $100 million home sitting on seven acres of Silicon Valley’s posh neighborhood of Los Altos Hills.

The man is no slouch, having studied theoretical Physics at the prestigious Moscow University and completing in the early 1990s an MBA at Wharton. After a little talked about stint at the World Bank he headed back to Russia, where the whole country was being ‘privatized.’ There he headed Menatep, an investment banking arm of an oil-and-gas empire controlled by  Mikhail Khodorkovsky.

A decade went by, Mikhail had been convicted of tax fraud and stripped of tens of billions of natural resources holdings by Putin’s regime, and had  been doing hard time in Russian labor camps since 2005. Meanwhile Yuri, who will turn 50 in November, moved on to become the major investor in Internet companies in Russia, with a particularly astute eye for Social Networking properties. His holdings were aggregated under the umbrella of Mail.ru, the largest email provider there. Mail.ru owns Russia’s number two social networking site Odnoklassniki (Classmates) and number three Moi Mir (My World). Also, it controls a third of Russia’s top social networking site, Vkontakte (In Contact). The famous Facebook seriously lags homegrown competitors in Russia, a distant fourth, with well under 10 million subscribers. Vkontakte and Odnoklassniki each have three to four times the audience.

Vkontakte

Vkontakte via Wikipedia

At the end of 2010 Yuri took Mail.ru public in London, at a valuation reaching $5 billion and raising well over a billion in cash in the process. A third of that valuation was based on bundling with the offering a fraction of the 10% stake  in Facebook that DST holds. This cash is perhaps twice what DST ponnied-up over last couple of years for their foreign investments, and after the deal they still own 75% of Mail.ru, plus two-thirds of their original Facebook shares. Purely brilliant.


Kremlin Owns Facebook

Kremlim Facebook

Kremlim Facebook

Not exactly Kremlin, but some smart guys from Russia.  Not exactly own Facebook, but have a 10% stake in it.

Even my mom heard on the news two weeks ago that Goldman Sachs piled almost half a billion into Facebook and in the process made the Social Network company worth $50 billion.  Not as prominent was the Russian angle.  Turns out that DST (Digital Sky Technologies), an investment company with heavy roots in the land of borscht and honey, had been all over Facebook for a couple of years now. It also has its fingers in all the darlings of the current ‘social networking’ version of the .com bubble: Groupon, Zinga, and now trying for Twitter.

Russians were getting a better deal for their money in 2009, having paid in a couple of installments roughly as much as Goldman Sachs just did, but ending-up with ten times the shares.  The deal for Goldman sucks, and to make it seem better, DST kicked-in another $50 million, at this crazy new valuation.

Digital Sky Technologies

Digital Sky Technologies

My apologies to non-MBA readers. Financial types say that Facebook has a ‘valuation’ of $50 billion because Goldman Sachs paid $500 million and got 1% of the shares.

%d bloggers like this: