How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley | WIRED

10/23/2017 How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley | WIRED MICHAEL WOLFF MAGAZINE 10.21.11 8:41 PM HOW RUSSIAN TYCOON YURI MILNER BOUGHT HIS WAY INTO SILICON VALLEY In less than two years, Yuri Milner's fund has gone from zero equity to more than $12 billion in assets. Photo: Greg Girard This is my first trip to Moscow, and Yuri Milner, the world’s most successful investor in social media, is taking me to his parents’ apartment, which he bills as a typical middle-class Moscow dwelling. It’s drab Soviet brick outside. The none-too-reliable- looking elevator is encircled by a crumbling staircase. But inside, the apartment is genteel and highly recognizable to me. It’s like many you would find on the Upper West Side of Manhattan, a cramped and comfortable set of rooms without a recent paint job, filled with too many tchotchkes and way too many books. Milner’s father, Boris, is an 81-year-old former professor—a specialist, during the Soviet era, in American management practices no less—who has written or edited more than 50 books and is eager to show me all of them. Do I know, surely I do, Professor So-and-So https://www.wired.com/2011/10/mf_milner/all/1/ 1/37 10/23/2017 How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley | WIRED at Ohio State or Professor So-and-So at Georgia Tech? His less garrulous mother, Betti, who lays out a table of tea and copious sweets, is a physician who practiced at the Moscow Department for Disease Prevention for almost 40 years. The message seems clear: Milner may have invested in virtually every social media powerhouse, from Facebook to Twitter to Spotify. He might be the vanguard of an entirely new financial philosophy. He might be the most controversial money guy in Silicon Valley—sought after, feared, and derided in more or less equal measure. But at heart he is just a nice Jewish boy. Which might help explain—and Milner very much wants to explain himself—how it is that he has gone from investing in a macaroni factory in Moscow to upending the American technology business. I believe, too, he is trying to say his success story ought to be just as appealing as any in the Valley. It certainly hasn’t played that way in the tight-knit club of Valley venture capitalists. In fact, the more successful Milner has gotten, and the faster he has compounded his success—beginning with his night-raid investment in Facebook in 2009 and now encompassing major positions in Zynga, Groupon, Twitter, and Spotify—the more suspect and outré he has come to seem. He’s definitely not your conspicuous non- consumption Valley billionaire. Kara Swisher, who, with Walt Mossberg, runs The Wall Street Journal‘s D Conference, one of the prestige events in the technology business, told me with arch inflection how Milner—a Vladimir Putin look-alike with a dark undershirt always peeking out of his collar—had shown up at the conference with a blonde model towering over him. (Swisher was only slightly sheepish when she found out this was his wife.) What’s more, a whisper campaign has dogged his American adventure. Indeed, among the early backers of his investment fund, Digital Sky Technologies, was Alisher Usmanov—one of the richest men in Russia, who even other Russian oligarchs find, to say the least, a little dodgy. (Usmanov’s résumé includes alleged Kremlin associations and an overturned conviction for fraud and extortion. He also has a near-$18 billion fortune in mining, steel, and telecom, as well as the obligatory ownership stake in a British football team.) Oh, and his house—that has not helped, either. Milner, who runs his business from a no-frills office suite in Moscow, is spending more and more time in the Valley and so has bought a place in Los Altos Hills—not just the Valley’s most expensive house but, at a reported $100 million, among the most expensive in America. (Milner is https://www.wired.com/2011/10/mf_milner/all/1/ 2/37 10/23/2017 How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley | WIRED embarrassed about this and seems aware that he may have misjudged how this purchase would be seen. Anyway, he has heard that there is another US property sale that will soon trump his.) To many, Milner’s success is not just too much and too fast in a land of too much and too fast but … but … and here people start to petulantly phumpher … somehow unfair: Here’s an outsider who has handed out money at outrageously founder-friendly terms —paying huge amounts for relatively small stakes, essentially buying exclusive access to the most desirable companies on the web! It is his outsiderness that seems most irritating and even alarming. How is it that an outsider has spotted opportunities that the Valley’s best investors missed? Does Milner’s success suggest that the rest of the world is starting to horn in on what has been, to date, as American as apple pie—the Internet future and Internet riches? That’s why I’m here—in Russia and in his parents’ apartment—to try to figure out just what his advantage is. If he is a game changer, how exactly does the game change? I’m curious, too, about what he’s after personally: He seems to want respect from the Silicon Valley folk—but why would he? Why does he care what they think? Milner’s rise as a power-brokering investor happened so fast—his fund went from zero equity to more than $12 billion in US assets in less than two years—that his story has not had time to come out. Russia may well be the most captivating place on earth for businesspeople, because it is purely about cause and effect. All of the power dynamics are on the surface—here’s who has the money, here’s who has the influence, here’s who controls the resources— so all you need is the gumption and savvy to take advantage of them. After the collapse of the Soviet Union, a class of robber barons—the oligarchs—rose to control much of STAKING OUT Russia’s vast resources. In a disorganized and corrupt process of privatization, they came to very cheaply SOCIAL MEDIA control vast reserves of Russia’s export wealth; oil, In just over two years, Yuri minerals, lumber, and wheat passed from government Milner’s investment firm, to private hands. Digital Sky Technologies, A not inconsiderable point: A disproportionate has taken big positions in number of the oligarchs are Jewish. The Jews in Soviet some of the Internet’s most Russia, often kept from taking official career paths, important and promising came to thrive in the gray and black markets. Hence, young companies. https://www.wired.com/2011/10/mf_milner/all/1/ 3/37 10/23/2017 How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley | WIRED they were among the only capitalists in Russia when May 2009 capitalism emerged. Milner, a half-generation younger than the first rank of oligarchs, is himself selling gray-market computers when the end of the Soviet Union arrives. He buys old FACEBOOK DOS machines, imported or smuggled from the US, and $200 million delivers them at appointed street corners. His father, displaying another side of Jewish business December 2009 tradition and acumen—the cautious side—isn’t pleased. Milner is slacking off his studies as a physics graduate student and doing things that could get him into trouble with the authorities. His father’s solution ZYNGA is both predictable and a wild leap into uncharted $180 million investment waters: His son should get an American MBA. In 1990, round Milner enrolls in the University of Pennsylvania’s Wharton School, where a close friend of his father’s is (with Andreessen Horowitz a professor. and Tiger Global Management) This leap for Milner is radical in all the obvious, transformational, emotionally topsy-turvy ways that might be imagined (he is, at Wharton, a great oddity), April 2010 but it is also a leap into one of the most dramatic and picaresque moments of American capitalism. It is the age of the takeover artist—Michael Milken, Carl Icahn, Ronald Perelman, Henry Kravis—and Milner falls in GROUPON love with them all: “These are very romantic figures $135 million investment for me—and they are very American.” round Meanwhile, his own country is imploding and turning (with Battery Ventures and into, for some, a highly profitable free-for-all. Rugger Ventures) Watching from afar in Philadelphia and filled with great envy, Milner, after Wharton and a three-year stint at the World Bank, comes back to Moscow. January 2011 He goes to work for the now imprisoned Putin enemy and founder of Yukos, then Russia’s largest oil company, Mikhail Khodorkovsky, who in the mid-’90s https://www.wired.com/2011/10/mf_milner/all/1/ 4/37 10/23/2017 How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley | WIRED was in the process of devouring, some would say by FACEBOOK extraordinary means, great parts of the Russian $125 million economy. Milner proposes to Khodorkovsky that they try a legal takeover—American style, and the first ever in Russia—of a candy company. The takeover fails June 2011 (Milner writes a book about the experience, pleasing his father), and he goes out on his own.

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