How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley

http://www.wired.com/magazine/2011/10/mf_milner/all/1

by razin • 15 years ago

197 101 15 years ago

"It is his outsiderness that seems most irritating and even alarming" - that's the main issue that people seem to be having with Yuri. If he was American, he would be yet another success story, flashier than the others, but still competent enough to have made it big.

As much as I admire the Silicon Valley investors who live in a normal house and drive a normal car, it's Milner's choice to go all out and get some expensive stuff if he wants - I suspect growing up in Russia, they didn't have access to any kind of luxury items when the Union collapsed, so the desire to get all the big houses, yachts and expensive cars is understandable.

By the way, I like it how he bought Mail.ru when it was cheap - it was certainly a smart investment (it's now the biggest mail service in Runet, not only Russia itself), at a time when most of them thought the fancy American invention, the Internet, went belly up.

guard-of-terra7• 15 years ago

Given the background of Milner described in the article, I'd argue he doesn't care about material comfort and luxury. At all. Like Perelman - who lives with his mother in the middle of St. Peterburg, sees a lot of opera and is happy with that.

His 100M home is probably just another investment. He had bought a part of California state, tiny but pretty impressive one. He can also live in his investment which is a bonus.

adlep3• 15 years ago

His mother and father were relatively hi ranked Soviet officials. He had it "made" in SU. Also, the guy bought a 100 million dollar house. YES, he cares about the material comfort and luxury. If you don't, you live in a regular apartment or a sub- million dollar mansion.

0x128• 15 years ago

If his 'outsiderness' is so irritating and alarming that's just nicely dressed up xenophobia.

And from what I've seen of it SiliconValley is not much prone to that. So why is it different with Milner?

antimarketing• 15 years ago

First of all, an attempt at a correction to one of the motives of the article. I think Milner's jewish background has nothing to do with his success. His family, while Jewish, had and still have a complete worldview that only a member of the russain intelligentsia can have. It is such a bizarre and wonderful world-view and way of life that it defies my abilities to explain — being delicate among a world of merciless brutality. The cultural class of Russia really are a class apart.

I suspect that the influence of growing up surrounded by cultured Russians, as few of them as they were in Soviet Times is why he always stands a little bit disconnected from the crowd.

The air of Russian culture is gentle but always restless.

Russia is a land of big crowds but the intelligent among that people always desire to be a little bit aloof, if not in solitude.

bluekeybox4• 15 years ago

A significant percentage of oligarchs from the former USSR carry a very bad reputation because the means through which they became rich are often suspect and shrouded in secrecy, which is understandable given the lawlessness of the 1990s in that region, and which to some extent continues to this day. Russia since the collapse of the USSR has been a lot like certain parts of the U.S. were during the time of the Prohibition -- giving orders to physically terminate rivals is or was daily business.

After finding out more about Milner, I am now more convinced that he is not at all the "robber baron" Al Capone type, but a genuine businessman who is both lucky and smart.

Wrote this just to explain the possible reasons behind the initial worry, being myself from the former USSR. I think this also explains why Milner cares about establishing a reputation in the Silicon Valley as opposed to being completely aloof to what other people think.

DilipJ2• 15 years ago

The Valley doesn't care about a person's ethnicity, as long as they generated their wealth through legitimate means. Milner, on the other hand, is nothing more than a frontman for Alisher Usmanov, who basically accrued everything through wholescale theft of state resources. Basically, Milner is a crook, and if there was any justice in the world he and Usmanov would be in jail for what they have done. But there isn't, and there are people in the Valley who are willing to overlook ethics if you have enough money. The fact that Milner is now working with YC is a sad testament to that fact.

jcampbell1• 15 years ago

Xenophobia is an unreasonable fear of outsiders. The VC community should rationally dislike him because he is driving down the risk adjusted rate of return for VC investment, and backed by an endless supply of funds that traditional VCs have no access to. Of course, startup founders and tech employees should embrace him for the same reason.

As for his character, I don't think he is picked on anymore than Donald Trump. I reserve the right to make jokes about both of them.

tptacek8• 15 years ago

No. The issue is that to most of the social class that makes up the Valley, every high net worth individuals from a CIS state is "Russian Mafia". If that's xenophobia, fair enough, but it's a specific brand of xenophobia, and as the amounts of money we're talking about go up --- perhaps past Yuri Milner --- it's a brand of xenophobia that may get less and less irrational.

They don't call it "Russian money" or "Milner money" or "Soviet money" or any other epithet. They call it "Russian mafia money".

dustineichler• 15 years ago

The story angle is wrong. Why would someone like him care if he bought into anything, when he can buy everything. It reads like an insecure fable which I doubt.

pg8• 15 years ago

If there's one mistake this story makes, it's in trying to come up with complicated theories about why Yuri does well. He's simply smart. That's what DST has in common with Andreessen Horowitz, though they have little else in common.

mapgrep• 15 years ago

Come now, Paul. Yes, Yuri is smart. But he also has huge sacks of money to throw around, most of which comes from oligarch Alisher Usmanov. Wolff confirms here for the first time (I believe) that "Milner has created a separate fund to invest in international—and especially American—Internet companies, with Usmanov taking the biggest stake."

And we've yet to see any sort of track record for the piles of money Milner throws around, at least the big new money he is spending in America. In what sense is he "successful?"

It's kind of sad, to me at least, the extent to which a sort of amorality has really taken hold in Silicon Valley. It's nice that he's helped your investments out, Paul, but where does Yuri's money come from? Have you looked into him and Usmanov? I mean, the sad thing about Yuri Milner to me isn't that he's an ostentatious outsider, it's that he fits in so darn well in Silicon Valley. I wish this was the sort of place that looked completely alien to someone from Moscow or Wall Street. Every year, it seems that's less and less the case, at least in terms of culture.

vaksel• 15 years ago

yeah it's not like VC world is full of idiots, most of those guys tend to be smart.

mathattack4• 15 years ago

Based on subsequent valuations it would seem like Facebook, Groupon and others are doing very well. It only takes a few home runs to cover a lot of strikeouts and singles.

pg8• 15 years ago

In what sense is he "successful?"

Financially, in the same sense Mark Zuckerberg is.

jbooth• 15 years ago

Huge sacks of money to throw around and huge cojones as well to make those bets, most of his investments had everyone saying "That's crazy!" at the time, yet they've paid off for him so far. Time will tell if they're successful or if he's making money off of a bigger fool, I guess, but he looks pretty good right now.

Hitchhiker• 15 years ago

http://www.youtube.com/watch?v=UgcxGFmYyPs

gsivil2• 15 years ago

While smartness seems necessary it was almost never enough to succeed in Silicon Valley or in Wall Street or in the sciences. Smart is such a generic term that is almost meaningless.

mathattack4• 15 years ago

Interesting. When I see success, it always seems like there is something additional to intelligence - like work ethic, or conviction. In this case it seems like his place in society allowed him to understand social media before a lot of other smart people. Additionally he had money when others didn't - he could invest in mail.ru and Facebook when other investors were in retreat.

jacques_chester• 15 years ago

> When I see success, it always seems like there is something additional to intelligence - like work ethic, or conviction.

I usually see luck. Luck is a huge variable.

yonasb2• 15 years ago

Exactly. That's what I got out of this article, insight into why he may be so successful. His ability to appreciate the value of social media more than some other investors and him being in a position to bet on it.

benrpeters• 15 years ago

It seems that the author had to come up with those complicated theories b/c he couldn't get Milner to open up. The loan insight that he uncovers about the perception that led to investing in SV is that YM foresaw that social networks could generate huge margins from advertising. Well, that certainly was smart of him, but how did he get there and how did he pick the companies he did? He buys Mail.ru and then ... he buys facebook? One dinner with Goldman people in Moscow and voila!?! The article provides a decent biographical sketch but the author is left to speculate on all the whys. I wonder whether he asked tough questions and was simply rebuffed or whether YM provided access but laid strict ground rules. If so, the author should have let the readers know this.

That he would prefer to remain enigmatic rather than open up about his process means that he is at least partly responsible for the overly complicated theories about him. Maybe he has good reasons not to or maybe it reflects a different culture. But I find it more than a little ironic that someone so tight-lipped is a social network tycoon.

bootload• 15 years ago

"... If there's one mistake this story makes, it's in trying to come up with complicated theories about why Yuri does well. He's simply smart. ..."

Smart in Russia isn't unique.

Opportunity is the scarcity. Smart also doesn't fully explain the "new money" problem. Timing might. Instability in the 90's meant opportunity but opportunity only happens in Russia with influence, in Yuri's case, "Usmanov". Expert knowledge of western economics & Russian business could also explain the ability to conceive & create a western style business in emerging Russia of the late 90's. [0] For me though, it's the link with Usmanov that clouds the "new money" problem. [1] The article also mentions Milner's religion. Highlighting Milner's religion, then questioning his integrity could be viewed as a smear attempt.

[0] The investment could be explained knowing that Boris Zakharovich Milńer PhD (father) is member of the "Russian Academy of Sciences" ~ http://www.gbata.com/jgbat.html & member of "Russian Institute of Economics" ~ http://www.guu.ru/files/gbata/english_program.doc

[1] Bill Powell, Jessi Hempel, Fortune, "Who is Alisher Usmanov?" ~ http://tech.fortune.cnn.com/2010/10/04/who-is-alisher-usmano...

adlep3• 15 years ago

If you think that the only needed quality to be a billionaire in Russia is being smart, you are in fact disconnected from reality and shame on you for that - you should know better.

jakeweineberg2• 15 years ago

Paul are you going to comment on the following?

People like Milner and others associated with Russian oligarchs spend lavishly because the money they have came with no sacrifice on their part. The sacrifice came from all those miners working in subzero temperatures in the Kazakh steppe for kopeks a day, their bodies broken down prematurely, with the share of wealth that was promised to them stolen away. And instead of those who betrayed them being brought to justice, they instead depart to the West where they are greeted with applause by those who mistake cunningness with intelligence.

vizzah3• 15 years ago

The wealth in hands of all these xUSSR oligarchs (Usmanov etc) was once a social wealth of all Soviet people. It is nice to see this wealth is now being converted 'back to social'. Our Facebook accounts are supposedly worth $100+ already, so it seems like a very clever plot to pay these money back to where they belong. Let's hope Mark will provide payouts for those choosing to close their accounts.

0x128• 15 years ago

The former owners of this wealth are likely not on facebook but for the most part on vkontakte.ru and mail.ru, which they apparently also own.

pwang• 15 years ago

> so it seems like a very clever plot to pay these money back to where they belong

Um... you seriously believe this?

vizzah3• 15 years ago

of course it was sarcastic, how could a sane person believe in that? you scare me with such question.

krookoo• 15 years ago

Sounds like money laundering.

budu3• 15 years ago

I wonder if it is possible for a YC startup to take Andreessen-Horowitz $50000 investment and pass on Milner's investment.

0x128• 15 years ago

Sure it is. But nobody did.

adlep3• 15 years ago

pg is extremely naive if he thinks the this guy's money is not tainted. Actually, it does not take a genius to figure this out. IT IT IMPOSSIBLE to make that kind of money in Russia by playing according to the rules.

yonasb2• 15 years ago

The man is making people's dreams come true and taking chances on young and hungry entrepreneurs, legally. Some of you make it sound as if he's a murderer. Leave him alone and let him and all the companies he's funding be great.

alexro• 15 years ago

Why not anybody thought that what Milner does is he paves the road to even more money coming from legit and not-so-legit investments from Russian oligarchs. Once Milner gets settled in the SV and proves his operations are successful, then Russian money will start flowing in in amounts that's hard to comprehend.

Why is this desirable for oligarchs? Simple: businesses in Russia are profoundly insecure - remember Khodorkovsky? So, Milner will find a great amount of willing investors among the second-tier oligarchs once he's ready to start doing money heavy lifting.

And when you pave the road that will go "pay-to-pass" you can spend few unnecessarily billions.

How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley

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