Yuri Milner, CEO of Russian investment firm Digital Sky Technologies (DST), just stepped off the Web 2.0 Summit stage after having a chat with John Battelle, founder of Federated Media Publishing.
In the last year and a half, DST has invested $200 million in Facebook, $180 million in Zynga and $135 million in Groupon, three massive funding rounds for three prominent late-stage companies.
The unusual size and timing of these rounds, as Battelle pointed out, has led many to wonder what exactly drives DST to disrupt the traditional mezzanine level process of startup funding. According to Milner, the firm aligns itself with businesses that, while maybe expected to go public based on a formulaic timetable, don’t really wish to do so yet. Facebook and Zynga are two perfect examples of Silicon Valley startups that are in no rush to IPO.
“Through a series of transactions,” said Milner, “we take the liquidity pressure off the table so the companies can still grow and develop the product a year or two before they go public.”
Also unusually, DST does not seek board membership for Milner or any of the firm’s partners. Milner said to do so would immediately create a conflict of interest with DST’s next or previous investments. Never mind the fact that DST’s Mail.ru, the biggest social network in Russia, obviously competes head-on with Facebook. (Milner had nothing to say about that.)
So what are DST’s parameters for a prospective investment opportunity? Milner said it must be a late-stage social Web company with a billion dollar-plus valuation, located anywhere in the world. He said maybe 25-30 pre-IPO companies currently fall under that category. Since Milner wasn’t helping him out, Battelle conceded by mentioning the most obvious candidate: Twitter. (To this, Milner had nothing to say.)
Having realized that Milner would not be spilling any juicy details, as perfect an investment opportunity Twitter appears to be, Battelle shifted the conversation to understand better Milner’s vision of the future Web.
Milner confessed to having enjoyed The Social Network, arguing that it shows a new trend where mathematicians rule the world.
“When you have two billion connected and pretty powerful machines processing all this information, by definition, you’re going to see a lot of mathematicians” gaining more prominence.
