Yuri Milner: billionaire investor on leaving Russia, investing in Twitter and Facebook, and turning scientists into celebrities.

Weekend Confidential: Yuri Milner

The billionaire investor on leaving Russia, investing in Twitter and Facebook, and turning scientists into celebrities

ALEXANDRA WOLFE

Nov. 22, 2013 7:33 p.m. ET

As a young dropout from a Ph.D. program in physics, Yuri Milner had no special ambitions to start a technology company in his native Russia. He worked in finance for a few years before coming across a 1999 report by Morgan Stanley MS +1.46% analyst Mary Meeker, describing the tech boom in the U.S. and how the industry was starting to grow in Europe.“This was a revelation,” says Mr. Milner. “How can it be that a company without any revenue could be worth $50 billion?” he asked himself. “I was like, ‘I like that! Brilliant!’ ” He decided he would try to do the same in Russia. “I figured OK, in the U.S. it’s $50 billion, so in Russia even if I do $1 billion, I’m still in good shape, even with a discount,” he says, laughing.

In 2000, Mr. Milner started a company inspired by the success of YahooYHOO +0.52%Amazon and eBayEBAY +0.24% “I said, ‘You know, what the heck? Let’s start all three!’ ” His business started with three separate branches—mail, e-commerce and auction companies—and was later grouped under the name Mail.ru. It went public in a 2010 IPO at nearly $6 billion.

Today Mr. Milner is focused on investing, and two of his biggest investments— FacebookFB -1.01% and Twitter TWTR -2.52% —just happened to be the most talked about IPOs of the last two years.

His investment firm DST Global’s share in Twitter was worth about $1.2 billion at its initial public offering in early November, after a $400 million investment in 2011. With Facebook, his initial $200 million investment in 2009 turned out to be worth $2 billion. Twitter’s $14.4 billion IPO, he says, is a testament to the power of social media. He considers the company “the largest influence mechanism in the world,” he says. Why its extraordinary market valuation? “Because exercising or trying to exercise influence is something people do very often.”

Mr. Milner punctuated his splashy arrival in Silicon Valley by purchasing a sprawling Los Altos, Calif., mansion in 2011 for a reported $100 million—then the highest known price paid for a single-family home in the U.S. The 25,500-square-foot French chateau-style house wasn’t on the market when his wife Julia discovered it; they made an offer anyway.

His sudden arrival caused a stir in the closely connected world of Silicon Valley, as did his somewhat mysterious background. In the mid-1990s, Mr. Milner worked for Mikhail Khodorkovsky, the founder of the oil company Yukos, who is now imprisoned on charges of tax evasion and fraud. Mr. Khodorkovsky’s lawyers have argued that the charges against him were politically motivated.

Nor has it escaped attention that a principal backer of Mr. Milner’s first DST fund was the Russian billionaire Alisher Usmanov, who was sentenced in 1980 on charges of fraud and embezzlement. (The DST funds’ principal investors today are global sovereign wealth funds.) Mr. Usmanov spent time in prison, but he was exonerated by the Supreme Court of Uzbekistan in 2000, which ruled that evidence incriminating him had been fabricated.

Mr. Milner says that he rarely travels to Russia these days. He stepped down from his role as chairman of Mail.ru in 2012, and now many of DST Global’s investments are in the U.S. Though his most visible presence is in Silicon Valley, he also frequently spends time in China and New York. In the lobby of his midtown Manhattan hotel last summer, he explained how he came to America. Leaning back with his legs crossed in a tailored gray suit, Mr. Milner looks nothing like the academic physicist he used to be.

Born in the Soviet Union in 1961, he was (like many Russian boys) named after Yuri Gagarin, the cosmonaut who that year became the first man launched into outer space. At age 12, Mr. Milner became interested in physics when a family friend involved in weapons development came over. “I found out for the first time about the nuclear bomb,” he says.

After graduating from Moscow State University, he spent the next five years as a physicist. But while working on his Ph.D. he realized that he didn’t have what it took to stand out in the field. “I was not smart enough,” he says. “If you really want to do fundamental physics, you have to be extremely smart.” His decision to leave the field coincided with the Soviet Union’s collapse. “Then I decided to start a new life,” he says.

Mr. Milner wanted to get a start in business. After taking great pains to secure an exit visa in 1990, he enrolled in the M.B.A. program at the University of Pennsylvania’s Wharton School of Business. He later dropped out and ended up at the World Bank in Washington, where he worked for three years before returning to Russia. There “I did a few things, not very major and significant,” he says, including an investment in a macaroni factory.

Then came the tech boom, and Mail.ru. It wasn’t a quick path to success: In the first 12 months the company’s value went from zero to $200 million. Then came 2001, and it dropped to $6 million. That year, he had to fire 80% of his staff and close the e-commerce business. He kept the mail and auction businesses and built them back up.

Meanwhile, he had started investing as well. In 2009, Mr. Milner put his first $200 million into Facebook, a large sum at the time for an investor outside of Silicon Valley. One reason he thinks that he was able to get involved with Facebook is that he was willing to invest during the height of the financial crisis. “Everyone was super scared to invest in anything,” he says.

His sizable stake in Mail.ru coupled with his bet on Facebook made him a billionaire. Unlike many other investors, he often doesn’t take board seats and gives his votes back to the founders. DST Global has made investments across Silicon Valley, from GrouponGRPN -4.30% to Spotify. Some have been less successful, such as his investment in game company ZyngaZNGA +0.23% and others have been smaller, such as his investments in Coursera, an online education platform, and GenapSys, a genome sequencing company. Beyond Silicon Valley, he invested in 2011 in the Chinese e-commerce company Alibaba, which looks to be planning for an IPO soon.

He has continued following developments in his old field, science. “I don’t have any other hobbies,” he says. “I don’t collect anything, and I’m not interested in sports, aside from going to the gym a few times a week.” Earlier this year, he joined Google GOOG -0.21%founder Sergey Brin and Facebook chief executive Mark Zuckberberg to launch an annual “Breakthrough Prize” in life sciences, which grants recipients from around the world $3 million each for their research.

Last year he launched another annual award, the Fundamental Physics Prize, in which winners receive $3 million each for discoveries and research in the field. Past winners have included scientists Edward Witten and Stephen Hawking. He believes that attention to the sciences is being crowded out by our “celebrity-driven society,” he says. Mr. Milner hopes his efforts will help shift society’s focus to people working to solve longer-term questions such as “How did the universe come to be?” and “Why do we exist?”

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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