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Silicon Valley Still Beats Skolkovo for Russia’s Richest Tycoons

Only weeks after the head of Russia’s largest bank warned that the country was at risk of “technological subjugation,” two  tycoons were reported to have done vast investments in some of the world’s many eye-catching tech projects — outward Russia.

USM Holdings, a company tranquil by metals and mobile record lord Alisher Usmanov, has invested in Uber, the fast-growing cab service, a spokesperson reliable to The Moscow Times. A source tighten to USM pronounced the deal was value several tens of millions of dollars.

Meanwhile, media reports announced the sale of a minority interest in Gawker Media — a New York-based network of seven ‘new media’ websites including Gawker.com and Lifehacker — to Columbus Nova Technology Partners, the U.S. investment arm of oil and metal firm Renova Group, owned by Viktor Vekselberg.

Then, an executive at Hyperloop Transportation Technologies, a startup operative on a super high-speed unconventional train — the brainchild of Elon Musk — told The Moscow Times that the company was articulate to a Russian private financier and a Russian supervision about building a line of the sight in a country. 

Hyperloop Technologies, a rival association also operative on the project, pronounced their executives would also be roving to Moscow in early February.

News of the investments came after German Gref, the head of state-owned lender Sberbank, gave a speech in which he pronounced Russia had depressed into a difficulty of “downshifter” countries that had unsuccessful to adapt to economic and technological change.

Gref, a former mercantile growth apportion underneath President Vladimir Putin, pronounced record would be the driver of countries’ success. He warned that though large overhauls of state institutions and the preparation system, Russia would loiter catastrophically behind some-more modernized rivals.

Yet the country’s biggest tycoons are still branch to Silicon Valley, not Russia, to do business.

“Gref settled the obvious [in his speech.] Those guys [Usmanov and Vekselberg] also settled the obvious with their actions,” Anton Nossik, a Russian Internet entrepreneur, told The Moscow Times.

The Most Money They Ever Made

The latest investments in Gawker and Uber are tiny in comparison to some of the large deals of the not-so-distant past.

Yury Milner — a co-owner of Mail.ru and Russia’s categorical amicable networks Odnoklassniki and VKontakte — paved the way for Russian investors in 2009, when he bought a 1.96 percent interest in Facebook for $200 million — deliberate a risky investment at the time.

Following Milner’s assertive investment strategy, Russian tycoons became famous in Silicon Valley for paying outrageous sums for relatively tiny stakes in web titans. They also gained a reputation for wanted small in return in the form of board seats or other preferences.

Usmanov was one of the early backers of Milner’s Digital Sky Technologies Fund, participating in further investments in Facebook and other tech frontrunners like Twitter, Spotify and Airbnb.

As the stocks rose, the men cashed in — “The many income they ever made, detached of course from privatizing state property, was done in Silicon Valley,” Nossik said. Facebook’s share value in the 4 years after Usmanov and Milner’s initial squeeze rose ten-fold.

Political blessing came in 2010, when then-President Dmitry Medvedev visited Silicon Valley to meet with tech giants such as Google and tout Russia’s possess Skolkovo project — a nascent tech heart near Moscow overseen by Vekselberg.

But 4 years after the political waves turned. Western sanctions imposed on Russia for its cast of Crimea in 2014 and involvement in Ukraine meant U.S. companies were no longer in vogue.

Ranking of startup ecosystems around a world

The change in political mood coincided with an announcement by Usmanov in March 2014 that he was divesting some of his U.S. assets, offered shares in Facebook and Apple to be redirected to Chinese companies such as Alibaba Group and JD.com, as good as to Russian assets. He sold, of course, at a profit.

Elena Martynova, emissary arch executive at USM, pronounced in written comments that sanctions had not influenced the plan and that investments were done into companies regardless of their origins. “Our priority is not where they are based, though clever companies and technology,” she said.

The new investments advise that, by the political ups and downs, business has continued as usual.

Martynova echoed this. Usmanov’s investments in Western companies have a “financial character,” she said, while stakes in Russia were “strategic.”

Thinking Big

Russia has small to offer Russia’s richest tycoons, analysts said. Despite supervision attempts to foster an innovative culture, Russia’s startup stage is conjunction as abounding nor energetic as the competitors.

The country’s record zone is dominated by a handful of large companies that offer a wide operation of services, such as Yandex — the Russian homogeneous of Google. One of the biggest, Mail.ru, is part-owned by Usmanov.

Startups in Moscow miss entrance to the collateral and infrastructure accessible in the United States, and struggle to go global. And global is where the real income is made.

While Uber has grown in a few years to value some $50 billion final year, usually a handful of Russian Internet firms and startups are value some-more than $1 billion. Yandex, the biggest Russian association until it was overtaken final year by Mail.ru, now has a market capitalization of $4.2 billion.

For billionaires, that scale falls short. “[Usmanov] is a portfolio financier looking for a comparatively teenager share of capital. But on the other palm he wants to invest in something big. You don’t have so most choice in Russia: Mail.ru, Yandex, and that is fundamentally it,” pronounced Vladimir Korovkin, conduct of digital investigate at Skolkovo’s Institute for Emerging Markets.

“It’s some-more or reduction the same reason that Saudis are investing outward Saudi Arabia,” he added.

State-Sponsored Innovation

The urge to invest in big, fast-growing bonds has usually grown due to the mercantile unemployment in Russia. A sharp tumble in the cost of oil sucked investment out of the country, shrank the economy by 3.7 percent final year and collapsed the value of stocks.

Over Jan alone, Vekselberg’s net value fell by $450 million, and Usmanov’s by a whopping $2 billion, according to the Bloomberg Billionaires Index.

That creates the quick earnings accessible in the United States some-more appealing, though it won’t assistance Russian tech.

Russia is in a chicken-and-egg conditions where the lack of investment is stalling development, and the miss of a tech stage creates Russian portfolio investors, and most of its innovative startups, demeanour overseas, analysts said.

The falling batch markets have also spoiled the biggest tech companies: Yandex’s capitalization has depressed by two-thirds given the rise of $14.6 billion in early 2014.

The government has attempted to jump-start the technology zone with Medvedev’s launch of the Skolkovo creation heart outward Moscow in 2010 and a purchase of state-backed investment funds. But in late Jan the cash-strapped supervision announced a shakeup that could see Skolkovo liquidated or engrossed into other structures.

Recently, Russia’s ability to produce handcrafted record is increasingly seen as a national confidence issue, heading to investments in state-owned hunt engines, program and mobile platforms that mostly aim to catch adult to rather than surpass unfamiliar technological achievements.

As a result, many Russian entrepreneurs are overly contingent on an distillate of state funds, and the mercantile predicament has not altered the status quo. “Many are some-more or reduction sitting and waiting for the good times to return. That’s a very bad strategy,” pronounced Korovkin.

That might leave Russia in a bad place: In his speech, Sberbank’s Gref warned that the new technology-driven universe would see large tellurian resources inequality, with the difference between leaders and losers “larger than during the industrial revolution.”

Article source: http://www.themoscowtimes.com/article/557116.html

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