Global Venture: how Yuri Milner earned billions in China

Founder of the DST Fund conquered the Chinese venture capital market after the Russian and American ones. However, he believes that his mission is to study the Universe.
Origin source
On a hot night in the summer of 2011 the Russian Internet investor Yuri Milner, 32, met at dinner with Richard Liu, founder of the rapidly growing Chinese online retailer Jingdong 360. The modest restaurant on the five tables were packed to capacity subordinates Liu, specialists in the delivery of any goods from books to garments, in the nearby town - not Beijing and Urumqi, one of the most remote from the capital and ghost towns in the northwest of China, near the Kazakhstan border.

To dine with Liu, Milner made a five-hour flight from Beijing and exhausting journey along the dusty valley - he wanted to see firsthand the effectiveness of the business model JindDong and leadership of its founder. Employees of the company came to their table with Richard in groups of three people and toasts in honor of his boss. Pili baijiu - strong rice liquor. Liu spoke politely to everyone, but when it was his turn to say the response it showed itself in all its glory. Charisma JingDong founder - is akin to Clinton: the audience's attention Chinese businessman holds no worse than the former US president, internationally recognizedof the speaker.

At dinner he talked about customer focus, motivation and other policy matters, which are still regularly brings up many thousands of JindDong during trips around the country. The results speak for themselves: the online shop Liu, which now bears the name of the capacious, every year shows a threefold increase in revenue (about $ 18.5 billion in 2014). The industry in which the company operates, it increases the "only" 40% per year (while the "off-line" retail - only 10%).

Milner was listening to Liu, in order to decide to invest in JingDong or not, - $ 500 million to the company he had invested three months earlier. His China mission pursued a more important goal. "You must be close to the founder of the company", - says the investor, wearing a gray tracksuit, of Forbes in an interview, which he gave at the conference hall of his mansion in Los Altos Hills, California. Milner, a physicist by training, do not even drink alcohol - the more valuable they rendered honor Liu.


Billionaire is considered one of the most successful investors in the worldin technology companies, despite the paradoxical method of investing: it does not require a seat on the board, trusting intuition startup founders, but personally communicates regularly with young entrepreneurs to help formulate long-term strategies and to build long-term relationships. Gross interference in the business does not work anymore - to replace him came a long discussion about the future of the Internet and the structure of the universe.

Talk face-to-wall is so important that only in 2014, Milner spent on the road 200 days. He was particularly interested in the Chinese partners. Their trust is worth the effort when, two years after this dinner JindDong opened a new round of investment, Liu, despite the absence of the deficit in the proposals, first hand remembered his Russian guest. As a result of Milner's DST Global Fund has invested another $ 250 million in online retailer, bringing its stake to 8.9% - Today the stake is to exchange $ 3 billion.

Chinese successes, however, still can not overshadow the historic deal DST in the US "front": in 2009 the founder of the Fund reached an agreement with 25-year-old MarkZuckerberg and invested $ 200 million in rapidly gaining momentum social network Facebook.

On the "output" of $ 200 million turned into $ 4 billion, and Milner - a recognized member of the elite club of venture capitalists.

The presence of investors in DST since then - a sign of good taste for almost any ambitious newcomer, already on the public Twitter and Lending Club to accommodate cooking Spotify, Airbnb and Snapchat.

Not to mention the Chinese companies, which Milner was involved in the success of three new tech giants, including Jingdong. In 2011, DST invested $ 500 million into the local leader of the Alibaba e-commerce, increasing its share of the cost for three and a half years, five times, to $ 2.5 billion Then Milner entered the capital Xiaomi smartphone maker -. 7 percentage for DST a company that in the China market and the Samsung surpassed Apple, now estimated at $ 3.2 billion.

2011-was particularly important for the investor, and in personal relationships: on the background of the Chinese supersdelok he took time to organize the lush wedding on his estate - so the billionaire said the tenth anniversary of his marriage to the artist Julia Milner. About tseremos couple wanted from the very beginning of relations. "I would like to arrange a ceremony for all those ten years, on the day - 11 days 11 months 11 year", - says Milner.

Together, DST has invested in Internet companies in the late stage of development of $ 5 billion. "Exit" the Fund received $ 10 billion as a result of cache offerings and resales of shares, and $ 9 billion in the form of equity. Total portfolio Milner draws to an impressive level of $ 19 billion.

Speaking in Russian

On the Chinese companies in the portfolio accounts for approximately half of the items and about 60% of revenues. This does not mean that Milner forgot Silicon Valley. So, rumors persistently attributed to him participated in the latest round of funding of visual social network Pinterest volume of $ 367 million. Sam billionaire this information neither confirms nor denies.

But he readily talks about his main miscalculation of recent years - the mobile service Uber taxi call. DST for at least three offers the chance to invest in the Sharing the locomotive of the economy, which has grown longer assessment to $ 40 billion, but each time from a Milner pass opseny for the outcome of litigation, the founder of Uber Travis Kalanick with passenger traffic controls in many countries. "I underestimated Travis. This is a big mistake "- he shrugs.

The most concise description of milnerovskogo investment principles - make a few big bets at an early stage and is calculated to disrupt the big jackpot. In five years, the billionaire team have looked 250 companies worldwide and invested - in units.

DST has already closed four funds, the first of which is supported by Russian tycoon Alisher Usmanov 3, and the last - foreign sovereign wealth funds and wealthy American businessmen.

Milner easily dispensed with "Russian money". "I am confident that the investment industry has to be global," - he explains.

Milner is quiet and rarely enters into transactions publicly. For example, virtually no one in the market did not know that he, along with the partner of Sequoia Capital Fund Jim Goetz, had to invest in WhatsApp before mobile messenger for a record $ 19 billion bought Facebook. A few weeks before the transaction in January 2014 Billionaire kuyl of the founders of the service shares for $ 125 million.

Milner declined to comment on this investment, but a source close to WhatsApp, said of Forbes, the businessman three years courting creator messenger Jan Kuma (both - the Russian-speaking immigrants from the Soviet Union). The investor does not just startups invited to her house, and as a result he broke and hit with a billionaire on his hands. DST Money steel Kuma insurance in case of failure of the transaction to Facebook.

A native of Moscow, Milner studied theoretical physics at Moscow State University. Lomonosov, but science eventually went into business. An asset that brought him to the big leagues - the largest in the 1990s, the Russian Internet portal In 2005, the entrepreneur founded DST Global, to invest in online companies, such as the main national social network "VKontakte". In his team he invited experienced employees of the investment bank Goldman Sachs, which was preparing to IPO. "They [Goldman Sachs] also made the first presentation for Facebook. So that everything is connected, "- billionaire explains, describing circles in the air with your finger.

Time after the crisis of 2008, he spent motayas on Silicon Valley in an attempt to convince the waspsovateley promising companies in their benefits as an investor. The result - a $ 800 million invested in Twitter, Zynga, Groupon, Airbnb, and - later - in Snapchat, Spotify and Lending Club. From Zynga and Groupon Milner Foundation "came out" with the IPO companies. The Airbnb its share of DST is not yet sold.

The key to China

Fund Breakthrough in China fell for 2011. And before you in just a few months to turn the deal JingDong, Alibaba and Xiaomi, Milner 32 prudently moved the DST headquarters from Moscow to Hong Kong. The market of China represented the interests of billionaire fluent in Chinese graduate Shu Chu Harvard. He spent a year, gathering useful connections among Chinese financial advisers. One of them - the company China Renaissance led by general director Phan Bao - Chu led to Jingdong. Milner met with Liu in December 2010 and quickly agreed to invest in the online store $ 500 million in exchange for a 8.8 percent stake.

After securing partners in Jingdong, the owner of DST his way to talks with the main star of the Chinese Internet scene, Alibaba founder Jack Ma. They were nodding familiar with 2005, but only on the floort time the meeting ended with a deal - DST acquired a stake in Alibaba is below 10% (its exact size not disclosed).

Extensive communication among consultants at first helped build a network of DST for the "catch" of promising projects in China, says John Lindfors, manager of the Hong Kong office of the Fund. But "the most important people in terms of business," he said, "still remained the founders of companies."

The objective number one for the DST has become Lei Jun, founder of a unique business model and CEO of Xiaomi. Almost unknown outside China company, however, was already famous in the domestic market, and its "founding father" was called in the press only as "China's Steve Jobs." Chu asked acquaintances financiers to submit it a couple of start-ups, in which he had made "angel" investment Lei Jun. After the founding of start-ups, and he arranged a meeting with the CEO of Xiaomi in March of 2011. In September of the same year, a month after the presentation of the first Xiaomi smartphone, but even before the start of sales of the device, Milner, Chu and Lindfors over a cup of green tea has been negotiating with Lei Jun and aboutnvestitsiyah in his company.

Despite early successes Xiaomi, «entrance» in its capital looked for the famous venture capitalist great risk. Chinese manufacturers of mobile devices were valued much lower than Samsung and Apple, all filmed with a rich cream of the global smartphone market. The Xiaomi thus wanted to keep the online sales model: already came Google with its Nexus - and did a complete gadget or iPhone rival Galaxy.

But Milner, aware of all the problems that pushed the film into the background - he was so impressed with the business "triathlon" Lei Jun: Xiaomi, in fact, was ready to pay attention to the three isometric market "whales" - "hardware", a software and services. "We can not say that you are good at one thing. You have to be the best all at once "- postulated the founder of the Chinese company.

"Often ambitious entrepreneurs themselves have no idea how to reach the goals inflated - recalls his impressions of Lindfors. - But Lei Jun's obviously had a clear plan. "

After the meeting, a trio of investors plunged into the car - on the front of Chuseat, Milner and Lindfors to the back - and while the car was in Beijing traffic, interrupting each other has begun to discuss the outcome of the negotiations alive. "We analyzed all the possible business scenarios under the Lei Jun," - he describes the head of the Hong Kong office of DST.

The final word was for Milner. "I really want to invest in this company," - he concluded. Lei Jun later admitted that he did not even hoped for agreement this venerable fund as DST, invested in his adventurous project. After several months of due diligence and the Milner team in a series of rounds, including three exclusive, Xiaomi invested $ 500 million.

How he managed to get exclusive rights to invest in China's most progressive startup?

"Maybe no one believed in this company as we? - Responds evasively Milner and then adds his mantra. - To trust each other, you have to be close. "

With investor Lei Jun is really close as a few with any of its business partners. They meet ten times a year, usually "onterritory "a Chinese businessman. Discussions begin with a discussion of details, and completed discussions about big ideas. In 2014, Milner gave Lei Jun's miniature model of the universe - as a symbol of their confidential conversations.

Eternal values

In an interview with Forbes Milner as usual stingy on the stories about the secrets of making investment decisions. China campaign, he said, the logical consequence of the fact that the country "was close to integrate into the global landscape." Entrepreneurs who have a chance to attract money DST, should be aimed at changing the world in the next ten to twenty years, says the investor.

In its 53 Milner had time to thoroughly examine and Silicon Valley and China, so that the very difficult to say what place he considers home - although he has property in Russia, Israel and the United States. "When you travel 200 days a year, there is a strange feeling that you are not tied to any of the places - gestures, the billionaire said. - Literally! "

Global view of things is transformed into a main hobby Milneand - questions of the origin and future of the universe - which is an investor calls his "mission". A few years ago, he came up with it the prize for scientific achievement Breakthrough Prize and since then every year conducts the ceremony - an analogue of "Oscar" for scientists. In 2014, shocked and embarrassed laureates climbed onto the stage to receive certificates for $ 3 million out of the hands of Hollywood stars Benedict Cumberbatch and Kate Bekinseyl.

But the prize - it is only the public part of the extraordinary activity Milner-patron. Its other, no less important project - financing of the non-profit organization called "Institute for Global Brain» (Global Brain Institute). Investors optimistic about the future of artificial intelligence, as opposed to Elon Musk, Bill Gates and Stephen Hawking: he believes that computers will never be completely autonomous, and progress is pushing us to the invention of the computer and the symbiosis of the human brain.

Francis Heylayen, gray-haired Belgian genius of cybernetics, is already working on the first mathematical model of a "global brain" - a five-year grand prixMilner at € 1,5 Mill. They met in 2011, during the break between the Chinese forced marches investor. When Heylayen received a letter signed by Milner, he thought it was spam. "I could not believe that I could write a billionaire," - joking scientist.

As a result, he said Milner - and very soon was eating lasagna in the Amigo hotel, a favorite refuge investor Brussels for a two-hour conversation about their scientific activity. Billionaire Heylayena agreed to fund the team in exchange for a promise to develop a unique model of simulator-symbiotic brain. Studies last four years. Heylayen once or twice a year talking to Milner for video conferencing, as well as the customer submits the draft semi-annual reports.

Why are investors so interested in big ideas? Heylayen suggests that with the help of his works Founder DST hopes to invent a unique forecasting model. Also important cultural background: the scientist says that another colleague from Russia no less strongly tied to the "big theories" that comprehensively explain complex systems.

"Russian philosophy of love, catoraya can explain everything, "- says the mathematician.

Milner They reflect not on its own account as well thoughtfully. For his work the main thing - to meet the right person, and therefore, should always be provided in the right place at the right time. "Investments - it is very difficult - sums up the billionaire. - There is no universal answer. If there was a single formula for success, we would be involved in all investments. "