12 rules to investing like Russian billionaire Yuri Milner

Yuri Milner is no doubt one of the most extraordinary individuals I’ve ever met. Thanks to his great vision and exceptional entrepreneurial flair he and his firm (DST Global) managed to invest in such companies as  Facebook, Twitter, Spotify, Groupon, Xiaomi, Alibaba and others. Many thanks to Oleg Tinkov for introducing me to Yuri, and Leonid Soloviev for connecting me with John Lindfors and Tom Stafford.

1. Yuri hasn’t financed most of the entrepreneurs he spends time with. While other investors endeavour to build institutions that will last for decades, Mr. Milner runs what is essentially a one-man show with a rolodex that’s decidedly global. His firm, DST Global, is staffed primarily by a small team of ex-Goldman Sachs bankers based mostly in Asia who help with due diligence and fundraising. And in an industry of consummate networkers, he has taken it to the next level, hosting lavish parties for an eclectic network across various geographies and industries.

2. Invest in attention (not in revenue) – it is the most expensive thing today (and money will come). 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.” He worked in finance for a few years before coming across a 1999 report by Morgan Stanley 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!’ ”

3. Unlike many other investors, he often doesn’t take board seats and gives his votes back to the founders. 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.

Pre-IPO investments in even high-flying tech companies that are not yet profitable usually conform to a specific pattern: A prestigious VC firm gets certain preferences when it invests (i.e., it gets its money out first should the company go public) and gets seats on the board (which means it gets a direct voice in the future of the company—almost always one that advocates an IPO as soon as possible).

Milner offers something radically or foolishly different: an investment with no such preferences and no board seats. In effect, his money is like IPO money—no advantages for regular shareholders—without the burden of an IPO (the time suck of a road show, the administrative costs of being public, the short-term earnings pressure of the market).

4. He might be the most controversial money guy in Silicon Valley—sought after, feared, and derided in more or less equal measure. The message seems clear: Milner may have invested in virtually every social media powerhouse, from Facebook to Twitter to Spotify. He might be the vanguard of an entirely new financial philosophy.

To many, Milner’s success is not just too much, too fast, but also somehow unfair. Which might help explain—and Milner very much wants to explain himself—how it is that he has gone from investing in a macaroni factory in Moscow to upending the American technology business. He is trying to say his success story ought to be just as appealing as any in the Valley.

To many, Milner’s success is not just too much and too fast in a land of too much and too fast but … but … and here people start to petulantly phumpher … somehow unfair: Here’s an outsider who has handed out money at outrageously founder-friendly terms—paying huge amounts for relatively small stakes, essentially buying exclusive access to the most desirable companies on the web!

It is his outsiderness that seems most irritating and even alarming. How is it that an outsider has spotted opportunities that the Valley’s best investors missed? Does Milner’s success suggest that the rest of the world is starting to horn in on what has been, to date, as American as apple pie—the Internet future and Internet riches?

5. Effect of “crazy dumb Russian money”. What Yuri Millner did to put Facebook back into the double-digit billions? Marc Andreessen: “Yuri came through Silicon Valley in 2008 or 2009 for the first time, and he basically said “I’m in business and I want to invest.”