Russia wants your startups
Photoillustration: Getty Images; Protocol

Russia wants your startups

Source Code

Good morning! LiveJournal was Russia’s first connection to American tech. My name’s Owen, and I’m old enough to remember LiveJournal.

From Russia, with money

“The more you know, the less interesting it'll all seem.” That’s how LiveJournal co-founder Brad Fitzpatrick tried to calm restive users alarmed by a partnership the blogging service had struck with Russian internet company SUP in 2006. A year later, LiveJournal’s parent company sold it to SUP.

It was the first strand connecting Russian money and American tech, a web that would soon spin itself around most of the social media universe. And looking back on it from 2022, with Russian tanks besieging Kyiv, that history looks far more interesting.

Silicon Valley was still getting back on its feet in 2007. The real estate bubble was about to pop, which meant startups had to hunt far and wide for funding.

  • Russia was finally crawling out of its ’90s slump, and its economy was booming. An upstart Russian investment firm, Digital Sky Technologies, was looking for investments.
  • Five-year-old Facebook was still losing money. It had raised $240 million from Microsoft in 2007 at a $15 billion valuation, but it needed more. DST gave it $200 million and didn’t even ask for a board seat. Facebook had to accept a lower valuation of $10 billion.
  • Twitter raised $400 million from DST in 2011.
  • When Facebook and Twitter later went public, DST made big gains on its investments.

The big revelation came a decade later. The Panama Papers and Paradise Papers megaleaks revealed that the Kremlin had backed DST.

  • State-owned firms VTB Bank and Gazprom steered funds to DST to finance its investments in Twitter and Facebook.
  • DST founder Yuri Milner denied any wrongdoing, saying VTB was a passive investor. “It never even occurred to me back then that VTB Bank was not just another investor for us,” he told The New York Times.
  • DST sold off its Facebook shares in 2013 and its Twitter shares in 2014. At its height, DST owned more than 8% of Facebook and 5% of Twitter.
  • Since 2014, DST funds haven’t taken any money from Russian institutional investors, the firm said, and it no longer even has an office in Russia. Less than 3% of the $12.5 billion it’s invested since 2009 came from Russian institutions.

So what did Russia gain? A homegrown social media sector that has stayed under the Kremlin’s control.

  • DST also backed VKontakte, a Russian Facebook clone now known as VK. Facebook took over most of the world, but it never quite conquered Russia. A long-running map of social networks shows Russia, Ukraine and Belarus as VK territory.
  • LiveJournal, which moved its servers to Russia in 2016 and banned “political solicitation” the following year, is now one of several venues for Russian propaganda, the Stanford Internet Observatory reported.
  • Facebook — sorry, better make that Meta — and Russia are feuding. Meta is placing fact-checking notices on Russian media accounts, which Russia is calling “censorship.” The country said it would “partially restrict access” to Meta services, which include Facebook, Instagram and WhatsApp.
  • DST’s still actively investing in tech: It participated in a $425 million round in business-credit startup Brex last year, and a $935 million round raised by supply-chain startup Flexport in February.

The more you know, the more interesting it seems, doesn’t it? The Kremlin’s financial support of DST didn’t need to be part of a deliberate campaign. By encouraging Western companies to think of Russia as a ready source of funds and a market to exploit, Putin got what he wanted anyway. Sen. Mark Warner recently called on Big Tech to watch out for Russian influence operations. But it’s Russia’s long game that got short shrift.

— Owen Thomas (email | twitter)

A MESSAGE FROM MODERN TREASURY

Payment operations can drain time and energy from Finance, Product, and Engineering teams that would otherwise drive growth and deliver greater value to customers. Unsurprisingly, 86% of leaders are now prioritizing improvements to their payment operations. Download our report to learn the costliest payment-related challenges and how fast-moving companies are solving them.

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People are talking

Airbnb is hoping to house 100,000 refugees fleeing from Ukraine, Brian Chesky announced:

  • "We need help to meet this goal. The greatest need we have is for more people who can offer their homes in nearby countries, including Poland, Germany, Hungary and Romania. If you can host a refugee, go here."

JustAnswer’s Andy Kurtzig said the company is standing by its Ukrainian workers:

  • “Lots of companies are pulling out of Ukraine … and that’s exactly what Putin wants. We’re not going to flee and run away.”

Mykhailo Fedorov, a Ukraine official, asked Tim Cook to stop offering Apple services and products to Russia:

  • "Such actions will motivate youth and active population of Russia to proactively stop the disgraceful military aggression.”

Coming up

MWC Barcelona starts today. After a quiet 2021 event, this year’s show is expected to have major announcements from several phonemakers.

eTail also begins today. The three-day ecommerce conference will be held in Palm Springs.

Notion is hosting an event on Wednesday called Block by Block, which will include announcements about new features and workshops.

“The Dropout” premieres Thursday. This is the Hulu version of the Theranos story, with Amanda Seyfried playing Elizabeth Holmes.

In other news

The EU is weighing a SWIFT ban and a freeze on Russian assets. European Commission President Ursula von der Leyen said she would coordinate with the U.S., Canada, France, Germany and Italy to propose the sanctions to EU officials.

Facebook, Twitter and YouTube have turned off ads in Russia and Ukraine. Facebook is blocking Russian state media from advertising or monetizing in other forms; Twitter is pausing ads in Russia and Ukraine “to ensure critical public safety information is elevated and ads don’t detract from it”; and YouTube blocked several Russian channels from monetizing.

Meta described a hack it identified that targeted a group Ukrainian public figures, including military officials and politicians. It was attributed to a group referred to as Ghostwriter, which gained access to social media accounts and posted anti-Ukraine videos.

Elon Musk said Starlink internet satellites are active in Ukraine. The country’s vice prime minister and minister of digital transformation asked him to offer internet service.

Russia cut off some access to Facebook after trying to order the platform to stop fact-checking and labeling posts. Russia also cut off some access to Twitter.

Ukraine will allow crypto donations after all. The country is taking donations in bitcoin, ether and USDT and has raised over $10 million in crypto as of Sunday morning.

Hayden Stafford is leaving Pega next month, a spokesperson told Protocol. Stafford has been the company’s president of global client engagement since 2020.

A state bill ensuring new benefits for ride-hailing drivers is moving along. The Washington state house approved a bill guaranteeing drivers benefits like paid sick time and workers’ compensation, but it also classifies them as independent contractors.

Discord wants to stop health misinformation, and will even take into account off-platform behavior.

How Google Maps tracked Russia’s invasion in real time

Professor Jeffrey Lewis realized Russia was invading Ukraine long before the news went public. He wasn’t on the ground or scrolling through social media to notice what was happening; Lewis found out through Google Maps.

Traffic data on the platform showed a traffic jam before rush hour, suggesting that cars were being blocked as military vehicles drove by, The Washington Post reported. (Google yesterday temporarily disabled live traffic data in Ukraine.) The story is a good example of the ways technology can show people events from thousands of miles away, be it through TikTok videos or tweets. And now, tech is allowing people to see events up close in ways only governments could before.

A MESSAGE FROM MODERN TREASURY

Scaling a company that moves money isn’t easy. Bad process, software, or luck can lead to costly errors, and worse, distract from your main priorities. Yet, many companies still struggle to build scalable payment infrastructure. Download our report to learn the main barriers companies face upgrading their payment operations.

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Thoughts, questions, tips? Send them to sourcecode@protocol.com, or our tips line, tips@protocol.com. Enjoy your day, see you tomorrow.

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