Digital Sky Technologies, a.k.a. Mail.ru, is the Russian investment fund that bought big stakes at then-high valuations in hot startups like Facebook, Zynga and Groupon, and recently went public in London. DST Partner Alexander Tamas was on stage at Le Web today and said they had invested $500 million overall.Because of the big numbers, people often forget an essential part of what makes DST’s investment strategy so essential. They don’t just finance a huge round — they then buy shares from founders, early employees and investors. This gives them almost as good liquidity as an IPO — and it lowers the overall valuation DST pays for the company’s stock.
(The other innovative aspect of DST’s strategy is that, unlike financial investors who would usually be financing companies at this stage, they don’t want board seats, which matters a lot to Founder/CEOs who want to keep control of their company.)
At LeWeb, Tamas said they had invested over $500 million overall in Facebook. He said they initially invested at a $6 billion valuation (and not the $10 billion that was reported at the time), and kept investing at valuations between $6 and $8 billion. Quick back of the envelope maths tells us they should own around 7% of Facebook, although of course the exact number is unknowable.
Tamas warned against trusting secondary market valuations, but since Facebook shares do sell for around a $50 billion valuation nowadays, that means their $500 million would be worth $3.5 billion today, or a 7X return in less than two years. Not bad.
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