An alien quest is good for businessThe Russian billionaire Yuri Milner’s pledge of $100 million to the search for signals from outer space seems like an ideal opportunity to grumble about billionaires who fund idiosyncratic projects that may not do anyone (except the grant recipients) any good. Yet, it could be argued that Milner and his Silicon Valley peers are making good use of money derived from inflated tech company valuations.
Milner made headlines in Russia in 1995 when, as a junior associate of the ascending oligarch Mikhail Khodorkovsky, he undertook the country’s first hostile takeover. The target was the Red October candy factory in Moscow, and its Soviet-era director mounted a spirited defense and won. Milner was trying to make a point: He acted as though Russia was like other countries. His offer was public and he talked to the press, not to the factory’s underpaid workers who owned shares, or to mobsters who might find a way to persuade the manager to step aside.
When Milner surfaced in the U.S. in the 2000s, representing the venture capital firm Digital Sky Technologies (DST), he looked as out of place as he had in Moscow in 1995. There, he seemed too American. In the U.S., he was too Russian: He seemed to be giving away huge sums to fashionable startups without demanding any control. But the money wasn’t his. It belonged to Alisher Usmanov, one of Russia’s richest oligarchs, who had strong ties to the Kremlin. Money with that kind of provenance inspires scorn, and the kinds of deals he pursued raised suspicion that they were intended to get rid of cash. Not so: Milner had a dream. He wanted to be in on a life-transforming business, the social media. His first U.S. investments were in Facebook and Twitter.
According to Bloomberg Billionaires, Milner, with 12.5 percent of DST, is now worth $3.2 billion thanks to his tech investments, which include Spotify, Airbnb, the online retailer Zalando and the mobile phone maker Xiaomi - the industry’s creme de la creme. He may have had a bigger role in driving up Silicon Valley valuations than any other investor: When “DST-style deals” became a byword, founders were empowered to demand as much as they wanted on the strength of nothing more than buzz and big user bases. Without Milner, it’s not certain Facebook would be trading at a price-to-earnings ratio of 94 and that unprofitable Spotify would be valued at $8.5 billion. The so-called “unicorns,” startups valued at $1 billion or more at the venture capital stage, might be worth far less if Milner hadn’t sought to break into the market with the brute force of Usmanov’s money and his own soft touch.
Milner helped create an anomaly that only a market cataclysm can fix. So he has the right to use his proceeds to fund another dream, that of finding extraterrestrial life by scanning radio signals from the one million star systems closest to Earth. (Milner says he was named after Yuri Gagarin, the first man in space). The sum involved - $100 million - is spare change to him: He paid that much for a house in Silicon Valley.
Milner’s money is a product of blind faith, so it’s fitting that he should spend some of it on a project underpinned by a belief that we are not alone in the universe. Perhaps tech entrepreneurs feel something of this kind on an instinctive level. Peter Thiel, who co-founded PayPal, funds research into immortality, as do Google founders Sergey Brin and Larry Page.
It may not be entirely selfless. Google trades at 34 times its earnings. It sells a lot of advertising, but its valuation is based, above all, on faith, and Brin and Page bolster that faith when they go out on a limb, financing projects with uncertain but potentially breathtaking outcomes. Someone who reaches for the stars is a visionary, not just an investor, a lucky engineer or a business executive.
What if some of these long-shot bets win the jackpot? That would make everything worthwhile - the inflated valuations and the shady money, the big talk and the grumbling about billionaires dabbling in science they don’t fully understand.
*The author is a Berlin-based Bloomberg View columnist.
by Leonid Bershidsky