If you’ve ever wanted to grab a piece of some of the hottest web startups in Silicon Valley and elsewhere, the upcoming initial public offering of Russian investment fund Digital Sky Technologies could be just what you’re looking for. The company has been widely rumored to be looking at a public share issue, and a report in the New York Times says that it has chosen Goldman Sachs as the lead underwriter for the IPO, which is expected to arrive sometime in 2011. The fund, which is controlled by one of Russia’s wealthiest men, has investments in what are arguably three of the hottest Internet companies on the planet: Facebook, Zynga and Groupon.
Digital Sky’s IPO offers investors the ability to buy shares in what has become a kind of mutual fund for hot tech companies. While it may not own a majority stake in any of the U.S. companies it has financed, the fund has a substantial enough investment in them to have an impact on its stock, particularly if any of its U.S. holdings decide to go public and see a subsequent rise in their market value (Facebook’s investors have said that they are not planning an IPO). Between Zynga, Facebook and Groupon, DST has a stake in companies that are estimated to be worth more than $30 billion.
DST first invested in Facebook last year, acquiring a 2 percent stake for $200 million, valuing the company at $10 billion, and later agreed to buy a further $100 million worth of stock from employees of the company (the latest investment in Facebook by Elevation Partners valued the social network at $23 billion). The Russian fund then participated in a $180-million funding round for Zynga that valued the social-game company at close to $2 billion, and earlier this year DST led a $135-million financing for Groupon that put a market value of more than $1 billion on the group-buying startup.
The Russian company is said to be a preferred investor for many companies because it cuts deals very quickly, and doesn’t require board seats or some of the other quid pro quo agreements that many venture capital groups ask for when they invest.
Investors who buy into the investment fund won’t be getting exposure to just Silicon Valley or Western startups, however: Digital Sky also has a substantial portfolio of Russian web companies, including Mail.ru — a leading web portal. The Russian fund also owns stakes in several large social-networking sites in Russia and Poland, and according to some estimates, controls companies that account for 70 percent of Russia’s Internet traffic. Major shareholders of the Russian company include the African media group Naspers (s NSPN), which recently bought 29 percent of Digital Sky’s stock, Russian billionaire Alisher Usmanov (who holds 27 percent) and Chinese web giant Tencent.
Of course, there’s always the chance that some or all of the investments that Digital Sky has made will turn sour, and the company will wind up holding a bag of useless preferred shares in failed startups — which would leave any shareholders of its IPO in the same boat. But there will likely be plenty who are willing to take that risk when the company finally launches on the public market.
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