The best-known Israeli in Silicon Valley is someone who has never resided here permanently. Yuri Borisovich Milner, a US citizen who has lived in Russia for most of his life and also holds Israeli citizenship, is one of the earliest and most renowned investors in social networks, such as Facebook, WhatsApp, and Twitter; companies that have shaped the Internet in the current decade, such as Spotify, Airbnb, plus companies that have lost their luster, such as Zynga and Groupon; and Chinese giants that have rearranged the global technology map in recent years, such as Alibaba, Wish, and Xiaomi.
Milner is not an investor who fanatically maintains his anonymity. Even though he usually cedes center stage to some of his personal friends, such as Facebook founder Mark Zuckerberg and Google founder Sergey Brin, Milner has become one of Silicon Valley's symbols - the man who knows what the next big thing will be and grabs it just in time. That is how he became number 52 on the "Forbes" wealth list with an estimated $3.7 billion in assets.
Milner attended last week's Prime Minister's Conference on Innovation for the purpose of awarding scholarships to 70 Israeli doctoral students. In a special "Globes" interview, he tells why he has yet to invest in an Israeli company and what his fund's future plans are. He talks about his hobby - investing millions of dollars in searching for extraterrestrial life. Another good friend of Milner died last March - astrophysicist Stephen Hawking.
"Globes": How did you spot the investment opportunities in the leading social networks when, although not just beginning, they did not occupy the leading place they do now?
Milner: "I had knowledge and understanding because I myself founded a company in Russia that was a little like Facebook, a little like YouTube, and a little like Yahoo! (NetBridge, G.W.). I thoroughly understood how activities of this type could be translated into cash. So when I saw Facebook, for example, I realized immediately where the money could come from."
You sold your holdings in Facebook and Twitter. Does this mean that the social networks opportunity has been exhausted?
"No, that's not why I sold. Our funds have a limited lifespan. We sold our holdings in those companies only because of the fund's end date, not because of assessment of the sector.
"The social networks are experiencing the network effect: the more users they accumulate, the stronger they become. At a certain stage, there was an explosion, in which the existing networks rushed to grab a lot of users, and now they dominate the sector. I therefore don't believe that there will be something new and big in this sector.
Not even niche networks?
"It's very hard to maintain niche networks and hard to build them. We specifically don't invest in them."
In that case, what will will be the next big Internet thing?
Our view of the Internet is optimistic. We believe that economically the Internet will grow 10-fold in the next decade - the same rate at which it's growing now. We've invested a lot in e-commerce in recent years. There can be local activity in this sector, which does not require being very big, so there are a larger number of opportunities."
Milner previously said that he foresaw a future in which the Internet becomes a kind of collective human brain creating intelligence that does not stem from a single person.
What other markets do you believe in?
"Other than social networks and e-commerce, we invest in transportation of the future and fintech. In transportation, we definitely believe that autonomous vehicles will be dominant, especially in the large cities. Airborne vehicles will probably dominate interurban transportation because of higher speed and less risk of encountering obstacles."
Milner's main connection to date to investments in Israeli high tech took place when DST, the fund he founded, acquired ICQ from AOL in 2010 for $187 million. The developer of ICQ, Mirabilis, was an Israeli company before AOL acquired it in 1998 for $400 million. When the legendary instant messaging company was sold to Milner, it was in effect no longer an Israeli company.
Have you ever seen companies in Israel that interested you?
"Our fund focuses more on Internet companies that address the end-consumer, such as Facebook, WhatsApp, and Alibaba. Israelis, on the other hand, are famous for companies that address enterprises." Milner nevertheless cites fintech as one of the sectors that interests him, so it is possible that a connection with Israel could come in this sector.
"I stay as far away as possible from politics."
Milner, 56, studied theoretical physics at Moscow University, but dropped out because he felt that he could not stand out the way he wanted to, and set his sights on studying business administration. In 1990, with the rapprochement between the US and the Soviet Union, he became the first Russian student at the prestigious (and capitalist) Wharton School of Business at the University of Pennsylvania.
After graduating, Milner worked in analysis of Russia for the World Bank, a period he refers to as "my lost years." It was the time when leading state assets in Russia were being privatized, and the successful grabbers got rich quickly. At the beginning of the century, Milner made up for lost time by founding a network of Internet companies named NetBridge. These companies imitated what was being done in the sector in the US. In Russia at that time, however, there was no real venture capital model; he and his colleagues were unable to obtain large external investment, and had to learn how to make money more quickly than their US counterparts.
In 2001, NetBridge was merged with Port.ru, which owned the Mail.Ru email service. The new company was called Mail.Ru and Milner was appointed CEO - and discovered that it had no revenue model. He developed the group over a decade, then had it hold an IPO on the London Stock Exchange in 2010 at a $5.6 billion valuation.
He resigned his position two years later and focused on DST Investments, which he had worked on at the same time. He turned a $200 million investment in Facebook in 2009 into $4 billion when it was sold in 2013-2014. Around the end of the last decade, he also invested $800 million in Twitter, $125 million in WhatsApp, and an estimated $500 million in Alibaba. Forbes Magazine estimates that the $5 billion invested by the fund became $19 billion within five years.
Last year, however, something went wrong with Milner's machine. When the involvement of agencies associated with President Vladimir Putin's regime in Russia in efforts to influence the US elections through social networks was exposed, attention immediately focused on the leading Russian investor in those networks. He completely denied any connection and also revealed that he had already sold most of his investments in these networks, and therefore presumably could not have influenced them, although he remains a close friend of Zuckerberg.
His denials indicate that, at least officially, he is severing his ties with Russia and those who run it, although he was previously a senior executive in Alliance-Menatep, a company linked to leading oligarchs, and later received investment for his fund from a concern named VTB, a government bank involved in strategic deals for the Russian government. Critics point out that Milner is now investing in a real estate investment platform named Cadre, co-founded by Ryan Williams with Joshua Kushner and his brother Jared, son-in-law of US President Donald Trump, who allegedly benefited from Russian involvement in the US elections.
In this conversation, Milner announced in advance that he had no intentions of talking about politics. "When you grow up in the Soviet Union, it makes sense when you hear your parents say, 'Don't get involved in politics.' That's what I did, and that's what I do to this day," he previously told the media. In a letter he wrote on the question of subverting the US election, Milner said, "When I grew up in Russia, I regarded the US as the land of unlimited opportunity, and when I got here, I realized that I was right. In Silicon Valley, no one cares where you came from, only what you can do. Now, all of a sudden, being Russian is automatically suspicious. It's as if the fact that Zuckerberg was exposed to my Russianness contaminated him." In his letter, he added that his involvement in the elections was a fairy tale, because the fund had never had any real influence on the social networks' business.
Whether or not the critics were convinced by his arguments, it does not appear that anyone in Silicon Valley is reluctant to befriend Milner or accept his money. Now, however, he has another political difficulty. As the trade war between the US and China heats up, Milner is an investor on both sides; he is friendly with Jack Ma, who recently resigned from Alibaba, together with his ties in California. He is determined to stay away from this question as well.
Unafraid of extraterrestrials
While Milner is determined to avoid political issues, when we start talking about space research, his attitude changes completely. Milner was named after Yuri Gagarin, the Russian astronaut who became the first man in space in 1961, the year when Milner was born. "Maybe it was a message that my parents sent me," he says. His father was a Russian academic in economics, while his mother researched viruses, but young Yuri was more attracted to the profession of his namesake than to that of either of his parents.
"As a boy, I read books about space and the universe, and I really wanted to know whether there were other life forms," he remembers. "I was inspired mainly by Iosif Shklovsky's book, 'Universe, Life, Intelligence,' which dealt with what we knew then about the universe and the possibility that it could contain life."
Milner was diverted from this sphere when he abandoned his studies in physics. A few years ago, however, he met the late Prof. Stephen Hawking. "He was one of the people with whom I could discuss my speculations about the best way of approaching this project of searching for life." Together, Milner and Hawking founded three well-financed ventures designed to scan the universe. Milner invested himself and raised money for the ventures from Silicon Valley and China - an amount that currently stands at $100 million.
The first project is Breakthrough Listen, which began operating in 2016. The world's largest telescope was built for the venture and aimed at far distances in order to scan one million stars in a search for signs of communication using laser and radio waves. Estimates are that the scan will be finished in 10 years. The second project is a focused broadcast to distant points in space in order to increase as much as possible the chance that extraterrestrials will hear us.
Life or intelligence is a very broad category. Why should we believe that such life forms will communicate via radio waves or laser?
"The laws of physics dictate that these are the only forms of communication that make it possible to transmit information at high speeds over long distances. Of course, it is possible that intelligent life does not communicate over long distances, but if they have made progress themselves in understanding the universe, as we have, and even if they look completely different from us, they should have already discovered these communications methods, in which case it will be very difficult for them to conceal them. We're also constantly 'dirtying' the world with our broadcasts, and if they start a search project, it won't be hard to find us."
In the third and more innovative and exciting project, "Breakthrough Starshot," miniature spaceships weighing about one gram will be developed and launched into space using a laser beam from Earth. Milner and Hawking believed that within 20 years, this approach would make it possible to reach the Alpha Centauri solar system, in which conditions fostering life were likely to be discovered. After that, if everything goes according to plan, it will take four more years to transmit messages back to Earth. Incidentally, Zuckerberg is also involved in this venture.
"We believe that within 5-10 years, we'll know enough to determine whether our goal is achievable. If it is, we'll invest more money in the project," Milner says.
Do you ever think about a meeting extraterrestrials? What could happen?
"I'm not worried, if that's the question. The distances are very great. Finding and communicating is one thing. Being in the same place physically is a story for the distant future."
"Shimon Peres persuaded me that Israeli higher education was important"
Milner visited Israel the other week for the launch of a special NIS 25 million prize for 70 Israeli scientists in honor of the 70th anniversary of Israel's founding. "In the first part of my career, I was a physicist," he reminds "Globes." "Although I went on from there to the business world, the connection with science was always important to me. I looked for a way to pay back to science a little of what I got from it.
"When my investments started succeeding, I sat with my wife, Julia, and we decided to create the Breakthrough prizes. We invited other sponsors to support it, including Zuckerberg and Brin. The idea was to celebrate scientific excellence. Today, in the society we live in, the celebrities are in sports and entertainment - almost never from science. I want to create a platform for celebrating the scientist. The Nobel prize took this idea quite a way forward, but I want to add to it and reach larger sections of the public."
The Breakthrough prizes, $3 million per scientist, are awarded in three categories: physics, life sciences, and mathematics, while more modest scholarships are granted to young researchers. Since 2012, more than $200 million has been granted in the various prize categories. The last ceremony was held in the NASA hangar in California, and despite Milner's statements that he hopes to make scientists celebrities, actor Morgan Freeman acted as master of ceremonies and rapper Wiz Khalifa performed.
An Israeli prize is now being added to the international ones. The scholarships will support 70 doctoral students in physics, mathematics, and life sciences for four years. "The inspiration for this prize was Shimon Peres, who before his death convinced me of the importance of Israeli higher education and brain research," Milner explains. "So we're now also awarding a special international prize for people dealing with mathematical models of the brain."
Is the motive for the Israeli prize your personal connection to Israel, or appreciation for science here?
"Both. I don't visit Israel very often, but it’s special for me and my whole family. The science and technology being developed here are the top, and that excites me. What do you think? Will this really help promote science in Israel? I really hope it will."
At an event held to mark the awards, Tel Aviv University President Prof. Joseph Klafter thanked Milner for the scholarships project and said that they would enable outstanding researchers to develop research likely to lead to global breakthroughs. Hebrew University of Jerusalem President Prof. Asher Cohen added that he believed that the scholarships could help researchers devote most of their time and energy to their work. Technion, Israel Institute of Technology President Prof. Peretz Lavie said, "The scholarships will enable us to expand and deepen even further the research infrastructure on which the scientific and technological breakthroughs affecting the lives of millions of people all over the world are based."
Published by Globes, Israel business news - en.globes.co.il - on November 5, 2018
© Copyright of Globes Publisher Itonut (1983) Ltd. 2018
