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Last week's Economist (July 16-20, 2010 issue) has an interesting story on three large internet companies in Russia, China and Africa. That these three emerging regions have growing internet powers is interesting in itself, but there was something else in the story that caught my eye. Russian Internet giant, DST purchased a stake in Facebook last year, beating the typical American venture capital firms to the punch.

Russian Aggression

According to the article, DST took advantage of being cash rich at a time when US financiers were sitting back afraid to act because of the horrible recession gripping the world at the time.

While even highly valued companies like Facebook struggled to find capital, DST decided to pounce. Possessing both the money and the ability to act quickly and make fast decisions, they swooped in and made an offer that was difficult for Facebook to refuse.

Show me the Money

Like many internet startups, employees are stock rich, but cash poor because Facebook has not yet gone public. So DST made a particularly attractive offer. They bought the stock directly from employees, providing them with cash they so desperately wanted. According to the article, this was like an "IPO substitute" for Facebook employees. They invested a reported $800 million US, which translated into a 10 percent stake in the company. DST was rewarded handsomely when another company, Elevation Partners, recently estimated Facebook's value to be a whopping $23 billion, which if true, means DST has already tripled its initial investment (according to the Economist article).

While many might question dealing with a Russian company, The Economist reports, DST has "gone to great lengths to be open and inviting" to try and fight any possible negative perception of the company.

A Russian company investing in an American internet company might not raise many eyebrows 18 years after the Soviet Union dissolved marking the end of of the Cold War, but the fact is these three Internet Service Providers could begin to have a profound influence on the technology business moving forward. They are smart, cash rich and aggressive and they bear watching.

Today's Russia could succeed where the Soviet Union failed using good old fashioned capitalism as its primary weapon. Today Facebook, but perhaps tomorrow the world.

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Last Post by LastMitch
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Today's Russia could succeed where the Soviet Union failed using good old fashioned capitalism as its primary weapon. Today Facebook, but perhaps tomorrow the world.

Russia was never a capitalism it has and always been socialism.

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