If you hadn’t heard of Russian Internet holding company Digital Sky Technologies one year ago, you probably weren’t alone. But last May — almost exactly one year ago — DST took the tech industry by storm with a $200 million investment in Facebook. It followed that up with a huge investment in Zynga, one in Groupon (and another in Facebook). Today at TechCrunch Disrupt, renowned interviewer Charlie Rose is sitting down with DST co-founder and CEO Yuri Milner to talk about Facebook’s dominance, social gaming, and more.
Rose: You were on your way to becoming a physicist, then you ended up at Wharton, then the World Bank. Where did you think your life was heading.
Milner: Back to Russia.
Rose: You put together the company in 99? What was the idea?
Milner: Internet was becoming big everywhere in the world. Russia is the place I thought it would thrive. There are only 4 countries in the world other than US: China, Russia, Japan, South Korea. There were a couple of exceptions. In Russia, the main reason is engineering talent. Backstage I looked at ACM championship (Olympics for programmers). Russia got six out of ten top places in the last decade.
Rose: When you put together the company. You wanted to create a company, DST , that would invest in Internet Companies, what is the model? How does it differ from traditional VC firms?
Milner: 10 years ago it was no different. In the last few years, it evolved toward late stage investment. This is valuation of around a billion, avg. investment of something like $100 million.
Rose; In other words, you want to see an established business. And you make this investment looking for, a payout from an IPO?
Milner: Yes. Either IPO or acquisition. I think the kind of investments we’re doing in the last 12 months are helping companies to delay IPO. Get another 1, 2 years to run to focus on the product.
Rose: Why Facebook?
Milner: It was the most fascinating company we had ever met. We’ve made investments in 5 social networks before Facebook. We thought we knew a few things about social networks. Facebook was a logical step.
Rose: Backstage you told me about an article in the NYT that spoke to you when we think about why social networking has become such a phenomenon.
Milner: Story was that human civilization started to develop with first social network. Emerged where population concentration was high. Helped propel to where we are now. Facebook is next step of creating a huge human brain to embrace hundreds of million, possibly billions of people. Facilitate exchange of information never seen in history of civilization. 10,000 pieces of information exchanged every day. In one year Facebook grew 3x. Three fold increase in information sharing per person.
Rose: You think FB will be one of most valuable companies on the internet. what would prevent it from doing that.
Milner: I think FB is important globally because it’s going to be one social graph that is unifying all civilization, maybe with a few exceptions. The company that creates one global social graph will be very important going forward. It will be Facebook, with maybe 2-3 local social networks able to sustain competition long term.
Rose: You believe in Russia they’ll skip email and go right to social networks.
Milner: Russia is one of the places where significant presence of social networks are driven by domestic players right now.
Rose: If Facebook is not dominant, where will it be?
Milner: THere are certain places in the world where the answer is out there whether FB will dominate — the four countries I already mentioned. Other places where there will be a tough battle.
Rose: What did you get out of the John Doerr Interview?
Milner: I agree that this will really change the way… When my wife bought the iPad her pattern of using the internet changed dramatically. She’s using it 10x more than before because it so useful and convenient.
Rose:Some people look at the iPad, there will be competitors. Does having the early start.. does that mean that this has not only the headstart but likelihood of gaining majority share?
Milner: I think so. I think the pace of change is really accelerating. You can become very big very fast.
Milner: I have this ration that if you divide age of entrepreneur by market cap of company. For Facebook it’s one. Every year of his life Zuckerberg has been making $1 billion for investors.
Rose: What advice to you give to people like Mark Pincus?
Milner: I’m not in business of influencing them… I’m influencing by them. I can bring some global perspective. Because we’re global we can potential bring global perspective to the table.
Rose: Where are the opportunities on the Internet?
Milner: A lot of it will be driving by US, picked up elsewhere..
Rose: Are there restrictions in terms of international? Will we see some kind of loosening of who has access to the market? Or does access present a problem?
Milner: I think China is going to go its own way. Russia is completely open as far as competition is concerned. Facebook is competing with a whole bunch of local networks. FB is blocked in China.
Rose: Do you think that will change?
Milner: I don’t know. It’s a tough question. In Russia, I don’t see any signs of it changing.
Rose: Finally, Facebook privacy. Where are we.
Milner: I think the definition of privacy is changing as everything else. People view privacy now different as opposed to five years ago. There’s something called Zuckerberg law. Similar to Moore’s law. Every 12-18 months the amount of information being shared between people is doubling. Basically means that people at large don’t really see that as a huge concern. But when they do I think Facebook is providing the tools to limit the information. I think the WP article today talks about making them more visible.
Rose: You want to be in this for a long time, how do you define a long time?
Milner: I think the companies we are investing in are in 5-10-15 year trend. I do want to stick around and watch them grow..
Rose: What is it about these goldman sachs people, you’re 75% Goldman Sachs.
Milner: They didn’t give me a job 10 years ago so I’m taking their people *laughs*.