- Startup investor Index Ventures will halt investments in Russia.
- Businesses have raced to take a stand as sanctions and a sense of moral obligation bite.
- Other VCs retain tech investments in or linked to Russia.
Russia’s invasion of Ukraine has prompted businesses to examine their ties to the country as sanctions and a sense of moral obligation bite.
Venture capital firms, which fund fast-growing technology startups, are now scrambling to explain whether they have taken any cash from Russian oligarchs, directly or indirectly, or have holdings in Russia. VCs are not obligated to disclose their own backers, known as limited partners, making it difficult to confirm absolutely which investors have financial ties to Russia, and how they may be impacted by sanctions.
Index Ventures, an early backer of Dropbox, Robinhood, and many other household tech names, stated on March 7 that it would drop investments in Russia altogether.
In a blogpost, the transatlantic investor said it was “taking steps beyond simply complying with all international sanctions” in order to “cut off resources” that would in any way support the Russian regime.
“We are therefore committing not to make any investments in Russia until further notice. We will not co-invest with entities and individuals with links to the Russian regime,” the firm said. The investor stated it has no Russian backers in its funds.
Russia is already under heavy sanctions in the West, and now a pariah in the global financial system. Index’s move to halt investments altogether will put pressure on other investors to make similar public commitments.
Insider approached top-tier investment firms that have made bets on startups based in Russia or with Russian ties for comment.
Big-name investors have current ties to Russian startups, which in turn have state connections
Though Russia’s startup ecosystem has lagged its counterparts in the rest of continental Europe, there are some startups based in Russia – with direct ties to Russian state entities – that have attracted some of the biggest names in private investment.
Mubadala Investment Company is Abu Dhabi’s sovereign wealth fund and a key investor in Japanese conglomerate SoftBank’s $100 billion startup investing vehicle, Vision Fund 1.
In January, Mubadala backed Russian data center operator IXcellerate in a $190 million investment round, co-investing alongside SberInvest, the investment arm of Russian state-owned lender Sberbank and the Russian Direct Investment Fund (RDIF), Russia’s sovereign wealth fund.
Both Sberbank, which holds around a third of Russia’s bank assets, and RDIF have been sanctioned by the Biden administration and the UK government.
The UAE has maintained a neutral stance on the Russia-Ukraine war, and Mubadala said it is monitoring and assessing the current situation.
Meanwhile InDriver, a transport app with roots in the Siberian town of Yakutsk, raised $150 million in a Series D round in 2021 with backing from big-name venture capital firms including General Catalyst and Insight Partners.
Though it is now headquartered in California, public Facebook posts indicate it retains offices and employees in Moscow and Yakutsk.
inDriver Facebook page
Many of its investors are undisclosed.
However, InDriver was publicly lauded by a portfolio manager at the Internet Initiatives Development Fund, a VC fund established by a Russian government agency that is in turn chaired by Vladimir Putin.
InDriver backer General Catalyst pointed Insider to its blogpost published on March 1 that outlined “a substantial donation” to a Ukraine crisis fund, as well as its work to address the “safety and wellbeing” of employees and families of portfolio companies and limited partners.
The post did not say the firm would stop investment into Russian companies or co-investment with Russian-state linked entities.
Insight Partners did not respond to Insider’s request for comment.
What counts as a Russian company?
Drawing the line on Russia is more complicated than it looks, as Russian startups and investors have gone global.
Few Russian or Russian-linked startups backed by top VC firms are actually based in the country, though they may retain ties. Investors appear less willing to cut off existing portfolio firms with connections to Russia.
One example is database startup ClickHouse.
Now incorporated in Delaware, ClickHouse span out of Russian tech giant Yandex in 2021. Yandex operates Russia’s biggest search engine, as well as ride-hailing services and self-driving cars. It has expanded beyond its home country, listing on the NASDAQ and registering in the Netherlands.
While Yandex is not targeted by sanctions, British lawmakers now want to impose restrictions on the firm; Uber has removed several executives from the board of its joint venture with Yandex; and two US-based non-executive directors resigned from Yandex’s board earlier this week.
In 2019, Yandex agreed a deal with the Kremlin to hand veto power for key corporate structuring decisions to a newly created “Public Interest Foundation”, to allay the regime’s fears of foreign control and to “defend the country’s interest.”
Yandex has also been accused of supporting the Kremlin in controlling the flow of information in the country during the war. Lev Gershenzon, former head of news at Yandex, told ex-colleagues to quit the firm in a post on Facebook because it was “hiding information about the war” from Russian citizens.
Several Western venture capital firms are co-investors in ClickHouse alongside Yandex.
In October 2021, Index participated in a $250 million Series B round in ClickHouse that was joined by Coatue Management, Altimeter Capital Management, and Lightspeed Venture Partners.
ClickHouse’s board currently consists of one member nominated by Yandex’s Dutch division and another seat Yandex is entitled to is currently vacant. The company doesn’t have operations in Russia, and moved its engineering team from Moscow to Amsterdam following the spinout.
For its investors, that seems to be sufficient.
A Lightspeed spokesperson said the firm “doesn’t have any investments in Russian companies, and doesn’t have any capital from Russian LPs.”
Insider understands Coatue does not have a seat on the ClickHouse board after investing in the startup at the Series B stage.
Aaron Katz, CEO of ClickHouse tweeted on March 3 that he and the firm’s Russian co-founders “condemn the Russian invasion of the Ukraine.”
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