Fort Ross Ventures looks like a typical venture capital firm. It was created about seven years ago in Silicon Valley with a focus on funding young companies. The founders named it after the first Russian settlement in the U.S., a nod to their heritage and to one of the firm’s largest backers, Moscow-based Sberbank.

Today, Russia is waging an unpopular war against Ukraine, and Sberbank is subject to crippling sanctions by Western nations. The other investors whose money is tied up in Fort Ross Ventures are, naturally, “very concerned,” said Victor Orlovski, a founder and managing partner at the firm.

Investors “are calling and asking, ‘Victor, what do we do?’” Orlovski said. “My answer is simple: If an investor becomes toxic, we will immediately isolate them from the other pool of investors.”

In recent weeks, global businesses have rushed to dump Russian holdings, and are ceasing operations in the region. But for venture firms that have accepted funds from Russian investors, de-linking from the country is a thornier imperative. Rubles may be part of a much larger fund, and in some cases, may already have been committed to startups. And because so many family offices of Russia’s wealthy are based offshore, it’s not immediately obvious what cash came from an oligarch. Many VCs aren’t required to disclose who their investors are, so it’s hard to know which investors and startups are awash in Russian money.

Aside from handing out cash to venture firms, Russian investors last year also poured $9 billion directly into startups across 232 deals, the vast majority of them taking place outside of Russia, according to data collected by research firm PitchBook. That total is triple the amount Russian investors spent in 2020.

Recipients of that money may now find themselves uncomfortably exposed to the country. Since the breakout of the war, some startups and VC firms are turning down deals with Russia-linked investors and companies. Meanwhile, in the opaque world of startups and venture capital, previously undisclosed ties now seem problematic.

When it comes to Russian investments in tech, “my guess is there’s a lot out there,” said Jeffrey Stein of financial crimes research service Deep Discovery. The norm has long been that if a Russian investor is “not on the sanctions list, it’s all go ahead,” he said.

Some links between Russian investors and U.S. businesses date back to early in the Obama administration, during a more optimistic time for relations between the two superpowers. For example, in Obama’s first term, Silicon Valley firm DCM accepted backing from Russian Venture Capital, an arm of the Moscow-based Russian Venture Company. Around the same time, Bay Area-based venture firm IVP also took an investment from Russian Venture Capital.

Now, the Russian Venture Company is subject to the strictest form of U.S. sanctions. A spokeswoman for DCM declined to comment. A spokeswoman for IVP said the Russian firm invested in two of its funds, both times committing less than 1% of the total capital of the fund. She also said that IVP is consulting lawyers about how to abide by all applicable sanctions and regulations.

To avoid the reputational and financial risks of having a business partner wind up on a sanctioned entities list, some VC firms are now steering clear of Russian money even when they’re not required to. “As far as Russia is concerned, we are taking steps beyond simply complying with all international sanctions,” Index Ventures, with offices in London and California, said in a recent statement. “We are therefore committing not to make any investments in Russia until further notice.” The firm also said it would not take on any Russian investors and that it would support its portfolio companies trying to cut ties with the country.

Even co-investing alongside a Russian investor has become a red flag. Index Ventures said it would not co-invest alongside any groups or individuals with ties to the Kremlin. And in late February a Russian investor was asked to bow out of an undisclosed seed investment being led by London-based Hoxton Ventures into a British startup, said Hoxton partner Hussein Kanji.

“I don’t ever want to take the risk of ending up on a cap table with someone who could be sanctioned,” Kanji said. “There are sides now, and you need to be on the right side.”

Some prominent Russian investors have recently worked to distance themselves from the country. For example, venture firm RTP Global was founded by entrepreneur Leonid Boguslavsky, who showed up on a controversial U.S. Treasury list of oligarchs identified as allies of Vladimir Putin in 2018. The firm, originally founded as ru-Net in 2000, is now based in London, a spokeswoman said, where it focuses on Europe, North America, India and Southeast Asia.

“Neither RTP funds, nor its beneficiaries, are under any sanctions/restrictions, so our business is not adversely affected,” the spokeswoman wrote in an email.

Perhaps the most prominent U.S. investor with ties to Russia is Yuri Milner, a Russian-Israeli billionaire. Milner’s firm, DST Global, was an early investor in some of the largest internet companies, including Alibaba Group Holding, Facebook and Twitter. Milner is not facing any action from the U.S. or other Western governments, and is not on the U.S. list of oligarchs.

DST has taken funding from Russian state-owned VTB Bank, according to documents revealed in the Paradise Papers. After Russia invaded the Crimean peninsula in 2014, VTB faced sanctions. However, DST had already fully returned the capital from VTB before that point, a DST representative said. Less than 3% of the total capital ever raised by DST Global was from VTB Bank, all prior to 2011, the representative said.

Alisher Usmanov, a Russian oligarch who was recently added to sanctions lists, was also a DST investor. But Usmanov has not put in money since 2011, the spokesperson said.

Meanwhile, Milner has appeared to offer a kind of rebuke to the country of his birth. This month, Milner’s foundation donated millions to a GoFundMe campaign for refugee relief run by Ashton Kutcher and his wife Mila Kunis, who is Ukrainian American.

Individual startups are also affected by shifting international rules. Israeli battery startup StoreDot and New York-based transportation platform Via Transportation have both taken cash from funds backed by Roman Abramovich, a Russian oligarch who is now sanctioned in the U.K. Representatives for StoreDot and Via declined to comment. Earlier this month, New York delivery startup Buyk, partly owned by Sberbank, furloughed its chief executive officer, along with 900 employees. Moscow’s limits on fund transfers prohibited Buyk’s Russian founders, which had been funding the company until its next financing, from wiring cash out of the country to the company.

In the case of Menlo Park-based Fort Ross Ventures, the firm with Sberbank as a major investor, it manages about $500 million and is actively working to ensure it complies with the latest rules. Orlovski, the managing partner, spent more than seven years at Sberbank prior to founding Fort Ross in 2015, and said the firm is analyzing the new measures put in place against Russia and Sberbank. “We’re not hiding Russian oligarchs’ money here,” Orlovski said. “We’re going to do what it takes to follow the law.”

Fort Ross, which launched a new fund in December, already deliberately left Sberbank out of the fundraising in a bid to distance itself from the Russian bank, Orlovski said. Now, because Sberbank is not on the U.S. list of Specially Designated Nationals, which sees the most severe restrictions, Orlovski said the firm is still analyzing what steps it will be required to take. For now, the investor doesn’t believe there will be a meaningful impact to the firm. He said Fort Ross is not planning to return Sberbank’s capital and that brokering a sale of the stake would be a possibility, but the firm is not currently pursuing it.

In the event that the U.S. decides to hit Sberbank with a full blocking order, though, the bank’s capital in any fund would be completely frozen, said Brendan Hanifin a partner at Ropes & Gray LLP. ]

The morality of VC funding can be complex. Often, tech investment firms and startups believe that their first duty is to build great businesses, using whatever funds available — even though private funding has not been hard to come by in recent years. Patricia Cloherty, who pioneered post-Soviet Western investment in Russian companies via her roles at the U.S. Russia Investment Fund and Delta Private Equity Partners, said venture firms typically obeyed the letter of the law, but not more. Now, of course, obeying the law could get more complicated as sanctions proliferate.

“Most venture firms love anybody with money,” she said. “It really doesn’t matter what nationality you are.”

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