Facebook's Russian backer buys into Zynga
Digital Sky Technologies, the Russian investment firm that poured money into Facebook Inc. earlier this year, has purchased a $180 million stake in Zynga Inc., an increasingly popular maker of games used on the social networking service.
SAN FRANCISCO - Digital Sky Technologies, the Russian investment firm that poured money into Facebook Inc. earlier this year, has purchased a $180 million stake in Zynga Inc., an increasingly popular maker of games used on the social networking service.
Closely held Zynga, which makes the Farmville and Mafia Wars online games, said Wednesday that Digital Sky's funding, in part, will be used to fuel growth.
DST's profile is on the rise because of its aggressive investment in Silicon Valley start-ups that once might have been considered solely the domain of local, big-name venture capital firms. It's also gotten attention for one of its most prominent backers - Russian tycoon Alisher Usmanov.
Usmanov, best known for his ownership of British soccer club Arsenal, has drawn criticism for his social connections and for his past, which includes a stint in a Soviet-era penal colony.
"Our earlier investment in Facebook and now in Zynga underscores our premise that social networking and social entertainment will define the next generation of the Web," DST CEO Yuri Milner said in a statement.
Some of the firm's investment in Zynga will be used to help employees cash in their equity stakes, a model used by DST when it invested $200 million in Facebook last May. DST followed that investment with a $100 million tender offer for Facebook employees' shares. Other Facebook backers include Microsoft Corp.
While startups backed by venture capital often lure in talent with the promise of stock, the thin market for initial public offerings and large acquisitions has made the offer of instant liquidity especially attractive.
DST is joined in its Zynga investment by new investors Andreessen Horowitz and Tiger Global. Andreessen Horowitz was co-founded by Marc Andreessen, founder of the now-defunct Netscape Communications Corp.
Institutional Venture Partners, an existing Zynga backer, also participated in the round. Other investors include Kleiner Perkins Caufield & Byers, a longtime Silicon Valley heavyweight.
DST won't gain a board seat or board observer rights, according to Zynga's statement. Zynga says it now has more than 230 million monthly active users playing its games, which offer players the chance to buy virtual goods.
"The investment from DST allows us to continue delivering on the promise of social games for consumers, making fun the biggest way for people to interact," Zynga CEO Mark Pincus said in a statement.
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