Russian VC Describes How He and His Startups Are Being Punished

• Russian VC Alexey Solovyov says he can’t deploy millions of dollars in his Russian bank accounts.
• He’s also concerned by the ways his US and global startups could be “punished.”
• Due to syndicates and funds of funds, startups often don’t know that they have Russian investors. 

Alexey Solovyov, the founder and CEO of the Moscow venture firm A.Partners, has been a prominent venture capitalist in Russia’s tight-knit investing community for more than a decade, promoting the country’s VC scene in blog posts and at conferences and boasting when one of his startups was bought by Pinterest.

He never imagined a day would come when he wouldn’t be able to send money from his Russian bank accounts, when the startups in his portfolio were distancing themselves from him, and when those startups also faced the potential of having their accounts frozen.

“It’s very difficult for Russian-born people or people with Russian passports to receive or deposit money around the world,” Solovyov said in a recent

Zoom

video call as he was riding in the backseat of a taxi through the empty nighttime streets of Moscow. “We can’t send money to our portfolio companies.”

Solovyov’s situation shows what Russian VCs are experiencing even when their funds are not managing money from sanctioned oligarchs. And, due to the trend of angel-investing syndicates and funds of funds — where investors pool their money  — it is difficult for startups to even know whether they’ve got Russian money buried in their funding rounds.

Concerned non-Russian startups will be ‘punished’

In the wake of Russia’s invasion of Ukraine, Solovyov has found himself suddenly perceived as a global pariah but said he’s done nothing wrong. He insisted that none of the limited partners invested in his firm face sanctions or are oligarchs and said he’s baffled as to why he’s no longer able to do business outside Russia. He said he is still just another investor hunting for the next deal. 

“It’s in the DNA of VC to have no borders,” Solovyov said. “This is why Russian VCs are so concerned because we feel we are part of international business, not a part of Russian business.” 

Solovyov said only about 10 percent of the startups he backs are Russian. Half are in the US, with the rest spread around the world.

Solovyov is not on the US Treasury Department’s list of “specially designated nationals and blocked persons” banned from doing business in the US.

But even still, he said sending money from his accounts has become nearly impossible because most Russian banks have been cut off. And he said one of his US startups, which he would not name, had its bank account frozen for receiving Russian money. 

“What our portfolio companies care about is that they will be punished without any particular reason,” Solovyov said. 

It doesn’t help that Solovyov won’t speak out against Russian’s invasion into Ukraine, though as someone still in Moscow, it would be dangerous for him to do so. Russia has clamped down on free speech; protestors have been arrested; and anyone who uses the words “war” or “invasion” to describe Russian actions could face 15 years in prison.

“I don’t want to make any political statements,” Solovyov said. “We understand you have your own news. We have our own news.”

US startups are surprised by Russian money

On his website, Solovyov includes B9, a San Francisco-based fintech, and People.ai, a Bay Area artificial-intelligence startup valued at more than a billion dollars, among his angel investments.

But illustrating how difficult it can be to track Russian funds, some of Solovyov’s portfolio companies said they had no idea he was an investor until they were contacted by Insider.

“I don’t know who Solovyov is,” Oleg Rogynskyy, People.ai’s CEO and founder, who happens to be Ukrainian, wrote in an email. “I’ve never heard the name.”

“We do not have Russian investors,” responded Sergio Terentyev, the cofounder and CEO of B9.

Solovyov explained that he invested in those companies through a syndicate that pools investors’ money. Asked to provide startups who could speak on his behalf, Solovyov said none would.

“Every company and investor with Russian roots is under pressure now,” he said. “Everybody is very nervous.”

On his website, Solovyov also includes Yaizy, a New York-based educational startup, among the investments of A.Partners, the firm he founded in 2019, and A.Partners is listed as an investor in Yaizy’s recent press release announcing $2.1 million in seed funding.

But Vitaly Gordon, the cofounder and CEO of Yaizy, told Insider that A.Partners never actually invested in his company directly but merely helped facilitate introductions to other investors. 

“We wouldn’t consider taking any money from any entity that supports the Russian invasion in Ukraine,” Gordon said.

Ironically, Gordan said the lead investor Solovyov introduced them to is Flyer One Ventures, a venture firm based in London whose staff is primarily Ukrainian.

An investor at Flyer One, who asked not to be identified because they fear for their family in Ukraine, said they no longer want to do business with Solovyov and find his unwillingness to condemn the war unacceptable.

“Having a position is important at this moment,” the investor said. “It’s important he say something.”

For his part, Solovyov is eager to return to a time when it did not matter that he was Russian.

“I still believe that there will be no borders when the situation ends,” he said.