Silicon Valley's Ties to Russia Tested

 

By Martha Mendoza

SAN MATEO, Calif. -- Entrepreneurs and investors say Silicon Valley's fast-growing financial ties with Russia's tech sector are being slowed down by current political tensions between the White House and the Kremlin.

"It's safe to say a lot of investors here are taking a step back to see how the situation will unfold," said Alexandra Johnson, who manages a $100 million venture fund called DFJ VTP Aurora, a Menlo Park, Calif., branch of Russian bank VTB.

For decades, Russia's sophisticated scientists and engineers remained at arm's length from Silicon Valley's venture capitalists and marketing mavens. That changed in recent years, with a flurry of investment, largely sparked in 2010 when then-Russian President Dmitry Medvedev visited the region and met with high-tech leaders.

Russians investors, including billionaire Yuri Milner, who has large stakes in Facebook (FB) and Twitter (TWTR), poured an estimated $2 billion into U.S. tech firms over the past three years, according to Johnson, who organized a technology symposium with venture capitalists and entrepreneurs last month in San Mateo, south of San Francisco.

But Silicon Valley entrepreneurs and investors fear negative economic fallout from Russia's takeover of Crimea, its troop buildup near Ukraine's border and its attempts to compel constitutional changes in that country, markedly raising political tensions with the West.

Secretary of State John Kerry has charged Russia with "creating a climate of fear and intimidation," and the Obama administration has frozen assets and revoked visas of some Russian officials and their associates.

Among the concerns in this technology center are whether visa limits will make it hard for business travel or for scientists to relocate. In addition, economic sanctions could tighten the flow of dollars between tech sectors in both countries. And for those U.S. and Russian firms with ties to Ukraine, rumors of a draft are fanning fears that young entrepreneurs and engineers will have to close up shop and fight.

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