The Generalist - DST Global: The Quiet Conqueror

Hello friends,

Well, here we are.

We’ve officially reached the last Generalist piece of 2021. Over the past twelve months, we’ve studied impressive businesses like Stripe, emerging markets like Tech in Africa, innovative organizational models like DAOs, game changing crypto projects like Terra, and winning investment funds like Tiger Global. Along the way, we’ve riffed on some of the themes shaping the future including multiplayer media, soft power in tech, VC alternatives, and what comes after nations.

It has been the greatest joy of my professional life to learn with you all each week. I can’t wait for 2022.

Before we get there, though, it’s time to dig into DST Global. The fund has one of the craziest track records of all-time having invested in Facebook, Twitter, Meituan, Snap, Airbnb, Spotify, Klarna, and more than a dozen other exceptional companies.

Despite that pedigree, assets under management in the tens of billions, and an investing pace of more than a deal per week, DST is an unobtrusive presence in the venture markets. Today, we’ll look under the hood and try and decipher its secrets.

Let’s get to it.

IN COLLABORATION WITH KALSHI...

One of the most interesting startups I discovered in 2021

​

As part of writing The Generalist, I get the chance to learn about amazing companies being built. I make a mental note of the ones I find especially interesting.

Today’s sponsor, Kalshi, is one that stood out. Though they’ve been around since 2019, they popped onto my radar after raising a Series A from Sequoia. Here’s what I think is fascinating about them:

• You can invest in opinions. Kalshi is an events exchange, allowing you to trade on what you think the future holds. Believe the debt ceiling is going up? Invest. Certain that Drake will have the album of the year? Buy in.
• You’re not locked in. On Kalshi the price of an event market ranges from 1¢ to 99¢. The higher the price, the higher the probability. But you don’t have to wait for the deadline to exit. If you buy into a market for 5¢ and it moves to 15¢, you can sell and snag a 3x.
• It’s regulated. Kalshi is the only exchange that’s regulated by the CFTC to offer event trading. The team really cares about protecting customers and have done the hard work.

I just bought a contract on real GDP growth in Q4 of 2021 this week. To join me on Kalshi, sign up here.

​

Actionable insights

If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about DST Global:

• DST is a surreptitious power broker. Many of today's founders may know little about DST Global. That hasn't stopped it from becoming one of the largest and most influential venture firms in the world, with an estimated $50 billion in assets under management (AUM).
• Geographical arbitrage has served it well. DST has a knack for identifying a powerful business model, then investing in winners in different countries. In this respect, its approach is not dissimilar to Tiger Global, though the firms differ in meaningful ways elsewhere.
• That approach also allows it to rectify mistakes. One of the unrecognized benefits of investing worldwide is that you can compensate for gaffes. Miss out on Uber? At least you can invest in Didi and Ola. DST is a master of this move.
• DST redefined what it meant to be "founder friendly." At the time of its 2009 investment in Facebook, it was considered absurd to invest hundreds of millions of dollars without receiving a board seat in return. Milner recognized that maintaining control was essential to Zuckerberg and struck a deal anyway. It changed the game.
• Yuri Milner is no figurehead. Though DST's founder is in his seventh decade, he shows no signs of slowing down. A source close to the firm confirmed he remains a key part of the fund and still has "so much energy." Milner's work ethic sets the tone for a high-velocity team.

***

There are two worlds, an investor told me. There is the world of loud investing and the world of quiet investing.

We know the loud world. It is the realm of Medium funding announcements, Twitter threads, and VC memes. It is podcasts and media-arms and YouTube shows and TikToks. It is logo shopping and #thoughtleadership and performative contrarianism and "I am thrilled to announce."

In spite of some of these less enjoyable elements, there is much to admire about the loud world. In an era in which attention is the rarest asset, loud world funds understand how to get it and turn it to their advantage. In the process, many bring information out into the open. The best inspire through storytelling, becoming masters of soft power.

Today, though, we are going somewhere else. We are going to a land in which footprints are muffled by snow and voices carry only a few feet. Where discussions take place behind closed doors and deals are struck in private. Where broadcasting too much of one's activities is not only unsavory but unwise. Welcome to the quiet world.

Among its denizens are dozens of funds whose names we may not know, along with a few simply too good to miss. Benchmark is a classic quiet world investor. Venture studios like Sutter Hill Ventures and Accretive fit the bill, too. Tiger Global would have fallen in this camp until its more recent investing detonations. It now shares its latest deals on LinkedIn.

If the quiet world has a conqueror, it is DST Global. After bursting onto the scene thanks to a 2009 investment in Facebook, the fund has evaded attention, especially in recent years. Such an understated presence belies both its size and track record. One source suggests that DST manages somewhere in the realm of $50 billion, making it larger than stalwarts like Sequoia and Insight Venture Partners. At the very least, it is certainly in their league.

That's not only the case when looking at assets under management; DST has a portfolio that would make almost any investor envious. Over twelve years, it has secured positions in Facebook, Twitter, Airbnb, Snap, WhatsApp, Spotify, Alibaba, Robinhood, Flipkart, DoorDash, Klarna, Bytedance, Slack, Wish, DraftKings, Meituan, Nubank, Gojek, Rappi, Flexport, Revolut, and many, many others. In the hits-driven world of venture capital, DST is the one firm that seems to never miss. It has done so while managing to stay almost entirely under the radar.

In today's piece, we'll unpack DST's playbook. In the process, we'll journey across continents and back in time, touching on:

• Yuri Milner's path to the top. Before founding DST, Milner was a physicist, a would-be corporate raider, a Mary Meeker adherent, and a macaroni magnate.
• How Mail.ru built Russia's internet. Though it started as a side-project, Mail.ru grew into one of its home country's most consequential internet businesses. Its history is intertwined with DST's.
• Snagging Facebook. Why would Mark Zuckerberg want to meet with an unknown Russian entrepreneur? Milner had to fly to America and give his pitch at Starbucks to make a deal happen.
• Being early and right. DST has a proven ability to correctly call internet trends. The fund was early to understand online monetization and has successfully caught multiple technological waves.
• The generosity of Jan Koum. Look on Crunchbase, and you'll see no indication that DST invested in WhatsApp. But it happened.
• Where DST heads next. Looking at DST's geographical distribution and some of its recent deals, we can get a sense of where the fund sees opportunity today.

Tread lightly.

IN A MEME

For the pictorially inclined, here's the whole piece — all 7,700 words of it — in a single meme.

PUZZLER

I write this “Puzzler” section with great humility and contrition. I committed the sin of repeating a riddle in last week’s email, depriving all of us of a good time.

In response to that gaffe, Brian R was kind enough to suggest a Puzzler for this week’s edition. I think it’s a rather elegant one:

As always, clues are available should you need one.
​
From my study in Brooklyn, I wish you all a lovely and safe year-end. Very happy holidays to those celebrating and I look forward to seeing you all again soon.

With gratitude and good tidings,

Mario