Flashpoint to raise $75M for Ukraine-focused fund. It has close ties with Russia
At the end of November 2022, the international technology investment firm Flashpoint announced its intention to launch a $75 million Ukrainian Tech Fund to support Ukrainian tech companies. After the news was made public, Yaroslav Krempovych, Senior Associate at Movens Capital, drew the attention of AIN.Capital’s Editor to the facts that might indicate Flashpoint’s close ties with Russia.
In particular, the fund was previously known as Moscow-based Buran Venture Capital with Russian oligarchs as LPs and vigorous activity on the Russian market.
Relying on the open source information, we investigated Flashpoint’s year-to-year activities and are sharing the story of its transformation from $10 million Moscow-based Buran VC to the international technology investment firm with $500 million AuM and 7 offices worldwide, still closely tied to Russia.
Headquartered in London, Flashpoint describes itself as an international technology investment firm, which provides funds to tech companies founded by entrepreneurs from Central and Eastern Europe, Baltics, CIS, Finland, and Israel. According to the data from the Flashpoint website, it was launched in 2012 by Michael Szalontay and Alex Konoplyasty.
“Our story began in 1998 when we – Michael and Alex – met at university and lived in the same dormitory. Having studied economics and finance, we had a student ambition to work in international finance but as our careers progressed, we realized that our dream was to be free in our professional creativity,”the website states.
It forgets to mention that Michael Szalontay and Alex Konoplyasty, the co-founders and General Partners at Flashpoint, met each other at the Moscow State Institute of International Relations (MGIMO), which they graduated in 2003. There is also no information about the fact that Flashpoint was known as Buran Venture Capital until April 2019, when it was rebranded.
Moscow-based Buran VC was launched in 2010
Michael Szalontay and Alex Konoplyasty launched Buran Venture Capital in 2010. It was a $10 million venture capital fund with a focus on investing in projects from Russia, the CIS countries, and Israel, as Konoplyasty earlier told Kommersant.ru.
In 2012, Buran VC registered a legal entity in Moscow. To be more precise, “Buran Financial Consultant” Ltd. (ООО “Буран Финансовый Консультант” in Russian) appeared on April 9, 2012. That year, the fund also welcomed a new advisory board member and the huge LP, Mail.Ru Group co-founder and Russian investor Mikhail Vinchel. He joined Buran Venture Capital together with 7 undisclosed backers. Grigorij Finger, another co-founder of Mail.Ru Group, also joined Buran VC as an investor.
In 2015, the firm launched its second $16 million fund. The investment was led by O1 Group. It is a private holding company investing in the Russian real estate and financial sectors, owned by Russian oligarch Boris Mints. Buran VC received several million of dollars from Mints.
Moreover, as of March 2021, the data regarding the LPs’ structure from internet archive Wayback Machine shows the following:
AIN.Capital sent a list of questions to Flashpoint concerning Russian LPs. We asked the fund about Russian billionaire Alisher Usmanov, who is listed as one of the Flashpoint’s investor and who was hit with EU sanctions following the Russia’s full-scale invasion of Ukraine. The answer we received was vague:
“The information on LPs that you mentioned does not reflect the actual or past structure of shareholders of Flashpoint (rebranded from Buran back in 2015 when the company stopped its investing activity in Russia and HQd in the UK). So since then, Flashpoint hasn’t made any new investment in Russia,”the fund responded.
Furthermore, the information about the rebranding and shutdown of the investment activity in Russia in 2015, which the fund provided us with, didn’t correspond with the facts we revealed.
What is more interesting, responding to the comment about LPs under the TechUkraine’s post on LinkedIn, Flashpoint wrote the same answer it provided us, but with 2014 as the year of rebranding and stopping its activities in Russia.
Buran VC was rebranded to Flashpoint in 2019. It continued to operate in Russia until September 2022
Flashpoint’s answers only raised new questions.
Buran VC officially changed its name to Flashpoint in 2019, announcing the news on its Medium blog. Interestingly, when AIN.Capital asked the firm to comment on rebranding, we were told that it happened back in 2015. Our question about the reasons why the public information in official press releases in international and Russian media differed so much at the time, was just ignored.
Along with the rebranding, Flashpoint also announced the opening of a new €50 million fund in 2019. This time, the press release stated that the fund invested in software startups across Finland, Baltics, CEE, and Israel.
It didn’t mention Russia, despite the fact, Flashpoint continued to support Russian projects. Although, the company said to us that it stopped investing in the Russian market in 2015, as AIN.Capital quoted the fund’s words earlier. For example, in 2021 it made follow-on investments in online cinema service ivi.ru and same-day delivery service Dostavista among others.
In 2022, Flashpoint also invested in Russian startups
- In January 2022, Flashpoint joined the Series A round for Russian logistics startup Fura that received almost $1 million. It is operating across Russia and the US. As Forbes Russia informs, in 2021 the total turnover of the company on all the markets amounted to $45 million.
- In June 2022, Flashpoint invested in London-based regtech startup ClauseMatch that was launched in 2012 by Evgeny Likhoded and Andrey Dokuchaev. According to the website, it also has offices in Singapore and New York. As AIN.Capital revealed, ClauseMatch also has a team and office in Russia.
This is proved by the data from the LinkedIn profile of the ClauseMatch employee, Administrative Head of the startup. It shows that the startup had an office in Saint Petersburg at least until August 2022.
AIN.Capital asked Flashpoint about its activity on the Russian market. The company said that it has not invested in Russian startups since 2015. When we asked it to explain the investments mentioned above, the firm declined to comment.
In fact, while Flashpoint was talking about conquering the UK, CEE, Baltic markets on the pages of English-language media, its Russian legal entity continued to operate under an old name Buran VC. According to the state registers base, the liquidation process of “Buran Financial Consultant” Ltd. (ООО “Буран Финансовый Консультант” in Russian) was completed in September 2022.
That means that Flashpoint continued to pay taxes in Russia for a while. The data from the Russian Federal Taxation Service shows that in 2021 the fund paid almost $73,000 in taxes.
To date, Flashpoint has offices in New York, Tel Aviv, Budapest, Warsaw, Riga, and Nicosia. It has $500 million AuM across 6 funds with more than 120 investors. Its portfolio has over 50 companies worldwide, 3 of them Ukrainian — Preply, Allset and AllRight.
At the end of November, besides the intention to launch a $75 million Ukrainian Tech Fund, Flashpoint also said that it wanted to open an office in Kyiv and raise the number of Ukrainian projects in its portfolio up to 20 until 2027.
AIN.Capital team is also curious: what makes Flashpoint so interested in Kyiv and Ukraine right now. The fund declined to discuss this issue as well.