Why Is a Russian Billionaire Gobbling Up the Internet?

In just five years, a Russian venture capital firm has amassed quite a portfolio of the Internet's hottest companies.

Digital Sky Technologies said this week it is taking the ICQ instant messaging service off of AOL's hands for $187.5 million, but it isn't the first time the small, four-partner firm has made social media headlines. Last May, DST bought a $300 million stake in Facebook. The company was also the key investor when social game maker Zynga raised $180 million in December and social coupon site Groupon raised $135 million this month.

So who's behind DST? The New York Times offered a partial answer in December:

Alisher Usmanov, a Russian industrialist billionaire who spent six years in an Uzbek jail for fraud and embezzlement in the 1980s (he was later cleared by a Soviet court), owns 35 percent of D.S.T. Mr. Usmanov has said he was jailed for political reasons.

Tencent, China's largest Internet company, also said it would buy a 10 percent share of DST earlier this month and Goldman Sachs, where two of DST's four partners worked, is a minority shareholder. A South African media firm, Naspers, also owns stakes both in Tencent and one of DST's websites, The Economist reported, though what all the ties mean isn't exactly clear.

Another nagging question is how a small Russian firm landed such major deals. The answer is that DST just isn't as demanding as its peers, writes VentureBeat's Kim-Mai Cutler, who asked around and last week offered up a seven-point list of reasons behind DST's success. That list includes forgoing getting seats on a company's board of directors, demanding fewer rights, turning deals around quickly and paying departing founders and early employees generously.

Those payouts are key to the company's model, writes Silicon Alley Insider editor Nicholas Carlson, who credits DST's billionaire-CEO with developing a "clever strategy that's changing the way tech companies grow up." Some startup managers try to delay initial public offerings to get more experience before subjecting themselves to quarterly analysis, Carlson writes, but employees and investors are not so patient. That's where DST swoops in:

DST solves this problem for entrepreneurs by coming in and buying stock from these early investors and employees at very high valuations. DST also buys some new stock from in the startups themselves.

Whatever the business model is, it seems to be serving the company well. According to Bloomberg, DST plans to spend over "$1 billion on social media over the next five years and is monitoring 50 global companies for investment opportunities."