CEO DailyCFO DailyBroadsheetData SheetTerm Sheet

Private funds are entangled with Russian oligarchs. The problem is no one knows by how much

March 25, 2022, 4:13 PM UTC

The numbers are staggering. An estimated 10 million Ukrainians have fled their homes in the last month—about a quarter of the country’s population—and at least 977 civilians, including 81 children, have been killed as Russian forces deliberately target Ukrainian citizens, according to the United Nations’ latest count.

At least 1,500 civilian buildings, structures, and vehicles—including opera houses, hospitals, schools, churches, and houses—have been damaged or destroyed, the New York Times tallies. The U.S. government officially proclaimed Wednesday that the Russian military has committed war crimes. 

Whether it be in response to sanctions, social pressure, or out of solidarity with Ukraine and moral principles—private funds, pension plans, and companies have been racing to shunt Russia and pull their money, operations, and services out of the country. 

But here’s a problem: What if you don’t know your firm is tied to Russian money in the first place?

Some wealthy investors or Russian oligarchs have gone to extraordinary lengths to conceal their identity. Russian oligarch Roman Abramovich, for one, reportedly used a string of shell companies and a small Austrian bank to invest billions of dollars in U.S. hedge funds and private equity firms, per the New York Times, keeping his own name under wraps as a source of funding. Without putting in the work, it may be difficult for private equity or venture capital firms—especially small ones—to know exactly who their investors are. But here’s more: They’re not legally required to know anyway. 

Earlier this week, the Financial Accountability and Corporate Transparency Coalition, an alliance of 100 state, national, and international organizations, sent a letter to the Securities and Exchange Commission, urging the regulator to amend its disclosure requirements for private equity firms and other private fund advisors and require those who manage money to conduct due diligence on who exactly it is their customers are.

“U.S. hedge funds, private equity funds, venture capital funds, and other types of private placement funds are being utilized to shield, protect, and grow the wealth of Russian oligarchs and the wealth of other potential U.S. adversaries or corrupt foreign officials,” three directors of the FACT Coalition wrote in the letter to the SEC. They added later: “That Russian investors want access to U.S. private investment markets—the growth of which have outpaced public markets dramatically in recent years—is not shocking. What is shocking is that nobody—not the funds, nor the advisers, nor any U.S. regulators—collects the information needed to understand who these investors are or the nature of their investments in order to calibrate potential systemic risks posed to U.S. markets.”

This is an issue that has been on the table for years. In 2020, a group of hackers obtained a confidential FBI memo that showed that a private equity firm had taken more than $100 million from a Russian business allegedly tied to organized crime. The intelligence agency expressed concerns that U.S. regulation may fall short of blocking access to the U.S. markets. 

After Russia invaded Ukraine at the end of February, these concerns are all the more pressing.

As U.S. sanctions force firms to study their own relationships, we’re only slowly starting to see the extent of the U.S. private market’s ties with Russia’s elite. Yesterday, Goldman Sachs said it had put a pause on business with $9 billion private equity firm Pamplona Capital Management. Around 80% of the firm’s funding stems from LetterOne, an investment management firm co-founded by sanctioned Russian oligarch Mikhail Fridman, the Financial Times reported yesterday. Pamplona said in a statement yesterday that it “has taken the decision to liquidate every fund where LetterOne…has any interest.” 

The most notable example in recent weeks has been Concord Management, a Tarrytown, N.Y.-based investment company funded by Abramovich and other Russian elites that reportedly manages somewhere between $4 to $8 billion. The firm has invested its pool of capital in the likes of BlackRock and Carlyle Group, among others, according to the New York Times.

We’re seeing many firms make a directional pivot and opt not to invest new capital in a region, some very publicly. Index Ventures, for one, announced earlier this month that it wouldn’t invest in Russia or co-invest with entities or individuals tied to the Russian regime (The firm says none of its pre-existing LPs have ties to Russia). In at least one case, a Russian investor was reportedly asked to leave a seed round led by Hoxton Ventures. 

But as for all the money already tangled into the rest of the system, who’s to say the extent of it?

Time to talk tech reg… The European Union agreed on new antitrust legislation, called the Digital Markets Act, that will limit the reach of tech giants like Apple, Google, Amazon, Meta, and Microsoft in apps, online shopping, and advertising. The penalty for a repeat offender could be as much as 20% of global revenue. The new rules still require adoption from the European Parliament and all the countries in the E.U., but could come into play later this year.

Until Monday,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
Submit a deal for the Term Sheet newsletter here.

Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- LifeMine Therapeutics, a Cambridge, Mass.-based biopharmaceutical company mining genetically-encoded small molecules from the biosphere, raised $175 million in Series C funding led by Fidelity Management & Research Company and was joined by investors including Invus, 3W Partners Capital, GV, Arch Venture Partners, Blue Pool Capital, and MRL Ventures Fund, and others. 

- Nasuni Corporation, a Boston-based file data services provider, raised $60 million in funding led by Sixth Street Growth.  

- Firstbase, an Aberdeen, Scotland and New York-based remote infrastructure for teams provider, raised $50 million in Series B funding led by Kleiner Perkins and was joined by investors including Andreessen Horowitz, Alpaca VC, and Forum Ventures.

- Weglot, a Paris-based no-code website translation solution, raised €45M ($49.4 million) in funding from Partech.

- HeyJobs, a Berlin-based careers platform for European talent, raised €35 million ($38.6 million) in Series B funding. Digital+ and FMZ Ventures led the round and were joined by investors including Notion Capital, Heartcore Capital, and Creathor Ventures

- MixMode, a Santa Barbara, Calif.-based predictive cybersecurity platform, raised $45 million in Series B funding led by PSG and was joined by Entrada Ventures.

- Spectro Cloud, a Santa Clara, Calif.-based leading Kubernetes management platform, raised $40 million in Series B funding led by Stripes and was joined by investors including Sierra Ventures, Boldstart Ventures, WestWave Capital, T-Mobile Ventures, Alter Venture Partners, and TSG.

- Clear Skye, an Emeryville, Calif.-based identity security and governance solution, raised $14 million in Series A funding. Storm Ventures and Toba Capital led the round and were joined by investors including Point Field Partners and Inner Loop Capital.

- Nalagenetics, a Singapore-based genetic testing solutions company, raised $12.6 million in Series A funding. Intudo Ventures and Vulcan Capital and were joined by investors including Diagnostics Development Hub, Diagnos Laboratories, and others. 

- SparkMeter, a Washington D.C.-based grid management software company, raised $10 million in funding led by Breakthrough Energy Ventures, Accurant International, and Clean Energy Ventures

- Rugged Robotics, a Houston-based construction technology startup focused on automation, raised $9.4 million in Series A funding. BOLD Capital Partners and Brick & Mortar Ventures led the round and were joined by investors including Riot Ventures, Morpheus, Embark, Consigli Construction Company, and Suffolk Technologies.

- REACH, a San Francisco-based virtual workplace cloud platform, raised $7 million in Series A funding led by Grayhawk Capital and Pritzker Group Venture Capital and was joined by NFX.

- TaxDown, a Madrid-based tax savings platform, raised €5 million ($6.09 million) in funding from investors including Base10, JME Ventures, senior advisor to Bill Gates Kartik Raghavan, and former engineering director at Meta Jeff Raynar

- Captain, a Walnut, Calif.-based fintech platform for rebuilding homes after natural disasters, raised $4 million in seed funding from investors including NFX, GGV Capital, and Red Swan.  

- Radish Health, a New York-based healthcare platform for municipal governments and midsize businesses, raised $4 million in seed funding led by Tusk Venture Partners and was joined by investors including MaC Venture Capital, Global Founders Capital, and The Fund

- Avnio, a London-based sales control and acceleration automation software platform, raised £3 million ($3.96 million) in seed funding led by Felicis Ventures

- WeLoveNoCode, a San Francisco-based no-code marketplace, raised $3 million in funding led by Mantis Venture Capital and was joined by investors including Liquid2, CapitalX, and Abe Burns

PRIVATE EQUITY

- Brookfield Asset Management acquired Hibernia, a Dublin-based real estate investment trust company, for $1.2 billion. 

- Blue Horizon acquired a minority stake in Syocin, a Rosario, Argentina-based biotech company developing non-toxic, bio-degradable protein-based solutions to protect food crops from bacterial diseases. Financial terms were not disclosed. 

- CES Power, backed by Allied Industrial Partners, acquired West Coast Cinema Services and its affiliate BST Power, a Hollywood-based power generation and temperature control services provider to Hollywood-based studios. Financial terms were not disclosed.   

- G.S. Precision, a portfolio company of AE Industrial Partners, acquired SMC Aerospace, a Seabrook, N.H.-based tubes and machined components provider for the aerospace and defense industries. Financial terms were not disclosed.

- Marco Rubber & Plastics, a portfolio company of Align Capital Partners, acquired Anchor Rubber Products, a Newington, Conn.-based O-rings, gaskets and other specialty rubber products provider. Financial terms were not disclosed.

OTHER

- Project Canary acquired Aeris Technologies, a Hayward, Calif.-based laser-based gas analyzers and leak detection systems provider. Financial terms were not disclosed. 

IPOS 

- Arm, a Cambridge, U.K.-based semiconductor and software design company, is seeking a valuation of around $60 billion in its IPO, according to Bloomberg. SoftBank backs the company. 

- PAG, a Hong Kong-based alternate investment firm, plans to raise at least $2 billion for an initial public offering in Hong Kong, according to Bloomberg. The IPO could value the company at about $20 billion. Blackstone backs the company. 

- Ferretti, a Forli, Italy-based luxury yacht builder, plans to price shares at HK$22.88 ($2.92) on the Hong Kong stock exchange, according to Bloomberg. A deal would value the company around HK$1.9 billion ($244 million). Ferrari backs the company.   

- AN2 Therapeutics, a Menlo Park, Calif.-based clinical-stage biopharmaceutical company focused on developing treatments for rare, chronic, and serious infectious diseases, plans to raise $69 million in an offering of 4.6 million shares priced at $15. 

- ProLogium Technology, a Taiwan-based solid-state battery developer, is considering an initial public offering either this year or next, according to Bloomberg. Mercedes-Benz backs the company. 

SPAC

- Coincheck, a Tokyo-based cryptocurrency and digital asset exchange, agreed to go public on the Nasdaq via a merger with Thunder Bridge Capital Partners IV, a SPAC. A deal would value the company at $1.25 billion.

FUNDS + FUNDS OF FUNDS

- FTV Capital, a New York-based private equity firm, raised $2.3 billion for a seventh fund focused on acquiring minority stakes in companies.

- Knox Lane, a San Francisco-based investment firm, raised $610 million for a fund focused on founder- and family-owned businesses and management teams.

- Nexo, a lending platform for crypto-backed loans, raised $150 million for a fund focused on web3, DeFi, metaverse and NFTs, and compliance.

PEOPLE

- Red Arts Capital, a Chicago-based private equity firm, hired Michael Henkels as vice president and Danielle Gerbie as chief of staff. Formerly, Henkels was with Comvest Partners and Gerbie was with Flexpoint Ford

Correction: After yesterday’s newsletter was published, an Eckuity representative stated that the firm had acquired a minority stake of Professional Triathletes Organisation, not a majority stake.

This is the web version of Term Sheet, a daily newsletter on the biggest deals and dealmakers. Sign up to get it delivered free to your inbox.