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Alexander Galitsky: I’m a natural born fatalist

The founder of the Almaz Capital venture fund in a TASS special project Top Business Officials
Andrey Vandenko 
Andrey Vandenko

Andrey Vandenko was born on November 8, 1959 in Lugansk, Ukrainian SSR. In 1982, he graduated from the Taras Shevchenko National University of Kiev with a degree in journalism. Since 1989, he has been living and working in Moscow. For over 20 years, he has built his career as a journalist specializing in interviews. His work is published predominantly in Russia’s leading mass media outlets, and he is the recipient of numerous professional awards.

Part 1
On chauffer-driven limousines, electric guitars, his father’s advice, choices made, Star Wars and his personal transformation

- If you don’t take risks, you never get to drink champagne! Nothing ventured, nothing gained as the saying goes. Is that true of venture capitalists?

- I may have champagne sometimes, but it is not on my list of favorite drinks. Out of all light alcoholic beverages, I prefer Riesling. During my college years, though, I thought it was the most disgusting wine of all, it tasted terribly sour. With time, I realized that Riesling wines can be very different. France, Germany and Austria make very decent brands.

I like red wines, too. Provided there is a fitting occasion to propose a toast.

Surely you celebrate successful deals, don’t you?

- Our fund’s team is scattered throughout the world. Our people are at very different locations. We get together twice a year. And then we celebrate everything that’s been achieved during the period under review.

Where do you usually meet?

- Different places. For instance, on Lake Baikal’s Olkhon Island, in Las Vegas, in San Francisco, in London, in Italy and Portugal… We select sites where we can have a good time together socializing, doing business and spending our spare time on recreation. Although the past tense of the verb “select” would be more appropriate here.

Regrettably, for the time being, the pandemic has made some modifications to our lifestyle.

How many people are employed at Almaz Capital?

- There are 14 of us at the moment. Not that many. California is our main base. That’s where the so-called “exit” from our portfolio companies usually happens. The main reason is different, though. Silicon Valley is the place where our services are in extremely great demand. It so happened that innovations, at least, those in the field of IT technology, are most wanted there. America’s share in this process is very significant. Particularly, during the first three years after some new technology appears.

In the US, everything is based on competition even among traditional businesses, which either introduce innovative approaches themselves or purchase companies that have them.

The Europeans are too slow in making decisions, they are afraid of taking risks and may hesitate for too long out of fear that a new project may not survive. The American mentality is different, they tend to ask: what if the new idea hits the bull’s eye and yields a colossal competitive edge over the competitor?

This explains why our main office responsible for supply and demand analysis is there in California. We also have our people in London, Berlin, Warsaw and Kiev, and here in Moscow.

Before the coronavirus pandemic, I used to spend a third of my time in the US. I think that I stayed a quarter of my time in Russia, and the rest, in Europe and Asia. It wouldn’t be an overstatement to say that just a year ago the skies were my home. Three or four flights a week were normal.

Do you have your own personal plane?

-  No. A private jet is not very important to me from the standpoint of convenience. I can easily do without it. I just don’t feel it is very necessary. To call a spade a spade, I hate show-offs, period.

I developed a certain set of habits a long time ago. For instance, it is a matter of principle for me to avoid using a chauffeur-driven limousine. Usually, I get around in a BMW X5 SUV with tinted windows. From time to time, some intriguing incidents occur thanks to this vehicle. Occasionally, when I drive up to some friend’s countryside home, their security guards or the domestic help usually swing the back door open to let the passenger step out only to see nobody inside. Then they gape at me and ask: “Where is the guest?” Sometimes I reply: “Gee… I must’ve lost him somewhere along the way?”

I only settle on using a car with a chauffeur, if I go to some official event in order to avoid confusion.

Believe me, I find it far more convenient to drive myself, that’s the typical European and American attitude. In Russia, people have a different take on things. Here’s another funny story you may enjoy. One time, I arrived at an office for a business meeting. From there I was taken to the next round of negotiations in a different car. Then I returned to the place where I had left my vehicle to find it was gone. I was stunned. I left it in the right place and didn’t violate any parking rules. Yet the car must have been towed away… In the end, a friend of mine confessed that he had pulled a fast one on me and said: “stop being stingy and hire someone to drive you around.”

You see, personal drivers became part and parcel of my daily routine at the dawn of my career. I was still a very young man when by virtue of my status I was entitled to a personal corporate vehicle. I was unable to shun the privilege, and had to put up with the thought that my personal driver was idling his working hours away waiting for the moment the “boss” might need his services to go someplace.

I worked endless hours, sometimes 12-14 hours nonstop. My personal driver was obliged to wait for me. While I kept toiling away from morning till evening attending meetings, holding talks and so on, my driver would move the back of his seat down and take a nap. His sole function was to take the boss from point A to point B from time to time. Did that make sense? As far as I can remember, all of my drivers were older than me and often complained they had to stay at work more hours than they should. Naturally, they felt that those extra hours were stolen away from their home and the family. I found this situation very awkward and irritating. When I moved to work abroad, I realized that even captains of big business - some of them multibillionaires - saw nothing wrong in driving to work and then back home. It’s normal.

And how did your transformation from an expert theoretical physicist into a global investor take place?

- Life is life. It reshapes us and forces us to make choices. My life first transformed me into an international businessman in the hi-tech segment, and then into an investor.

I believe that at the very start, a great deal was decided when I graduated from high school in Zhitomir with honors and decided to go to Moscow to apply to the Institute of Physics and Technology. On the face of it, in my younger days my life was easy and simple. Although if we dig into my past a little bit deeper, some very interesting and humorous stories will surface.

Such as?

- In the eighth grade, a bunch of us guys started making electric guitars. They were a great luxury and in very short supply in those days. There was no chance of buying them at all! First, we made some for ourselves to establish what was then called a “vocal instrumental ensemble” commonly known under its Russian acronym VIA, or more precisely, a school band. Then we launched a batch production process with the aim of making no less than 20 instruments only to be stopped on the way.

By whom?

-Those vested with the proper authority.

Were you trying to sell the guitars?

- Why, of course. At a certain point, we even ditched our school band project. We kept trying and experimenting…

We had some parts and components made for us at a local musical instrument factory. The radio-electronics components we made ourselves. My sister’s husband worked at the Yuzhmash plant in Dneptorpetrovsk. I asked him to have the missing metal components for a set of ten instruments made for us according to the blueprints that I had given him. They made it from titanium. Yuzhmash, as you may remember, was a defense industry giant that built missiles and space rockets…

Also, one day I was foolish enough to air a love song for my girlfriend Svetlana using an amateur radio transmitter. We had no license for independent radio broadcasting, of course.

In a word, we got in trouble. Police operatives paid a visit to our house and confiscated all the radio equipment, and even the guitars.

Your father supervised a large farm cooperative and was a very respectable person.

- My dad stood up for me and put a good word in for me here, of course. That affair was swept under the rug. But at the same time, I suspect, it cost him the title of the Hero of Socialist Labor… By that time, my dad had been awarded many government and state decorations. But he was not destined to get the Gold Star medal of the Hero of Socialist Labor. He was nominated twice only to be crossed off the list both times. The reasons for this might have been many. I reckon my dear father must have felt deeply hurt, but he never said a word about it.

He was a very successful farm manager of great initiative. For instance, he was the one who put forward the idea of making a new variety of apple wine, called Golden Autumn, and it was very high quality. It was a nice complement to such customary products such as canned fruit and jam our farm cooperative manufactured. To clarify, I should say that the farm cooperative’s products could be seen on the tables of the Ukrainian Communist Party’s top officials, including Central Committee members.

Output kept growing and my father built a glass factory to make bottles. He never stopped working all his life. He would launch project after project – greenhouses for vegetables, flowers and mushrooms, a meat factory and so on and so forth. He could not stay idle for just a second…

When he was already 80, my dad embarked on building a Catholic church, because he was a Catholic himself. He spent much effort and time on this idea of his and strongly desired that it would become a community-funded project. At first, he strongly objected, when I tried to donate more than the others. Originally, I participated in it on equal terms with the others. Also, I extended a helping hand at the final stage in 2014, when the community ran out of money…

I’m glad that we put the finishing touches to it on time. My dad saw his last project materialize. He even when to church services for about six months.

My dad passed away at the beginning of 2017, and by that time, he was 89…

With his father Vladimir and son Alexander, 2005 Personal archive of Alexander Galitsky
With his father Vladimir and son Alexander, 2005
© Personal archive of Alexander Galitsky

Did you inherit this knack for business from him?

- Perhaps, I did in some respects…

And my mother was a school teacher of Ukrainian and Russian literature. But I never went to the school where she taught so as to avoid suspicion of bias and nepotism. It was our family’s rule.

Why did you decide to go to study at a college in Moscow, and not in Kiev, which was way closer to home?

- To tell you the truth, first I thought of becoming a journalist. My dream was to see the world and to travel outside the Soviet Union. I think that I was able to author some good stuff and I also won many school literature contests. For instance, I wrote a very romantic story in Ukrainian, in which I described the morning dew as the Sun’s tears. That story of mine, entitled The Sun’s Tears, was published in a regional daily newspaper.

In a word, I was pretty serious about a career in the media. One day I came home to see some newspaper clips on the table. All of them were editorials from the nation’s leading dailies, such as Pravda and Izvestia and from our regional newspaper. My dad told me: “Here is some stuff for you to read.” I was surprised. “What for?” I asked. In those days, everybody started reading the newspapers from the last page – sports news, foreign news, the TV program list and the weather report. My dad said: “Son, you will spend the next 10 to 15 years writing about all these things – Brezhnev’s speeches, harvest statistics and the latest resolutions by the Communist Party’s Central Committee. After that you will be allowed to write about sports and world news. Maybe…”

My father’s words had a sobering effect. Step by step, my dad instilled in me the notion that I was born in the same city as Sergey Korolyov. His message was: your hobby is engineering, you have a gift for science and some day you will surely assemble something more decent and noteworthy than electric guitars.

After graduation I went to Moscow to apply to the Institute of Physics and Technology. On my application, I wrote that I was from a family of white- collar workers, although I could have said that I was from a family of farm cooperative members as well. In the end, I fell a little bit short of the admission threshold. My social origin was not taken into account. I remember I was terribly upset. Then I decided that I’d go and serve in the army and then have another try at getting into that same college.

Furthermore, I should say that when I was still making plans to go to Moscow, I overlooked one more important point: all the exams were in Russian, yet I had been studying at a Ukrainian school and at home we spoke Ukrainian. It might seem that the two languages are very close, but there are slight nuances. Some terms in mathematics and physics sound quite different, and it was a problem for me to retune my ear to grasp the meaning.

Also, on my application I never mentioned that I had been an athlete, a swimmer and even had a master of sports degree in the 200-meter freestyle. I was too shy to boast about this achievement of mine, although it would’ve surely boosted the odds in my favor…

In a word, the door of the Institute of Physics and Technology remained shut to me. I was about take a train back to Zhitomir, but before leaving I decided to visit a girl from the same class who had applied to the Moscow Institute of Electronic Technology in Zelenograd. I went there just out of curiosity and I extremely liked what I saw there! A futuristic city! That girl’s mother was a mathematics instructor at Zhitomir Polytechnic State University. She was well aware of my level and persuaded me not to waste time on military service, but rather show my exam results to MIET, because the points scored at the Moscow Institute of Physics and Technology were good enough to get admitted elsewhere. I followed her kind advice and I’ve never regretted that I did so.

At first, I kept thinking in Ukrainian and even took notes in this language. Eventually, I adjusted myself to the new environment, but I felt homesick for a long time.

Are you still homesick now?

- It couldn’t have been any other way. Home, sweet home!

How long has it been since the last time you went there?

- I visited Zhitomir more than a year ago. I have a sister and some other relatives there. I go to Kiev far more often on business.

Are you allowed to enter the country without any problems? Aren’t you stopped at the border and asked who Crimea belongs to?

- Nobody has ever asked me things like that.

-  And what if somebody does?

- I’ll say I have nothing to hide. During the tsarist era, Crimea belonged to the Russian state. But before that it had been part of the Ottoman Empire for much longer. What sense does it make to dwell on the past? We should be guided by the formally authorized international obligations that are in effect these days. They have to be honored.

We provided guarantees of Ukraine’s integrity and signed the Budapest memorandum. In exchange, Kiev agreed to the removal of all nuclear weapons to Russia. Just imagine today’s Ukraine having missiles with nuclear warheads. I believe that the tone of our discussions would have been quite different and history would have taken a different turn. True, that’s all theory. What was done cannot be undone.

But as I see it, from a de-jure standpoint, Crimea remains Ukrainian.

So, we got your opinion on that topic. Now let’s get back to the story of how a Soviet citizen turned into a businessman.

- After graduation, I took a job at the Micro-Instruments Engineering Research Institute, an affiliate of the ELAS research and production association. Concealed behind this uninformative name that revealed nothing to outsiders was a first-class defense industry establishment. As a matter of fact, I found myself working for an arms race frontrunner. We were commissioned to create space systems relying on the latest achievements in microelectronics.

The man who led the ELAS research and industrial association was the legendary designer Gennady Guskov. Back in 1953, he received the Stalin Award for creating the nation’s first-ever ground-based radar. After Gagarin’s space flight, his space communication system earned him the title of the Hero of Socialist Labor. All telemetry was his realm of responsibility. It was Guskov who made the first computer for a space satellite that was orbited in 1972. In this respect, he outpaced the Americans.

In addition, he devised a mobile communication solution – an electronic gadget the size of a backpack capable of putting through a phone call from any point on the globe to any telephone number via active phased array antenna relay satellites, which his research center had created earlier. When President Richard Nixon paid a visit to Moscow in 1972, he proudly showed Leonid Brezhnev such an option he had at his disposal. A couple of years later it was Brezhnev’s turn to demonstrate to Nixon a similar Soviet-manufactured communication device.

With space communication station based on active phased array antenna which transmitted information via IP protocol, 1990 Personal archive of Alexander Galitsky
With space communication station based on active phased array antenna which transmitted information via IP protocol, 1990
© Personal archive of Alexander Galitsky

And then Guskov created the first-ever optoelectronic surveillance satellite.

That’s when my own career at ELAS began. The man who hired me was Vladimir Bryunin.  He had taken note of my potential when I was still a fourth-year college student. That’s how I started working on software for a remote sensing satellite.

Guskov trusted me and in 1987 he put me in charge of ELAS’s computer systems and satellite software division. I reckon no other person younger than me had the status of a chief designer in the Soviet Union’s entire defense industry at that time. I was just 32!

Were those satellites military ones?

- Naturally. It was a satellite system for monitoring a strategic adversary. I used it to thoroughly explore the map of San Diego back in the early 1980s.

Why San Diego?

- It’s the base of the US Pacific Fleet. Submarines are docked there. We often took pictures of them, down to every tiny detail.

When 12-13 years later I found myself in that city for the first time, I easily walked around without using a navigator. Never lost my way!

Was that your first visit to the United States?

- No. I’d flown there several years before that. In March 1991, Roald Sagdeev, a member of the Russian Academy of Sciences, who, as many remember, was married to President Dwight Eisenhower’s granddaughter, arranged for a Soviet-US space exhibition of achievements in science and engineering. The USSR agreed to dispatch its top-notch products there without a second thought. We took our backpack transmitter there. Some of our colleagues displayed a nuclear engine model and the Moon Rover…

Bringing the exhibits to the United States was far easier than taking them back. According to US laws, anything can be taken out of the country only on the condition that it is officially permitted by the authorities.

Everybody and everything in, nobody and nothing out?

- Roughly speaking, yes. A stark contrast to Russia, whose policy is based on an export-import prohibition. In that sense, the US system is far more reasonable.

We were allowed to have our exhibits back only after lengthy talks. They would remain in store at the Soviet Embassy in Washington for quite some time. The affair ended well, but we gained some experience and realized that we should be more prudent the next time around…

Shortly after that, in April 1991, Guskov saw to it that I was included in another group going to the United States. ELAS at that moment was working on a “response” to the United States’ Star Wars initiative. The Americans approached us with an idea of holding a seminar in Washington on ways of eliminating space debris and delivering a series of lectures at their universities. My boss was invited, but he refused to fly and said: “Let Alex go instead. He’s a young man. It’s of greater interest to him.” Besides, the management of Sun Microsystems back in March invited me to visit the company’s Silicon Valley office.

With Apollo 9 astronaut Russell Schweickart, his wife Nancy and John Gage at Sun Microsystems, California, 1993 Personal archive of Alexander Galitsky
With Apollo 9 astronaut Russell Schweickart, his wife Nancy and John Gage at Sun Microsystems, California, 1993
© Personal archive of Alexander Galitsky

I had the strongest desire to go there. It was an engineer’s dream!

In those days, there were no direct flights from Washington to San Francisco. The official program of my visit to the US capital came to an end, so I proceeded further on by myself. I got a connecting flight through Denver. As soon as we landed, I heard the announcer’s voice call out my name: “Mr. Galitsky, someone’s waiting for you on the aircraft ladder!” My first thought was: “Damn, those CIA guys in Washington must’ve decided to stop me. Forget about seeing the Valley.”

The usual reaction of a Soviet citizen expecting a pitfall at every corner. However, to my surprise it was a fax message from the seminar’s organizers wishing me a safe and joyful journey.

In San Francisco, I was welcomed by astronaut Russel Schweickart, a participant in the Apollo 9 mission to the Moon and a spacewalker. He then shared with me his idea of pooling efforts in creating a low-orbit communication system. That was surely my cup of tea. We’ve been on friendly terms with Russel ever since.

That visit to the Valley and Sun Microsystems (the number one company in 1990!) had an extremely powerful impact on me. I was taken around the laboratories. They showed me everything without making any secrets, although they could’ve surely kept some things away from foreign eyes. There were many meetings. Some of my discussion partners had been well familiar with me extramurally, so to say. I’d read their works. Some became my friends: Scott McNealy, Eric Schmidt, John Gage, and Jeff Bayer, of course – eventually my partner in Almaz Capital Partners.

All looked absolutely fantastic in those days!

Were you paid for the lectures in Washington?

- It was not part of the deal. The organizers shouldered the financing for all the costs and that was enough. Sun Microsystems surpassed all expectations. In the hotel, I had a luxury suite I’d never seen in my life. Even a jacuzzi bathtub was there! The hotel’s employee, a Mexican, made an attempt to explain to me how the equipment worked, but I arrogantly dismissed his offer of help. I’ll manage myself, I said. Then I started pushing all the buttons and at a certain point I turned on a mode that caused water to flow and spew from every nook and cranny, as I stood helplessly by, not knowing how to stop this fountain display…

It was funny and sad at the same time.

Of course, it was not the main thing that I saw in Silicon Valley. At that time, I could’ve had no reason to suspect to that my life would take such a dramatic turn. Later, I started flying to the United States, 5-6 times a year on average. But in 1991 everything looked new and surprising. It was then and in the following years that I got the chance to meet and talk with many remarkable people like Bill Gates, John Chambers, James Gosling, Bruce Schneier, Whitfield Diffie… My new acquaintances were too numerous to count.

With Bill Gates in Moscow, 1997 Personal archive of Alexander Galitsky
With Bill Gates in Moscow, 1997
© Personal archive of Alexander Galitsky

I recall my 1994 meeting with General Abrahamson, who once led the Star Wars program at the Pentagon. I was on the list of authors for our counter-response, so the Americans invited me for a talk. Possibly, Abrahamson wished to have a word with somebody from the other side of the barricades. He demonstrated some of his achievements…

I should say that on some tracks we were far ahead of the [United] States.

How come you were allowed to travel outside the Soviet Union? You were quite familiar with many state secrets and surely had to adhere to certain restrictions in your contacts with foreigners.

- That’s right. I had the highest security clearance degree – Special Importance it was called. Or Number One, according to a different classification. The Top Secret clearance was rated lower.

But don’t forget, that those were the years when the Soviet Union was on the decline. The system’s grip had eased somewhat. Joint ventures began to mushroom in the late 1980s. I put signatures on some documents required for the registration of several such ventures myself.

And my first trip abroad – to Finland - followed in 1990. I was given a service passport (blue cover) via the Soviet Union’s Electronic Industry Ministry. When I went there to collect it, at first, I got a refusal. Literally! The deputy minister responsible for overseeing external affairs frowned at me and said that he had been to Finland eight times himself only to find nothing of interest there.

In my younger days, I was never at a loss for words and snapped back: “You know what? For me one trip will be enough to decide if the trip is worthwhile.” Naturally, the big boss felt insulted and told me to get out. From his lobby, I phoned Guskov and explained what the situation was. He replied: “Stay right there and wait.” After sometime the deputy minister told some of his subordinates to come to his office and then stepped out, dropped the passport on the desk in front of me and hissed through the teeth: “Don’t you think that with a boss like yours you’ll have all your problems settled. From now on you are on my list!” I preferred to stay quiet. Just picked up the passport and left.

Were you invited to the KGB office on Lubyanka Street for a briefing?

- That was not connected to this incident. We had our own security department – The First Section – staffed by security service people. Let me say again, the empire was crumbling and the old rules were becoming obsolete.

I had to recall that affair in 1998, when my passport was about to expire and to be exchanged for a new one. I’d just returned from a business trip to the United States and was scheduled to travel to Europe, where my new company had already gone into business. I flew into Moscow for my passport. I thought the whole procedure would not take long and very soon I would be on my way, but it was more easily said than done. They refused to give me a new one.

On what grounds?

- Due to my previous access to state secrets. As if they woke up after nearly ten years.

As a result, while my application was being considered, I had to run my business online. In fact, it was my first experience of distance work. There was no chance for me to leave the country, so investors and staffers had to fly in to meet me at Sheremetievo Airport.

Part 2
On never selling out your homeland despite the opportunities, the August 1991 coup, a grilling by US Senators, rejecting an umbrella and the Russian mentality

- I reckon you had many opportunities to sell out the Motherland, with all of its secrets known to you, if you had the wish?

- Over a decade? Why, surely. A thousand times!

- Have you ever been asked to?

- Never. Possibly, my mode of conduct left no room for such proposals.

Each time, I was about to take a trip to the United States, I received very strict instructions, but even without those briefings, I’ve always behaved myself, because I’ve never had any intention of leaking anything to anybody. Besides, our American counterparts were all smart enough to instantly see who was worth approaching with “cooperation proposals.”

- Did you have to write reports about your foreign trips after getting back to Moscow?

- Yes, but not to the KGB office on Lubyanka Street. After visiting Silicon Valley, I even presented a whole memorandum containing my analysis to the Central Committee of the Communist Party. We discussed that issue at an office on Staraya Square on August 12, 1991, with my boss Guskov, Central Committee Secretary Oleg Baklanov (the defense industry’s supervisor) and the Central Committee’s property manager Nikolai Kruchina also taking part.

I recall that we had a glass of brandy to celebrate the occasion and agreed that fundamental work on my plan would begin in September.

- And a week later the government coup followed, Baklanov was among the plotters, and Kruchina jumped out of a window to commit suicide…

- Of course, nobody had foreseen that. All of our plans collapsed.

- What was your main proposal?

- Silicon Valley’s international essence was stunning. There I saw the offices of Siemens, Nixdorf, Toshiba, Philips, Sony, Alcatel, Nokia, Hyundai and Samsung… These companies represented the whole world. But not a single Russian name! In those days, delegates from many foreign companies and private businessmen were coming to the Soviet Union in their efforts to establish mutually beneficial cooperation, but no partnership ties panned out for some reason. Perhaps, the people’s mindset and the overestimation of our technologies were to blame.

My idea was simple: Soviet companies would make a start in California with their own products and specialists. At the initial stage, they would get some budget funding, but eventually they’d begin to attract foreign investment on their own. Once things got rolling, these businesses would begin yielding profit and the state treasury would get the invested money back. I had no doubts this project might be successful.

The August coup messed up all our plans.

I heard the news about what was happening when I was on a train from Novosibirsk to Biysk on the way to a conference on signal processors on Lake Teletskoye. Even the news about what was afoot in Moscow was hard to come by. The Internet already existed, but mobile and cell phones were still unheard of. To make a telephone call to Moscow you had to go to the nearest post office first. Meanwhile, TV stations were broadcasting the Swan Lake ballet the entire time.

Fortunately, the turmoil did not last, but the Silicon Valley project was hopelessly buried.

By that time, I realized that the idea as such does not cost a dime, but its implementation was way more important. There can be a great amount of fantastic ideas, but there must be people capable of breathing life into them. Otherwise, even the finest plans will be stillborn.

After sometime I realized another truth: a joint venture can never be successful.

- Why?

- A conflict of interests among the founders will surface sooner or later. Just look around to see if there have been many examples of successful JVs. Sony-Ericsson had an idea of making the best mobile telephone. Where is the telephone and where is the joint venture? It fell apart.

Some automotive giants did merge, too, that’s true, but still they continued to operate as independent entities competing within one holding company.

When companies start joint production of something material, or some software, they inevitably clash for the commanding position. Usually, such an undertaking collapses or the weak are swallowed up by the strong.

- And still you set up a company called ELVIS+, which began to work together with US-based Sun Microsystems. Incidentally, what gave you the idea for such an unusual name?

- It had little to do with Elvis Presley, if at all. I liked the king of rock-n-roll of course, but everything was far less poetic. The company’s name is the Russian acronym of “electronic and computer information systems.”

As for Sun Microsystems, that company in its heyday was a trendsetter in the world of information technologies and the Internet. Thanks to Sun, the world enjoys Internet technologies in our daily lives and business with such innovations as Java, Firewall, VPN, RICS-architecture, Internet networks and so on and so forth. They challenged Microsoft and many others. They were the founders of the culture that Eric Schmidt would later successfully transplant to Google. Merely four individuals founded it. All of them are in fact in my age group. Our vision of the world was greatly alike. We appreciated technological breakthroughs over material gains. As a person who had grown up and matured in the Soviet Union, I had no understanding at all of what doing business is all about, but I knew very well that from the standpoint of coping with the systemic tasks of the Soviet Union’s research, the USSR’s approach was competent and effective enough, in spite of how flawed a planned economy might be in some respects.

With Jeff Bayer, Gennady Guskov, John Gage and Bill Joy during Sun Microsystems and ELVIS picnic on the Volga river, 1992 Personal archive of Alexander Galitsky
With Jeff Bayer, Gennady Guskov, John Gage and Bill Joy during Sun Microsystems and ELVIS picnic on the Volga river, 1992
© Personal archive of Alexander Galitsky

As I’ve already said that starting from the mid-1980s, I was working on our response to [the Reagan administration’s] Star Wars. We were developing various systems, including those for data transmission and exchange among reconnaissance satellites. It was a working model, and back in October 1990 we demonstrated to the Americans how IP-packets, in other words data units can travel through space. They were dumbfounded. And the 22-ply polyamide PCB the size of a cigarette pack that I pulled out of my pocket at a certain point in a very casual manner was the punchline. Such PCBs were not yet made in any other place in the world back then!

Way back in 1990, a US team led by Sun Microsystems founder Bill Joy asked for permission to visit our factory. I called Guskov and explained what the situation was like. He said: “Let them have a look.” Without any prior coordination with the authorities concerned we allowed a team of foreign specialists to see our secret factory.

- How good was your English then?

- On all applications and CVs, my level of English was described in very roundabout and delicate terms: “I can read and translate using a dictionary.” My English was good enough to have an informal chat, but when it came to professional matters, my command of the language left much to be desired.

Of course, it was a great hindrance. Yet, I started working with Sun Microsystems. In October 1991, they sent me 20 high-performance stations with SPARC processors more than $20,000 apiece from the US. There was no way of registering the computers at ELAS, because officially I received them for private use, nor had I any right to sell them. A colleague of mine, who by that time had set up a cooperative venture, came up with a bright idea: “Alex, don’t you worry. Just start a company of your own.”

That’s how ELVIS+ got started. The stations from Sun Microsystems were contributed to its charter capital. Then we were commissioned to develop a prototype of what today is known as Wi-Fi – a module to be inserted into a PC or laptop. We made it back in 1993, yet the term Wi-Fi would come into use much later.

With antennas and radio devices using 802.11 (Wi-Fi) standard including implementation in PCMCIA package, Moscow, 1993  Personal archive of Alexander Galitsky
With antennas and radio devices using 802.11 (Wi-Fi) standard including implementation in PCMCIA package, Moscow, 1993
© Personal archive of Alexander Galitsky

- May I ask you about the time you were interrogated in Ukrainian?

- It was not an interrogation, after all, but closed-door hearings.

Clearly, I was under close surveillance by US intelligence services. They studied me, made inquiries about my background and put together a profile. I was working on very sensitive subjects. When cooperation with Sun Microsystems began, even the hawkish senators became worried: “What’s cooking? Funding Russian projects?”

For Sun Microsystems it was the first investment in their history. Also, that first investment was to be made into a Russian company. They were going to pay one million dollars for a ten-percent stake in ELVIS+.

The decision was made at offices on Capitol Hill. Our opponents did not stop at some very nasty tricks. For instance, some claimed that I had participated in creating nuclear weapons delivery systems for anonymous countries in the Middle East, which was a very clear hint at Iran and Syria.

It is true that the Soviet Union’s Academy of Sciences had contacts with foreign counterparts, as ELAS often contracted the leading academic institutions to do some research for us. Together we managed to cope with very different tasks. For instance, we used radar images to create the first-ever map of Venus. And we were building radars for monitoring and electronic systems, but all that had nothing to do with the weapons trade.

In a word, I was asked to come to Washington for an interview. Two representatives from Sun Microsystems, including a lawyer, were there by my side, too. In fact, that incident made me feel uneasy at some moments, because at the entrance my passport was taken away and I remained without any ID at all. A large panel of senators and secret service officials bombarded me with all sorts of unexpected questions, some of them very strange, indeed. For a start, I was asked what I had been doing in China. But I’d never been to that country! Somebody said: “According to our sources, you have been to that country. Who did you meet there and what issues were discussed?” And so on and so forth.

In the end, I was told to sign a pledge stating that neither I, nor any of my companies would under any circumstance work for the enemies of the United States of America. I added a comment that as a Russian citizen I reserved the right to work for my country, if bilateral relations became unfriendly officially. I added this handwritten comment to the printed text.

The paper remained in the US. I still regret that I was not experienced enough then to demand and keep a copy of this artefact.

- Didn’t this paper have any side effects on you here?

- You see, whenever someone needs a pretext, they will surely find one. This is true not only of Russia, but of any other country in the world. Don’t worry, if a person of authority feels like ruining somebody’s life, this can be done very easily. That’s for sure!

As I signed my agreement with the Americans, I asked: “How should I know who your enemies are?” From that moment on, Sun Microsystems would send me a message every two weeks with a list of companies that were on the Department of State’s blacklist…

- Have you any crossed paths with organized crime here in Russia?

- I did receive some “business proposals”. Honestly, I’ve always tried to keep a low profile and tried to avoid publicity in the Russian media for fear of drawing attention of some undesirable types, whose logic looked like this: “Aha, this guy is successful enough. Looks like he’s a cow worth milking.” But we weren’t making money just to give it away for nothing…

One day I had a phone call from someone who would eventually move up to be a big business tycoon. The message was simple: “We’ll offer you an ‘umbrella’ for a quarter of your company.” I replied that I did not need one, because “the weather outside was fine.”

Then there was an official from one of our special services, who took me to the woods. Ostensibly for some serious discussion in private. First, we had a bottle of gin, but after being bitten alive by mosquitos, we went to my home to go on partying with a bottle of vodka. I’d never drunk so much in my life, before or since! My drunk guest was talking nonsense about some joint business and even hinted my daughter might get in trouble…

I realized that some urgent measures must be taken right away. Through my acquaintances I contacted a high-placed man of great influence. I explained that the screws were being tightened on me without any reason. With this everything froze for a while till 1997, when we made the first VPN for Windows, after hacking Microsoft NDIS drivers. A huge uproar followed in the US establishment. The media claimed that Russians might have stolen secrets for Sun Microsystems.

In Russia, all of a sudden, a campaign was launched by the Federal Agency of Government Communications and Information (FAPSI). Stories about me in the US media began to be reprinted here. A rumor was launched that a new billionaire would emerge soon. You know, the attitude to very rich people here has been approximately the same all along.

A case was opened.

- A criminal one?

- No, they confined themselves to an inquiry, conducted by a large panel involving some high-placed generals. I won’t disclose any names, for some of them are still remembered very well… It was at that time that I had problems with getting a new passport. At a certain point, the probe found that starting from the very moment ELVIS+ was established I did not obtain a single state contract, nor did I receive a single ruble from the state budget. Apparently, they decided that it would be wrong to send me behind bars…

Andrey Vandenko and Alexander Galitsky Sergei Bobylev/TASS
Andrey Vandenko and Alexander Galitsky
© Sergei Bobylev/TASS

- Have you ever felt like bolting elsewhere for good?

- No. Although in the United States I’d repeatedly heard insistent invitations to stay and I was even offered a residency permit. I decided against getting a green card. I remained certain that I must live my whole life with the passport of one country in my pocket. I grew increasingly certain about that, particularly when I was warned that each time before going to the US I would be obliged to declare where I intended to go to and for what reason, and to hear recommendations in return if I was free to go where I planned to. I replied that I had lived within a system that restricted my freedom for too long to be eager to exchange it for another one that would be doing the same. No, thank you!

Much later, when I had already returned to Russia with my family, the US consul visited us in Zelenograd for a chat with me and my wife and remarked with sadness in his voice that our son, Alexander, must be missing American playgrounds a lot.

I hope you’ve found my story sufficiently entertaining.

- We are gradually moving towards the next major chapter in your life, the moment when an innovator transformed into an investor.

- You know, while you stay focused on innovations, all investors around you look like idiots. At least, most of them. You look at them and think they are very wrongheaded people and their way of thinking is strange. You want to change the world, yet they can only talk about the priority of cash flows, unable to see the greatness of your ideas.

Sometimes this feature was glaring and a great annoyance. One day investors in fact blocked a very lucrative deal that might have let us earn a whole lot more. I still remember how very disappointed I was about the outcome. The company Trustworks Systems was sold, and I had no wish at all to stay in it. I stopped to think about what I should do next. And I had a very interesting idea. I tried to become the ‘correct’ investor: I hired people, I gave them money and they started working on my idea.

- What was it about?

- Corporate telephones’ cost management. At that time, roaming was a great problem in Europe. People travelling from one member-country of the European Union to another had to spent colossal sums of money on mobile communication. One day a Dutch friend came to me and said: “My boss wants me to present a report what calls I make from my corporate number, where and why. I’m dating his daughter, and do not want him to learn about our affair earlier than he should.” I replied: “My idea is to make special software capable of identifying your personal contacts, so that all related costs could be deducted automatically.”

We were sitting at a restaurant discussing the problem over a glass of wine. That’s how the idea emerged. I said: “Let’s start a company.” Then I found the right people who got things going. I was not in the mood for doing that myself, since I’m used to working on larger projects.

In 2003, I went to Nepal in order to ponder over the meaning of life. After some mountain strolls, I went down to earth and… started distributing my monies among different start-ups.

- Did you have a lot?

- Of companies?

- No. Monies.

- Enough to invest some place according to the principle of “a ten-percent stake is not a big loss.”

- Then I was asked to make the TechTour for foreign investors in Russia. It was a well-established platform in Europe, but for some reason it never worked here. TechTour was a turning point for me. When I came here, I saw Kaspersky Lab, Yandex, and SWSoft, which was eventually renamed to Parallels, Acronis and SJlabs… I thought: “What great companies they are!”

No Western partners hurried to invest in them, though.

- Why?

- I still wonder about that myself. Perhaps, there was lack of trust. It was in 2005, to my recollection. After Beslan… In a word, I looked at all that and thought: “What if I try to put some money into it myself? That’s how my transformation began.

- Yet, there was no Russian money in the first Almaz fund that you established in 2008.

- Right. Zero. Only Western investors were involved. Cisco was the first to come. In the second fund, some Russian sprouts showed up: private investment from business people.

- You’ve mentioned that you are not very fond of dealing with domestic businesses, is that true?

By and large, yes. My skepticism is mostly due to the inability of our people to identify priorities correctly. An experienced investor is determined to comply with the assumed obligations first of all, even at one’s own costs. It’s a question of mindset. Many of our domestic investors think differently. We’d rather break a promise but never agree to cut personal expenses.

What does it look like in practice? Such a person may come to and say: “Sorry, pal, but I’ve got to buy a new yacht”.

- Something like that. “The revenues are not as good as before,” “My wife feels like flying to the Maldives” … Such arguments do not sound serious enough, but people use them again and again.

- And how did you reply?

- What can you say? Thank God, so far it has never come to the point where any sanctions laid out in the agreements had to be used. For instance, it might be possible to strip defaulters of a certain share of the profit as a penalty, and so on. There’ve been no such incidents, but it’s very hard to sail close to the wind all the time. Because as a rule I have to pay for this from my own pocket. And even after that it remains to be seen whether the investor will bring the expected amount of money or not. There are risks.

- This means that you are very selective in admitting newcomers?

- Naturally. You can’t trust the first person you meet. It is better to turn down a lucrative offer and think ten times, in order to select the right partner in the end. These relations are built for many years to come. What’s the point of striking a deal with those you don’t trust?

I try to be very scrupulous from the very outset in choosing associates. True, some people have experienced financial gaps, but all of them painstakingly honored their obligations. I have no grievances against anybody. Perhaps, I’ve been lucky. I know many cases of venture funds being established on LP money – provided by major private investors, who eventually decided to quit. These types of deals did not look very gentlemanly. Let me repeat, I’ve been very fortunate in choosing my partners. They were selected very carefully. Recommendations from my institutional investors, such as the European Bank for Reconstruction and Development, were very helpful. They have their own lists and closely scrutinize those who would like to join a project and advise us on the choice we are about to make – this one is good, and the other – no good at all. But it is up to us to decide, of course.

With Almaz Capital partners on Nantucket Island, 2016 Personal archive of Alexander Galitsky
With Almaz Capital partners on Nantucket Island, 2016
© Personal archive of Alexander Galitsky

- And your cooperation, say, with Vekselberg, who is under sanctions, does it involve any additional risks for you?

- We’ve never had any problems for this reason. It’s all very simple. There are strict rules and they have to be observed. If a certain event has already taken place, the money accepted before stays in circulation, but you are not allowed to take more. Imagine I’ve started a fund in which ten people are under sanctions. Clearly, such an outfit will be unable to survive in the United States or Europe. It will not last a day. But if the sanctions were introduced after the fund was created, we will be merely unable to distribute the money it has made. It will have to be frozen and remain idle until permission is granted to take it. But that’s none of our business.

- Okay, and what about the Honest Mark digital labeling system, in which you participate along with Alisher Usmanov and Rostec? This is, in fact, a government contract, yet you have claimed all along that you don’t work for the state.

-  There is not a single ruble of budget money in the project. It is funded totally with private money. The overall costs stand at about 200 billion – 100 billion is ours and the other 100 billion comes from the outside. I’ve discussed this project with the European Bank and the International Monetary Fund. Everybody likes it, because it may help encourage innovations in Russia. If it were not for the sanction problems and – as a consequence – cooperation problems with other countries, this model might be replicated around the world. For one simple reason: it is in great demand.

It benefits businesses, the state and the individual.

Take the acute problem of fresh water. How is it possible to control quality and expose fraudulent competitors? One producer takes water from an artesian well, another, from natural springs, and a third add adds chemicals into the water running from the tap. The water tastes approximately the same, but the effect is drastically different.

You will agree that this is a very sensitive issue.

Why do you think tobacco manufacturers rushed to welcome the idea of digital markings on all goods? Huge amounts of counterfeit products are pouring into Russia from its neighboring states. QR codes are a barrier to shadow supplies. Even more so, since QR codes can be automatically printed on cigarette packs, while the process of sticking excise duty stamps slows down the production line by 30%.

The same is true of medical supplies, where the social aspect and the issue of quality are no less important.

The categories of goods to be marked are determined by the authorities in the process of restoring business to order. No bootleg items. Everything must be accounted for from the standpoint of taxation and transparency of incomes.

The current resistance is very strong. Clearly, many dislike the project, since it may upset many illegal logistics chains. The traceability of goods will make it possible to control the process from beginning to end. The brokers who are in the habit of getting their piece of the pie on the way find themselves on the sidelines.

I’ve already mentioned medicines. It is critically important to be certain that at the pharmacy next door you will be sold precisely the medication stated on the box.

Or take foods. It is wrong to declare a product as Fresh Milk, if in reality it is made of powder. These two products are be different in status and in terms of price, quality and the effects on the consumer’s health. The codes will make it possible to mark products and trace all counterfeit items.

But won’t it be possible to forge your QR codes? There are some very resourceful people, who can deliver anything…

Theoretically, everything can be replicated in this life, but the difference is the abuser will be exposed in the end.

- Have you made many new enemies?

- I have no idea. At least, I still manage to do without personal bodyguards. I’ve never thought it would make sense to have any.

Perhaps, our product labeling project has interfered with somebody’s interests and upset certain money-making schemes and stripped some of their cash cow, but order must be established in the end.

I am certain that the production of medicines, baby-foods and soft drinks certainly needs a system of complete monitoring. As for the resistance you’ve mentioned, I’m used to it. We went through something like this when we launched the cash register reform, which yielded tremendous benefits to the state. Pressure in those days was enormous, but these days the nation’s entire system of statistics is based on it, even during the pandemic.

It was an absolutely innovative undertaking. The cash register reform gave rise to many other remarkable projects. An intellectual upsurge ensued, generating new top-down, vertical chains of command.

- But wherever the state is present, corruption is frequent, too.

- Not with regards to labelling goods. Corruption here is impossible. Before I thought that any business begins with some technological solution that is of great interest, but then I reconsidered my viewpoint, because I realized that a service and a demand for a certain product is the root cause of all. Then the technical means and solutions appear that allow for providing both the services and products in demand.

The product labelling project is a chance to build startup companies. Say, isn’t it a good idea to create a smart medical box containing all information about the medications available at home, the proper way of taking them and the expiration dates? All information will be based on scanned QR codes. It will be far easier than trying to read instructions written in tiny font.

For innovations to succeed there must be a correct motivator. I am certain that private-public partnership projects, launched for addressing a socially important task will surely bring about something new.

In the past, budget money was funneled into technologies for the sake of addressing national issues. The very same defense industry served as a development engine. Today’s situation is different.

- Do I understand you correctly that the product labeling campaign is one of your priority projects?

- It’s a trial balloon. Will I be able to do something in Russia? I know that today I am prohibited from doing many things. I would like to find out what is allowed.

- And what are you prohibited from?

- I’ve already told you: Almaz Capital’s charter does not permit investment in Russia.

- Is Almaz Capital registered in the United States?

- No, our third fund is registered in Luxembourg. The European investors asked us to move it there from the Cayman Islands. A typical procedure for transnational funds.

- Has the attitude towards Russians changed a lot in recent years?

- Yes, certainly. After Crimea.

And not only towards money or investors. There is a certain restriction on using specialists from Russia. A new wave! It is not officially stated anywhere and nobody will tell you outright that Russian specialists cannot be hired, but unofficially they are very unwelcome. For this reason, many Russian companies who have accessed foreign markets are trying to conceal their origin.

These are the current realities. But external circumstances are very different from the desire to do something useful for Russia. The Center for Research in Perspective Technologies (CRPT), commissioned to develop the digital marking system, is a litmus test for me. When online cash registers were still in the creation phase, I made no secret of my intention to promote investment opportunities for Almaz. And I would like to see the product labeling project bear fruit. True, some resistance will last for some time. There will be no end to the fuss and rumors about the country being robbed, but I believe that not only the state, but businesses and consumers, too, can see the benefits.

Part 3
On motivation, phishing, fraud, resourcefulness in business, polygamy and favorite ‘wives’

- But you made up your mind to start the product labelling project not for charity, of course. How much do you hope to make on each QR code?

- Fifty kopeks. Believe me, the question of money in this particular case is not the most important one. I see it as an attempt to get innovations going. True, it will not be bad at all if we manage to get a return on the investment. There have been attempts to stop us at every step: let’s exclude milk, medicines and mineral water. The whole affair is on the brink. For the time being we are well into the red.

Although I’ve seen some cartoons about Alisher Usmanov’s new yachts. I guess that his old one is not bad at all. As for me, I manage to do without any yachts at all.


- The way I see it, it’s not a way of investing capital, but vulgar vanity. First, people hurry to buy such luxuries, but then many owners of such expensive toys start thinking about getting rid of this burden. I’ve already explained to you that I got acquainted with US billionaires when I was still a young man, and they told me everything about material wealth. Happiness is elsewhere.

Look at the top names in the IT business. Our media outlets are fond of inventing stories about their fabulous estates in Hawaii and other luxuries... In the meantime, I see something very different. Most of them are very ascetic people, who are very calm about material values. What’s the point of buying a yacht, if you can use it once a year at the most?

Do you think our fat cats will ever get their fill?

- I hope so and I do believe even so. I can see more and more wealthy people in Russia stop to think they can avoid squandering money on some expensive items again and again, and invest private money into what will do society a lot of good. The conceptual view of the world and events around us is bound to change.

What is your personal motivation?

- I’d be thrilled to see an innovative Russia. I want to see Russian capital at work inside the country, and not outside it. This explains why I’ve been trying to advance an idea that looks very simple at first sight: investment in exchange for a market or a market in exchange for investment. Whichever you like better.

Once the demand is guaranteed and the size of the market is clear, both private businesses and public companies may take risks. The main thing is to secure the obligations of the parties in the so-called public-private partnership.

The projects may be different like a smart road (for transportation of cargos between China and Europe in just 12 days with the costs being the same as those of delivery by sea), or a smart home (each newly-built home can be commissioned only if it has a smart utilities control system), and so, on and so forth. Such projects are real, and extremely vital. There are real customers behind them, and they will guarantee demand for new innovative Internet-based solutions, computer software and radio electronics.

That’s my idea of how to go about the business of starting new projects: generate the demand for innovations through technological challenges for businessmen and engineers, and not through so-called import substitution.

Furthermore, we can make competitive solar cell panels. Thus, let’s set the objective of installing 5%-10% of all newly-commissioned buildings with such panels on their roofs. I believe that what is essential is not just the money I can make, but the end result, if the whole chain from software to microprocessor will work well enough. The key thing is how many new companies will emerge will they be able to be competitive on the world market and what will their capitalization be.

Money is an indicator, a parameter of the project’s success. Although getting into Forbes’ list has never been my goal. It is not my ultimate objective.

All others say the same

- I’ve told you the story of my life. In the Soviet era, my career skyrocketed by the 1990s. You’ve been asking me if I have a private jet. ELAS had three and any minute I felt free to order any of them to embark on a business journey myself or, as the firm’s chief designer, let a government minister or some other senior official or agency use it.

And in a single day, life changed in an instant. All those benefits and privileges vanished. It’s like a rollercoaster ride. I’ve been through such ups and downs several times already.

In the 2000s, I lost an awful lot of money after I put it in a trust fund. I was too focused on my own business. And last year I was stripped of a large sum again.

In what way?

- In a very banal way, I should say, to my regret. A good old friend and partner of mine, well-known in the IT business, and I got taken in by a massive scam.

I transferred a loan to him, but the money ended in somebody else’s account in Hong Kong.

How was that possible?

- It’s all very simple. The Hong Kong police say such incidents happen 5-6 times a week. There are international crime rings, whose profession is phishing. First, they select a certain person and put him under surveillance. In this interview today, we both discussed many things. Somebody may read this interview tomorrow and say: “Aha, this guy is on the Forbes list, he has his own fund, assets and projects… He deserves closer scrutiny.”

That’s how they start zooming in on their future victims. I reckon I’d been spied on for a long time. One day they must have hacked into my correspondence with that friend of mine and a great IT specialist. I suspect it must have happened in China, where I was careless enough to leave my telephone in a hotel room for three hours. Or my friend’s gadgets may have been hacked into. He has very different people working for his company.

Different software products still have many weaknesses. Or we might have given our secretaries access to our corporate inboxes, so that they could manage them and write answers to boring messages. There is a special function like that.

It’s hard for me to tell you now what really happened, but the hard fact is that somebody inconspicuously got plugged into our correspondence.

So, you transferred the money and it ended up going to the wrong account, right?

- It was a jaw-dropping con job. When I narrated the highlights to Timur Bekmambetov, he replied that it was a ready-made plot for a Hollywood blockbuster. Fits in perfectly! And a producer I know, whom I met in Taiwan, confirmed Timur’s every word. Just add a female character and some romantic flavor to the mix and success will be more than guaranteed. It would have drawn huge audiences.

Could you please give us the whole story on how it all happened?

- I still don’t know how my friend and I got reeled in, but it goes without saying that we got on someone’s radar at some point. Special companies were opened and registered and domain names created… It was a large-scale spying campaign! You can spend a whole year living unaware you’ve been marked as a potential target and that some people just watch and wait for the right moment to bait the hook for you to swallow.

All people, when they encounter some problems from time to time, turn to their friends and partners for help. In my correspondence with my friend such an issue was mentioned. A rather large sum of money was at stake.

-  How large was it?

- I’d prefer to keep quiet about this. Millions of dollars…

When we started discussing the question of a loan, the swindlers stepped in. Before that, they’d studied our mentality, including our style of writing and manners. After that they began to inconspicuously replace the messages we were exchanging. To be more exact, to blend in their own, and to steer the whole discussion in their desirable direction.

Didn’t you suspect that something was wrong?

- Haven’t I told you that some professional hands were at work there?! They did not upset our dialogue, but joined it. Of course, they could see only part of the messages we were exchanging. Also, we discussed some things on the phone and the swindlers remained unaware of some nuances, but our subsequent moves made it very clear to them what we had in mind, so they could go on playing their game.

- As I’ve already said that occasionally I may ask some of my colleagues to write a business letter for me, which I eventually send myself. People who know me well enough will instantly see I was not the one who authored some particular message. Every person has a unique style, and forging it is very difficult. The swindlers I’m telling you about were very successful in this respect. I don’t know if they used artificial intelligence or not, but they did a great job. And then they began to pull the strings with neither of us aware of it. For instance, they might turn off the e-mail box at some point, prevent a letter from being delivered or replace it with another one instead…

They displayed remarkable skill and workmanship. Just think of it, my counterpart and I were writing to each other very often, but in this situation, I wasn’t suspicious at all that both of us were being duped all along. In the end, they even sent us certificates for checking their company and provided all other documents we requested and… the money went to a wrong account.

At the height of this episode, I was on a flight to San Francisco from Amsterdam. Wi-fi was available on board and I could still use my telephone. First, I missed a phone call and when I tried to call back, my friend’s number was busy. I texted him a message: “How’s business? The money was sent to you three days ago.” His reply was: “What are you talking about? I haven’t received anything.” I was shocked. The plane was already on the runway. I made a feverish attempt to make a phone call, but the flight attendants hurried to warn me that all mobiles must be turned off during takeoff and ascent. I was beside myself with anger. During that flight, the sole thought that raced through my mind again and again was that two experienced adults had been bamboozled like little kids…

In San Francisco, my son met me at the airport and we went to dinner in the company of some colleagues. When we arrived, they all had already been informed about what had happened. It was an amazing coincidence that one of the board members in my friend’s company was the former chief lawyer of the US National Security Agency. In 1997, it was the NSA that looked into the case of the VPN for the Windows environment that we developed and licensed and then sold to Sun Microsystems. He was a well-established and well-known individual. When he learned about that incident with the money transfer to the wrong account and that I was involved, he recalled that old-time case and did his utmost to help. That transaction could be stopped only by using unofficial resources. An account cannot be frozen without a court order.

The transaction was blocked and all formal procedures and court hearings followed later.

-  Did you manage to get your money back?

- Every last penny. Minus the legal costs.

And the moral of the story is?

- The world has become more aggressive. Publicity is not always good. Everyone should be far more cautious these days. You may be shadowed and spied on. Troublemakers may be waiting for an occasion to use it for their selfish purposes.

But to tell you the truth, I haven’t changed my attitude on life. It is fundamentally wrong to distrust everybody around you. All cases are different. And now I’ve grown still more certain that money is one of humanity’s worst evils.


-To an extent, yes. At least, that’s how I see it.

Money causes people to betray one another and commit other wrongdoings that put them in situations from where they are unable to get out of. There are many stories like those that are very sad.

-  What’s the way out?

- To forgive. I see no sense in harboring grudges, let alone trying to settle old scores. If a person realizes he committed a despicable act or move, that’s very good. However, those who are unable to confess their guilt cannot be helped.

Why make a fuss? From the standpoint of eternity, our life lasts an instant …

Does this philosophical viewpoint help?

- I can’t swear that I won’t be fooled another dozen times. How can you know this beforehand? Everything is relative. Some will say that a colleague’s mode of behavior is fraudulent, while others will reply it is resourcefulness and part and parcel of private enterprise. Dishonest people can be found in any line of business. They take advantage of other people’s inexperience and gullibility. Things like that happen now and then. Remember the Silicon Valley film? An engineer in an attempt to produce a favorable impression on his potential employer reveals the details of his ideas, while a gang of 30 specialists sitting next to the boss jots everything down with the aim of trying to implement his proposals on their own. What’s the right name for this? Deceit of someone being too naive?

I want to reiterate that a lot depends on one’s attitude to a certain situation in life. I am a born fatalist. Many times, I found myself on a plane that had some technical problems in the air, but that did not make me stop flying. Or take the coronavirus pandemic. Some of my partners throw up their hands in bewilderment: what forces you to go here and there and everywhere, make trips and take risks? Are you in your right mind?

Of course, I’ve been trying to take reasonable precautions, but at the same time I tell myself that I cannot avoid the unavoidable. One can become ill even in a concrete bunker. Somebody’s casual sneeze may cause you fall ill.

I’m for reasonable sufficiency and for reasonable risks.

- What else can be expected of a venture capitalist… You’ve been working on different projects at a time, for which you and your colleagues were dubbed polygamists. Can you tell us who is the favorite wife in the Almaz Capital harem today?

- There are several “wives” enjoying the status of a “favorite”. And this is a great problem. Whenever you invest into some company, all of them become wonderful, near and dear to you.

- But it’s impossible to love them the same way.

- True, at certain stages some may require greater attention, and not necessarily the best ones. Some are capable of growing without extra assistance, while a helping hand is to be extended to the middle-of-the-road ones and outsiders. True, some are hopeless with no chances of surviving, and you’ve got to choose what your efforts must be focused on – saving the weakest or helping others who still have the ability to recover.

Circumstances change, so does the current market situation and technologies become obsolete. Analysis takes time…

And which of the previous projects do you appreciate the most?

- Clearly, your first love never dies… At the very beginning, we had a video messenger called Qik, which we sold to Skype. My sole regret is we quit too early. Our co-investors were too greedy and wished to cash in, while we should’ve certainly acquired more shares. At least for half of the sum.

Six months later Skype was sold to Microsoft at a price six times higher.

- And how much did you sell it for?

- At the shares’ price at that moment.

- And in real terms?

- We were paid one billion dollars. The buyer was ready to pay with shares, but we took cash at a discount. That’s normal for such deals. And then the company was traded for six billion…

That deal is now history. But it all could’ve happened differently. Memories of it are still fresh, just as the lessons I learned. For instance, a couple of correct phone calls can change the price drastically.

With Almaz Capital team in Italy, 2019 Personal archive of Alexander Galitsky
With Almaz Capital team in Italy, 2019
© Personal archive of Alexander Galitsky

- By stirring up interest in the transaction?

- Of course. Competition pushes the price upwards. Should some major players begin to make moves, everybody else gets nervous for fear of losing benefits. The psychological aspect is very important in making investments.

It’s a duel that never stops, like an arm-wrestling competition. I am certain that energy vampirism does exist, while internal motivation is a genetic quality. Remember, my father launched his last project when he was already beyond 80 years of age. I just cannot imagine how can one stay idle. I think I’ll go crazy, if I have nothing serious to do. Moreover, I keep meeting young people and borrowing energy from them. I cannot see myself from the outside, but when look into their eyes ablaze with energy and enthusiasm, I begin to feel the way they do. When I hear them making plans for 20 years down the road, I tend to forget my age and join the process. A very useful experience.

- And by starting your third Almaz Capital Fund you’ve in fact pledged to stay in business for another decade.

- In reality, there are eight years left, but still, it is a rather long time. I agree. I took on certain obligations. There is such a term as “key person”. Should the key person, in this particular case, yours truly, decide to quit, the LP, the main partners can say the joint fund affair is over. They can feel free to go ahead, but at the same time they obtain the right to leave Almaz Capital. I would’ve been terribly upset to see this happen, because this fund is my brainchild and I hope there will be many more occasions to raise a glass to toast some successful deals.

- A glass of champagne?

- Didn’t we find out at the very beginning of the interview that it is extremely important to have a worthy occasion to celebrate? The choice of a beverage is then much easier to make.

Andrey Vandenko