How a U.S. VC firm keeps doing business with Russia

Domain Associates has strong ties to a Russian government-backed fund. Can it continue?

Around four years ago, a group of U.S. venture capitalists headed to Russia on a state-sponsored trip that was designed to promote foreign investment in the nation’s startups. One of the most impressed VCs was Brian Dovey, a longtime partner with healthcare-focused DomainAssociates. He remained in touch with the Russian organizers, and in Domain later announced a $760 million partnership with Rusnano, a government-owned investment fund in Russia.

Under terms of the deal, Rusnano and Domain would form a Russian shell company that would license pharma solutions from Domain portfolio companies for use within Russia. Rusnano also would invest in those companies, alongside Domain.

So I was curious as to the program’s current status, given the Western sanctions against Russia and the broader geopolitical conflict.

Dovey was actually in Moscow when I rang, but fellowDomain partner Jim Blair took the call. He says that the firm is more concerned than it was just a few months back, but that the sanctions have not yet had an impact:

“We’re talked to Treasury and State and all the way up to the Ambassador level,” Blair explains. “What we’ve been told is that the sanctions are targeting the financial, oil and energy sectors – and that, to date, there has been a distinct desire not to target healthcare, since that’s something that really has a value to both the U.S. and Russian populaces… We wouldn’t predict the future, but the flow of cash has not yet been impeded and we haven’t seen any operational problems.”

Domain currently is in the midst of raising its ninth fund.

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