Anyone who lives in Tel Aviv’s old Neve Tzedek neighborhood or who takes a walk around it will inevitably encounter the Chelouche Bridge, which connects Neve Tzedek with the Florentin neighborhood. Over the past few months, photographs of the area taken in the 1930s have appeared on the bridge. Every few weeks, teenagers tear down the pictures or destroy them, and after a few days they appear again. It is not the Tel Aviv municipality that has hung the pictures, or the neighborhood committee. The person responsible is Arkady Yuryevich Volozh, a Kazakhstan-born Russian billionaire who lives in central Israel, keeping a low profile.
Volozh’s wealth is estimated at $1.1 billion. He accumulated a substantial part of it in one of Russia’s internationally best-known companies, one that has become associated with controversy as a result of the war in Ukraine, namely Yandex.
The company, founded by Volozh, is reckoned to be the fourth largest search engine in the world, competing with Google, and has thus gained the soubriquet "the Russian Google", but the company, estimated to be worth $7-8 billion (an estimate made after the start of the war) also competes with Amazon, Uber, and other technology giants, through complementary services such as groceries delivery, a taxi hailing app, and cloud services. In Russia, Yandex became one of the strongest and most visible brands in the big cities. How did Volozh get to Israel, and what is he looking for here?
An entrepreneur, not an oligarch
Volozh is not an oligarch, and finds the term distasteful. He is strict about presenting himself as an entrepreneur who has made his fortune in technology. Throughout his years of activity in Russia he adamantly refused to become connected with the regime, and avoided sectors associated with the Russian oligarchy such as oil, arms, and mining.
In 2008, at the same time as the Russian incursion into Georgia, Yandex started to prepare for an New York IPO, but the financial crisis that broke out that year delayed the move. Nevertheless, the intention to float the company aroused concern among senior people in the Russian government.
At that time, Yandex was the most popular news source in Russia, through a product that aggregated news stories from all the local outlets. In addition, it became an important player in the technology market, with its unique IP assets and its data on Russian users. The Russian regime feared that a flotation would expose the company to a hostile takeover. Under an agreement with the company, the Russian state was given, through its holding in local bank Sberbank, a golden share that in effect could block any foreign entity from gaining control of the company. In exchange, Yandex received almost complete freedom of action.
Nasdaq delisting
In March this year, Yandex and four other Russian technology companies had to delist from the Nasdaq exchange. Days after the Russian invasion of Ukraine, trading in the company that represents Yandex outside of Russia (Netherlands-registered Yandex NV) was halted in New York and Frankfurt. At the same time, "The Financial Times" reported that Volozh’s Internet giant had transferred to its servers in Russia data on millions of users of applications developed with software tools distributed to developers. In the report, experts expressed their fear that the information gathered could be made available to the Kremlin and could be used for surveillance, including of Ukrainians.
Yandex admitted that its software gathered data that was transferred to storage in Russia and Finland, but claimed that these were limited data not connected to specific users. The company added that identification of users on the basis of this information was a complicated process that even Yandex itself was not capable of carrying out. However, the affair made the Google of Russia’s image controversial around the world.
EU sanctions
Last June, the EU imposed sanctions on the Russian billionaire, accusing him of "materially or financially" supporting Russia. The decision surprised Volozh and also the business community, since he claimed to have no connection with the Russian government, and had not lived in Russia for nearly a decade. Volozh argued that the EU had made a mistake, but quickly announced that he would step down as CEO of Yandex and as a director of the company.
The invasion of Ukraine was thus a turning point for Volozh. There were reports that Yandex’s management was conducting negotiations on control of the international company in exchange for the transfer of parts of the business to a control group outside the Russian company. According to these reports, Volozh had decided to transfer part of Yandex’s business outside Russia and to his management, and apparently this is currently being organized in Israel among other places.
Yandex NV has declared its intention of exiting the Russian market, and has commenced the process in order to distance itself from the hold of the Kremlin and its war in Ukraine. After the exit from Russia, the group will be left with four technology companies in AI, cloud, autonomous vehicles, and a technology education venture. The decision on the split will be in the hands of the shareholders in Yandex NV, among them several US investors.
Immigration to Israel
Following the Russian invasion a substantial part of Yandex’s management came to Israel, as well as a group of developers and technology people. Volozh said at the time that this presented an opportunity for Israel, and he asked the Israeli government to assist in bringing in engineers from Russia, and some from Ukraine. He wrote to then minister of finance Avigdor Liberman and other ministers asking for help in completing the move, which in the end did not take place.
Volozh himself has visited Israel several times over the past twenty years, and told his associates that he was very impressed by the Israeli technology ecosystem. In 2010, he and Daniel Recanati invested $4.3 million in Face.com, founded by Gil Hirsch and Eden Shochat, which developed facial recognition technology. A year later, the company was sold to Facebook for an estimated $100 million.
This was the start of a long and significant connection to Israel for Volozh. In 2014, when Russia annexed the Crimea, Volozh decided to focus on developing Yandex’s international activity under the Netherlands company.
At that time, he decided to immigrate officially to Israel, and he received citizenship under the Law of Return. He met his wife Tosha here. The couple married in 2017 in Zichron Ya’akov, and they have three children. Volozh also has three children from a previous marriage.
These days, Volozh mainly spends his time advising the four startups located in Israel under Yandex, while Yandex’s management continues to act to dissociate it from Russia. One of the companies, cloud services company Nebius, has been in the headlines in recent weeks as an Israeli attempt to compete with cloud giants Microsoft and Amazon.
Volozh makes few public appearances. He recently broke with this custom, and took part in a "fireside chat" with entrepreneur Yossi Vardi at the CyberTech Global Tel Aviv event. In the past few months, he has been very active in AI, and has held meetings with leaders of the sector in Israel. He also talks at conferences and meetings of the way Israel can develop independence in this strategically important field. In his few public comments, Volozh has expressed concern that Israel might not jump onto the AI bandwagon in time, and might be the last to adopt advanced services.
In closed conversations, he also expresses admiration for those in Israel’s technology industry who have taken part in struggle against the judicial overhaul in Israel, and tells friends that, as someone who grew up in the Soviet Union, he is no less than thrilled by the campaign for democracy and by the way in which demonstrations can take place freely in the streets.
Published by Globes, Israel business news - en.globes.co.il - on April 27, 2023.
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