The original article was published in Forbes magazine, February 2018
An American actress Sharon Stone was in fury. Having arrived at the Cannes Film Festival she was shocked to learn that her villa that had been reserved a year in advance had been taken by some Russian businessman. It sparked a public scandal which was brought to an epatage close by the businessman who sent an offensive note to the actress carried by a small plane. It happened in 1995, and the “Russian businessman” was the banker Oleg Boyko. In September 1996 he was coming back to his villa from the beach in Monaco and discovered that he had lost his keys. Boyko tried to climb in through a second-story window but fell down and received a serious spinal injury. Although breaking a spine did not break him.
Forbes estimates Boyko’s wealth at USD1.2 bn. Moscow office of Oleg Boyko’s investment holding Finstar is located in one of twin tower skyscrapers of the City of Capitals complex, where he performs all kinds of antics on his state-of-the-art automated wheelchair. Oleg Boyko remains true to joviality and love for extravagant behavior. He keeps a baseball bat behind his desk in the office, and Finstar employees confess that when the work process goes wrong one can see a billionaire wheeling down the corridor swaying the bat and tapping the floor with it. Friends call him a jester and the life and soul of the party. Oleg Boyko asserts that he has been absolutely happy for a long time already: “I am always in good spirits”.
Good spirits were hardly Oleg Boyko’s permanent companion back in 1996 when he moved from one French hospital to another. The restructuration all of the OLBI empire in Russia and revocation of the National Credit Bank`s licenсe from National Sports Fund in 1997 during the banking crisis, also dealt a devastating blow to the billionaire. One of the richest people in Russia lost everything and hadn’t shown any signs of activity for a long time. He managed to come back to business through his connections. Boyko owned a small restaurant in the center of Moscow frequented by crème de la crème of the Russian business elite. It was there that Oleg Boyko got acquainted with Alexander Abramov. In 1999 they started to buy up the receivables of insolvent steel firms and then consolidated their assets – that is how Evraz Group was launched. In 2004 Boyko sold his 25% share in Evraz for USD600 mn. He says that at the time his mission in Evraz was over and staying in a cyclic metal industry was no longer prudent and comfortable.
In 2005 Abramov’s Evraz went public, today the share capital of the steel giant is USD6.5 bn. “We say jokingly that the best investment for Boyko would be to keep Evraz shares and enjoy his rest in the Canary Islands”, says Finstar’s ex-employee. -‘He would be much richer now that way”. As for the businessman himself, he hardly shares the idea. He starts feeling bored after spending only a few days on his 44-meter Blade, one of the fastest yachts in the world. Boyko says that his most successful investment was the purchase of the gaming chain Vulkan with a couple dozen of slots halls for USD6 mn in 2002.
Headed by Boyko and his partners, Vulkan grew into the biggest gaming holding in the Eastern Europe – Ritzio Entertainment – with annual revenues at around USD1 bn. Boyko recollects that the business had a fantastically high profit margin: it could amount up to USD800 mn. “It was a perfect money making machine, – he says. – And then it was destroyed”. The machine was destroyed in 2006 by then president Vladimir Putin who endorsed a law prohibiting gambling everywhere in Russia except for four isolated areas. In 2009 gambling was banned nationwide in Ukraine and in 2010 Ritzio’s revenue plummeted to USD154 mn. Boyko says: “Such a pity… We created the biggest gaming company in the world and even managed to sign the mandate letter for the IPO…”. Ritzio still has slots halls in Germany, Italy, Romania and Croatia, but for Boyko it is now just “an insignificant part of business”.
Boyko tried to launch a new business on the ruins of the gambling empire. Gambling halls were getting free of slot machines and in 2007-2009 they turned into lottery storefronts and betting offices. Oleg Boyko managed to make one more successful investment, though on a much more modest scale compared to Vulkan investment. In 2007 he bought a 75% stake in Saint Petersburg perfumery and cosmetics chain – Rive Gauche – that belonged to Larisa and Pavel Karaban. By August 2012 Rive Gauche grew into the second largest seller of perfume and cosmetics with 190 stores all around Russia. Boyko sold his majority stake to the ex-owners of the Lenta chain August Meyer and Dmitry Kostygin for an estimated USD200 mn.
Ocean of finances
One summer evening on the Jūrmala seafront Oleg Boyko was surrounded by beautiful ladies in tight T-shirts and shorts. A charismatic billionaire visiting the New Wave music festival couldn’t ignore them having an all-girl party and collecting money in exchange for odds and ends.
Boyko’s interests in Latvia go far beyond music festivals and “adventures” of the kind. He actively invests in Latvian real estate, and in 2011 he invested in the local online consumer lending company 4finance. Boyko says that the sellers of the share were two influential Latvian businessmen – Uldis Arnikans and Edgars Dupats. Arnikans is characterized by one Latvian businessman in his interview to Forbes, as an active investor with a particular interest in oil and aviation sectors, and politics.
Boyko keeps the investment amount undisclosed, but according to a source, the billionaire invested over EUR100 mn in the company. 4finance offers online loans to customers across 17 countries, including Mexico and Argentina. Arnikans and Dupats, each holding a 25.5% share in 4finance, remain Boyko’s partners; a share of the Boyko is registered as a family trust.
Why did Boyko invest in a fintech company? He jests that he fell for fintech in the USSR. In 1988 he and his friends earned their first money by selling computers and software to state-owned enterprises. Buyers paid for them using bank transfers and money could be withdrawn from the account with a considerable 20% commission. Then partners invented a scheme: they sent floppy discs with computer software to their cooperative on cash on delivery terms. Thus, the cooperative paid with a cheque and the sender received cash paying 2% commission. “This spread between 2% and 20% made our living”, jests Boyko.
Today’s business volumes are much bigger. Finstar actively invests not only in 4finance but also in other fintech companies. Thus, in 2016 Finstar made a joint EUR31.5 mn investment with Holtzbrinck Ventures in Sportcap, the German lending service for small and medium-sized businesses, and in P2P online lending platform for private customers – Viventor – operating, among others, on the Spanish and Polish markets. Finstar also invested in Rocket10 and Billfront offering online marketing services.
All companies that enjoy Finstar’s financial support share experience and services. “The segment that we work in – is the biggest blue ocean in the world, – Oleg Boyko believes. – I can’t think of any other segment with no serious competition. We work with people excluded from the financial services sector: we make our product for those who fall short of the bank scoring system or those who are not satisfied with the quality of services – the underbanked and the underserved, as we call them. Existing technologies can satisfy all their needs, the most important thing is to make the pieces of that mosaic finally fit”. To make the pieces fit Boyko is ready to spend another USD150 mn, he is interested in companies engaged in payment systems, marketing, data procession and credit risk management.
Are there any results? “Finstar has accumulated a great number of assets which reflects its strategy to expand lending services in different countries, – says Mikhail Lobanov, General Partner at the Venture Capital fund Target Global. – When you work on 30 markets, the results may vary and not be that successful everywhere but Finstar manages to demonstrate excellent results in the majority of countries”.
In 2016 4finance’s income totaled EUR63 mn and the company continues to demonstrate stunning growth rates: from 2012 to the third quarter of 2017 company’s loan portfolio grew by 650% to EUR720 mn, not least due to the acquisition of TBI Bank, that operates in Romania and Bulgaria, in 2016. “4finance has demonstrated astonishing results, – says Mikhail Lobanov. – It shifted its business model from PDL (pay-day-loan) to granting loans with much longer terms and lower interest rate for the borrower. 4finance rates are still higher than those, for example, of the oldest company on the online lending market – Zopa, though they work in different target segments. 4finance is the absolute leader of the European alternative lending system and presents a unique case by almost all financial indicators significantly outclassing its competitors in customer lending”. Boyko expects the business to grow yearly by 20-25% in mid-term due to new types of loans and entering markets in Latin America.
Hollywood stars Mickey Rourke, Bruce Willis and Jessica Alba posed for photographers at the premiere of “Sin City 2: A Dame to Kill For”. Director Robert Rodriguez wearing a black cowboy hat was singing praise to his film: “An astounding cast! Go and see what we’ve done! Soon we’ll be back with the third part”.
Reality fell short of expectations. Box office sales revenue of “Sin City 1” exceeded the USD40 mn budget almost fourfold. Having cost a reported USD65 mn to make, the sequel that was released in August 2014 flopped and made only USD39.4 mn. In a few months Rodriguez filed a lawsuit to the Los Angeles Superior Court against spouses Sergey Bespalov and Marina Bespalova – owners of the production company Aldamisa Entertainment that financed the film. The director claimed that he never received a payment of USD7.7 mn that was promised to him and that he actually paid it out of his own funds. Bespalov threatened the director with a USD50 mn counter-suit and Rodriguez withdrew the case.
It wasn’t only the director who got ripped off by the “Sin City 2”. Oleg Boyko was one of the film’s investors and it was Bespalov who invited him. Boyko arrived in Los Angeles, and in the course of six months that he spent there he immersed in the Hollywood milieu and Bohemia. Boyko says that he made the rating of the most successful directors and didn’t find a single worldwide famous director among them, with third-rate horror films being the only safest choice commercially. Now he recalls this experience as a big adventure, but he doesn’t seem to like the idea of going down that road again. When the production of the “Sin City 2” was in progress Oleg Boyko was meant to become the key investor of Scarlett Johansson’s directorial debut – “Summer Crossing”, but the project never set sail.
Now Boyko displays a keen interest in biotechnologies, which looks like following in his mother’s footsteps – she is a biologist. Boyko is interested in projects targeted at the increase of longevity. He is sure that the market lacks the investor who could consolidate the results of laboratories working in multiple narrow fields of study. Boyko estimates investments in the project of this kind, not counting the research process investments, to be “dozens-hundreds of millions of dollars”.
But these are plans for the future, now he devotes all his time and energy to fintech. Founder and Chairman of Finstar is molding a company that, like Ritzio in its time, could become the “money making machine”. Many Boyko`s businesses were successful, but none went public. Will he be a success this time?