US investors walk away from Ostrovok investment

Both GPs confirmed the Russian company is no longer in their portfolios to the Wall Street Journal, but neither disclosed any details about the exit.

According to Ostrovok co-founder and CEO Serge Faguet, the exit was a result of disagreements over the company's spending, and the two GPs' refusal to participate in further financing, which had prompted other investors to threaten legal action.

General Catalyst managing director and co-founder Joel Cutler told the Wall Street Journal that the exit was over disagreements with management over how much capital Ostrovok should be spending.

Faguet also claimed Accel and General Catalyst paid $1.5m to the company for a guarantee they would not be sued, in addition to the $25m in shares handed over to investors by the US firms.

Lev Leviev, a co-founder of Vaizra Investments, which led Ostrovok's most recent funding round of $12m, confirmed Faguet's claims the GPs had abandoned their stakes. He said Accel and General Catalyst had not sold their stakes but had given them up.

General Catalyst and Accel were both lead investors in the Russian start-up's series-A as well as in its $28m series-B round last year.

Despite losing two large investors, Faguet noted the developments had been positive for Ostrovok, as the management now owned 50% of the company and had a solid relationship with its remaining investors.

Accel and General Catalyst could not be reached for comment at the time of publication.

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