We’re starting to see the perils for startups that accept foreign cash

Russian billionaire Yuri Milner and Saudi billionaire Prince Alwaleed bin Talal have little in common beyond being, well, billionaires.

But together they served as a cautionary tale this past weekend for U.S. startups gravitating toward the easy, few-strings-attached cash that comes by the bucketload from overseas and increasingly funds the excesses of Silicon Valley.

Not all money is created equal, as Milner’s and Alwaleed’s portfolio companies are already learning.

On Nov. 4, Alwaleed was arrested in a sweeping anti-corruption probe pushed by the rising crown prince Mohammad bin Salman, a jarring ouster from power that is sure to rattle the U.S. investors who see their next payday in the nation’s oil wealth.

Then, the following day, it was Milner’s time in the barrel after a New York Times report evaluated a newly disclosed trove of financial documents called the Paradise Papers. The story painted a damaging picture for Milner and cast a cloud over the Kremlin-tied companies that funded some of his landmark investments like Facebook and Twitter. The Russian-American had to quickly defend himself in a lengthy riposte unequivocally stating he was not working at the behest of the Russian government.

But now, the companies that have accepted their cash are under the microscope for how they used the money that is suddenly loaded with international intrigue. CEOs are now forced to answer whether they have any ethical qualms with taking on financing that, in the eyes of some, is tainted by foreign drama — even if Saudi purges or Russian hackings are completely outside of their control.

Take Ryan Petersen, the CEO of Flexport, which took $110 million in investment just last month from Milner’s venture capital firm, DST Global.

Petersen late Monday took to Facebook, unprompted, to defend his investor.

“I trust Yuri so until I’ve seen evidence that he’s done something wrong, I intend to stand by him,” Petersen wrote. “His feats as an investor are so extraordinary, and his behavior toward entrepreneurs so benevolent, that I find foolish the notion that this entire time he has been engaged in covert operations for a foreign government.”

Petersen’s defense of Milner, clocking in at 565 words, is thoughtful and well-considered, but it spotlights the hot seats that Milner’s CEOs firmly occupy underneath the klieg lights of media scrutiny.

Companies funded by Milner and Alwaleed are so far startled by the fast-turning storylines, though look for them to downplay their connections to the newly controversial investors in upcoming days. And given the profile of the companies that have taken on their financing — giants like Twitter, Airbnb and Slack — they will not be able to escape the questions for long.

One company funded by Milner, the fantasy sports site DraftKings, did defend Milner in a statement to Recode on Tuesday.

“DST has been investing in technology startups for a long time. Everyone in Silicon Valley knows them as a premium venture capital firm,” said DraftKings CEO Jason Robins. “The notion that they are investing for any purpose other than financial is far-fetched.”

This problem has legs, too. While foreign dollars have long backed venture capital funds, overseas investors are gingerly poking at directly investing in startups, too. Look no further than Saudi Arabia’s Public Investment Fund, which sits on the board of Uber after sinking billions of dollars into the company. Or Mubadala, the Abu Dhabi sovereign fund that just opened a venture office in San Francisco. Or the China Investment Corporation, which wants to do the same.

Tech investors caution that not all foreign capital is so stained. Even blue-blooded U.S. venture capital firms have international investors, and some of the technology sector’s most successful bets have been placed by men and women who live overseas but have a sophisticated understanding of future market opportunities.

Perhaps that describes SoftBank, the Japanese conglomerate which is upending Silicon Valley finance with checks that have a seemingly endless number of zeros. Almost half of SoftBank’s mammoth $100 billion Vision Fund comes courtesy of Saudi Arabia’s sovereign wealth fund — so any startup vying for SoftBank’s largesse is also indirectly clamoring for Saudi Arabia’s.

Prominent venture capitalists have in recent months raised hushed questions about the morals of taking on funding from a nation where, for instance, until recently women could not drive.

But when the money’s easy, it’s hard to turn down.

This article originally appeared on Recode.net.

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