How High Can You Count: New Facebook Fundraising?
Here’s an interesting idea if you don’t want to get bought and you can’t quite IPO yet and you need to have a tidy war chest for expansion or perhaps a choice acquisition or two: Bring in more investors and raise more money at a huge valuation.
That’s a concept that the top dogs at Facebook are seriously mulling over now, according to sources, after getting so many inquiries from investment funds and several bigger companies–such as its ad-serving partner, Microsoft–about grabbing a stake in the fast-growing social-networking Web site.
While who and how much is still unclear and, most importantly, in what form, sources said a deal could come together quickly if the numbers are lofty enough for the site, which has about 40 million members currently. But the investment could be quite large, well beyond its last $25 million one in 2006, for little dilution.
“There are several B’s involved in the discussions,” said one person interested in the possible round, referring to a multibillion valuation for the Palo Alto, Calif.-based start-up.
Those kinds of valuations have already been bandied about for the site, from a just-under-$1-billion deal from Yahoo that fell apart last year and rumors of a $6 billion interest from Microsoft.
And in a widely read interview with the Deal in July, board member and early investor Peter Thiel (pictured here) of the Founders Fund floated a more massive figure.
“If we got an offer from someone for $10 billion, we probably would listen to them,” Thiel told the Deal’s David Shabelman. “I don’t think we’re going to get that offer, and we’re not going to solicit it.”
Thiel initially invested $500,000 in 2004 in the company, which was followed by two more rounds, for a total of about $32 million. The last one was more than a year ago for $25 million, giving Facebook a $525 million pre-money valuation.
In the Deal interview, Thiel also said that Facebook would not go public until its business was stronger and not until at least 2009, following the successful tactics once employed by a pre-IPO Google.
But that’s a lot of time for the company, which needs to keep growing at a rapid pace, both from a technology and innovation point of view.
While it is on track, Thiel and Breyer have both said publicly, to have revenues of $150 million this year, half of that comes from its guaranteed ad deal with Microsoft.
While its revenues are growing strongly, insiders report, so are its costs, as it ratchets up headcount and features and services.
Thus, it will need a lot of investment to keep competitive, including increasing its international profile.
For example, top Facebook execs are now in London, meeting with the British press and also announcing the opening of a spanking new office there. London is Facebook’s largest member city, in terms of geography, and Britain is its third biggest country, after the U.S. and Canada.
In addition, Facebook might need a pile of moolah to buy smaller companies to help build its business, such as its very first acquisition in July of Parakey (mostly for its star techie duo, Blake Ross and Joe Hewitt, co-founders of Mozilla Firefox).
But in order to do more acquisitions, Facebook might want a larger established valuation for its stock and also cash to use.
“If Facebook can do this without significant dilution, it’s a great deal for the venture investors,” said one person familiar with Facebook. “And it could give Facebook a lot of flexibility.”
But who gets to invest is another story, especially given that the company is the latest hot ticket since Google in Silicon Valley. An obvious candidate is Microsoft.
But some close to Facebook worry that aligning itself so closely with the software giant is a mistake, believing that it should not be too closely linked to any one company.
In any case, given the heat surrounding the company, there is no lack of moneybag suitors, all waiting to rain down copious cash on Zuckerberg and his team.