But some deserve the attention: It looks like Instagram is close to wrapping up a Series B round led by Sequoia Capital, according to several sources close to the situation.

Instagram co-founder and CEO Kevin Systrom

The maker of the fast-growing photo-sharing app, which just made its way to Android, is set to receive $50 million at a $500 million valuation, the sources said. Others joining the round could include DST Global.

The Wall Street Journal had reported that some were skeptical that Instagram deserved a half-billion-dollar valuation without revenue to speak of, but there does not seem to be a lack of people wanting to get into the deal.

Instagram received Series A funding of $7 million led by Benchmark Capital just over a year ago. At the time, it had 1.75 million registered users.

The company had 30 million iPhone users before it came to Android this week, at which point it got more than a million new users in 12 hours.

Instagram, which just got its own office on San Francisco’s South Park, had 13 employees at last count. CEO Kevin Systrom declined to comment on fundraising.

(Image courtesy of JD Lasica on Flickr)

In what is probably the most anticipated document ever received by the U.S. Securities and Exchange Commission, Facebook has filed to take its company public in a $5 billion initial public offering later this year.

Having endured lots of speculation around who owns exactly how much, there are now some hard numbers from the S-1 filing that hit the SEC Web site today.

Here are some details of the cap table, which is made up of both Class A and Class B shares, which carry different voting powers. Class B are the common shares.

Not surprisingly, co-founder and CEO Mark Zuckerberg owns the most equity of any single person. His 1.1 billion Class B shares give him almost a 57 percent stake — about half of which he owns and half of which are owned by others but over which he exercises proxy voting authority.

The 27-year-old entrepreneur also holds 42.2 million Class A shares, which represents a 36.1 percent stake of that group.

Facebook’s filing said he will sell some shares in the IPO, although it doesn’t specify how many. However, it noted that most of the proceeds from the sale will go toward paying taxes on his purchase of 120 million options of Class B common stock he also has.

Peter Thiel, the PayPal founder and CEO who sold that company to eBay, owns a 2.5 percent stake, which has decreased over time from the more than 10 percent he owned as Facebook’s first angel investor. Not bad for a $500,000 investment made in 2004.

Jim Breyer of Accel Partners controls more than 201 million Class B shares, amounting to a little more than 11 percent of Facebook’s equity, having led Accel’s participation in Facebook’s $25 million Series A way back in 2006. Breyer is also a personal investor; 11.7 million shares are his, and about 190 million shares are Accel’s.

Digital Sky Technologies, the Russian investment firm, has 5.4 percent of the Class B equity, or 94.6 million shares, owing to its $200 million investment in 2009, plus an additional $500 million in 2011. DST has also been buying Facebook shares from existing shareholders, allowing some to cash out their equity. It also has 36.7 million Class A shares, or 31.4 percent.

Goldman Sachs has a sizable 66-million share slice of Class A shares, or 56.3 percent. Last year, it was involved in the $1.5 billion round that included DST.

There’s also a batch of individuals with single-digit stakes and smaller ones of note.

Dustin Moskovitz: The Facebook co-founder owns 7.6 percent of the company or 133.8 million Class B shares.

Zuckerberg’s father, Edward Zuckerberg, a dentist, was rewarded with two million Class B shares in consideration for his providing early start-up capital to his son in 2004 and 2005. He was given an option to purchase the shares, but the option expired a year after it was given to him, without his exercising it. The board of directors — minus Mark Zuckerberg — issued the 2 million shares to Glate LLC, a company controlled by the elder Zuckerberg.

There are also a few names of note who don’t appear in the filing:

Microsoft had bought a stake amounting to 1.6 percent, stemming from its $240 million investment in 2007, which included a strategic alliance for advertising. Its stake, now likely less, is not mentioned in the filing.

Eduardo Saverin, the Brazilian co-founder, also has a stake worth a few points, but he is not mentioned in its cap tables.

And other VC investors, Greylock Partners and Meritech Capital Partners, are barely mentioned as well. T. Rowe Price owns 6 million Class A shares, or 5.2 percent, as well as 12.1 million Class B shares.

The filing shows that the top five highest compensated employees are:

Mark Zuckerberg’s base salary is $500,000 a year. Effective January 1, 2013, his salary will be reduced to $1 per year. He has options to buy 120 million additional shares of the class B common stock at a strike price of six cents a share, which expires in November of 2015.

COO Sheryl Sandberg made $382,000 in salary and bonuses in 2011 and received $30.5 million in stock awards. She has options to buy 4.7 million shares, of which 3.5 million have a strike price of $10.39, and 1.2 million a strike price of $15. Sandberg already holds 1.9 million shares of Class B common shares and holds 39.3 million restricted stock units, too.

David Ebersman, the quiet CFO whom AllThingsD profiled yesterday, made $382,000 in salary and bonuses and has 2.2 million Class B shares and 7.5 million RSUs.

Mike Schroepfer, vice president of engineering, made $334,000 in salary and bonuses last year. He holds 2.1 million in Class B shares and 6.1 million RSUs.

VP and general counsel Theodore W. Ullyot also makes $275,000 per year and is eligible for a $400,000 annual retention bonus during the first five years of his employment, through 2013. He has about 1.9 million shares and exercisable options and holds 3.8 million RSUs.

Then, there are Facebook’s outside directors: Venture capitalist Marc Andreessen; Erskine Bowles, the former White House Chief of Staff under Bill Clinton; Breyer; Washington Post CEO Don Graham; Netflix CEO Reed Hastings; and Thiel. Each were paid $16,700 in fees for sitting on the board. Bowles got 601,400 shares, while Hastings got 593,400 shares.

Andreessen also has 5.3 millon RSUs that vest over four years. Graham has one million RSUs. Bowles and Hastings also each have 20,000 RSUs.

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The funding is intended to alleviate founder stress and encourage faster product progress, said AngelPad’s Thomas Korte. Competing program Y Combinator has a similar deal to give participating companies $150,000 from DST investor Yuri Milner and Ron Conway’s SV Angel, the so-called “Start Fund.”

Korte said the AngelPad money is not the same: “It’s different. It’s a real investment from a VC firm, rather than just plain capital or quote-unquote free money.”

Korte acknowledged that having funding from the get-go will put more pressure on the companies in his program to make a return for their investors. “It’s probably more of a sense of responsibility,” he said.

AngelPad is two weeks away from starting its third class of 15 start-ups, but has left one spot open for a company that may be enticed by this new funding offer, Korte said.

Korte declined to specify which VCs are putting up the money, but said they focus on investments in B2B, mobile and e-commerce, like AngelPad.

Though AngelPad has a close relationship with Google Ventures, a spokeswoman for Google Ventures said that the firm was not one of the two participants in the new funding program.

The streaming music service is going to raise something like $100 million, at a valuation of $1 billion or more, very shortly, according to TechCrunch, the Financial Times, the New York Times and Sky News (?).

People who tell me they’re familiar with Spotify’s plans also tell me all of those publications are wrong. But they won’t be specific about why they’re wrong. So my hunch is that some combination of the total amount raised, the valuation and the investors may still be in flux. Or not.

Whatever. Sooner, or later, Spotify is set to cash a very big check. What’s it going to do with that money?

The easy assumption is that the company will turn around and redistribute its new investors’ funds to the big music labels, as part of the distribution deals it is cutting to get into the U.S.

Spotify already has deals with Sony and EMI, and is supposedly closing in on one with Vivendi’s Universal Music Group, the world’s biggest label.

And as I wrote last fall, Spotify is willing to pay the labels real money over the life of these deals to get them done. But I don’t think the bulk of this cash goes immediately from DST, or Kleiner Perkins, or whomever, to UMG, Sony, et al.

For starters, I don’t think Spotify’s backers would be happy to serve as a direct funding source for the flailing labels. And remember that Spotify is a money-losing startup, so it would likely need cash to fund operations even if it was staying put.

But I think that Spotify is going to have to spend real money to break into America, which already has plenty of streaming music services, and doesn’t seem very interested in them.

A rough guesstimate is that Rhapsody, Napster, MOG, Rdio and Thumbplay have a total of about a million subscribers–about the same that Spotify has on its own. So in order to really make the case for music you rent by the month, Spotify is going to have to lay out serious marketing cash to get people to pay attention.

It will need to staff up, too: The company, based in Sweden and London, has a handful of people working in a small corner of Google’s New York City office, but that won’t be nearly enough to tackle the States.

The other big variable, which wasn’t on Spotify’s radar when it started looking for cash last year but certainly is now, is the impact of Apple’s new subscription plan. As described in Apple’s press release, that plan will lop 30 percent off of every subscription Spotify sells through Apple’s iTunes store.

Spotify, like every other music service, can’t live with that. So if Apple doesn’t back down, and U.S. or European regulators don’t force it to back down, Spotify will have two choices:

• It can market the heck out of the service on everywhere but Apple’s platform, and hope that the overwhelming majority of its signups happen via some other outlet, where they won’t have to pay Apple’s tariff.
• And/or it can spend a lot of time fighting Apple in court.

Either way, some extra cash might be handy. Good thing the company has some lined up.

Facebook is exploring permitting a tender offer up to $1 billion of its employee shares, after being approached by a number of big institutional investors about investing in the company, according to sources close to the situation.

The new approximate valuation? An eye-popping $60 billion, sources said, which is a significant increase to a recent $1.5 billion investment round by Goldman Sachs and its international clients that had pegged the social networking behemoth at a $50 billion valuation.

And the reason? Liquidity, allowing Facebook employees to monetize their privately held shares, since the company is not likely to have an IPO for at least a year.

That’s been a big issue for Facebook as it seeks to walk the ever dicier line between being a private company and becoming a public company.

And managing how its shares are dispersed is critical, especially with regulatory concerns about these private secondary markets increasing.

All the machinating is because Facebook has tried hard–via ever bigger funding rounds and ever larger valuations–to delay its IPO, in order to grow its massive 600-million user base away from scrutiny.

The move is not dissimilar to one that the Palo Alto, Calif.-based company did in mid-2009, when one of its major investors, DST, forked over $100 million for employee shares in a transaction that was in addition to a $200 million investment.

At that time, current and former employees of Facebook were able to sell up to 20 percent of their common shares at $14.77 per share at a $6.5 billion valuation.

If completed, the new tender offer would be at a share price almost 10 times that. But sources said interest is high among big institutional investors who want a piece of Facebook before its inevitable initial public offering.

It’s likely the deal will be split between two or more investors, sources added.

A Facebook spokesman declined to comment.

The latest wrinkle is part of a massive race to invest in the winners of Web 2.0, often via secondary market sales.

Silicon Valley venture firm Andreessen Horowitz, for example, confirmed it had bought $80 million in shares of Twitter, in a story first reported here.

After Russia-based Internet investor Digital Sky Technologies got $388 million in a stock-swapping deal with South Africa media giant Naspers–coming after an earlier $300 million investment from China’s Internet behemoth Tencent–BoomTown dialed up DST partner Alexander Tamas in London to interview him about the implications.

This developing international spiderweb of digital and media companies begged the question of what DST might do with all this new dough, especially since it has created quite a splash over the last year investing massive gobs of money in high-profile, social-focused U.S. Internet companies.

That has included, most prominently, social networking powerhouse Facebook, as well as Groupon and Zynga.

Actually, said Tamas, the money is for expansion of DST’s core businesses in Russia, Poland and the Baltics–in email, social networking, gaming and entertainment–at units such as Mail.ru, which was co-owned by Naspers and DST.

In essence, said many analysts, it will simplify its ownership structure, and could eventually lead to an IPO for DST.

For a 30 percent stake in DST and the $388 million, Naspers forked over its 39.3 percent stake in Mail.ru into DST.

“The idea was for us to be able to completely control our Russian portfolio,” said Tamas, part of a series of moves which included its recent purchase of AOL (AOL) instant messaging unit ICQ for $187.5 million in cash. “We wanted 100 percent at one company.”

Also a goal: To better link its services with those in China, owned by Tencent, which invested $300 million in DST in April, giving it just over a 10 percent stake.

Naspers, by the way, owns 35 percent of Tencent.

“It’s a pretty good dialog all around,” said Tamas (pictured here), linking companies with both global and local aspirations.

But it’s the global ambitions that have attracted the most attention to DST of late, which, Tamas noted, created some confusion and unfair maligning of the company.

Interestingly, although it is all mashed up on its Web site, DST itself is not technically the entity that maintains its investments in companies such as Facebook.

That would be DST Global, its international arm which directly hold the stakes. It is not part of the Naspers or Tencent deals.

Of course, both are run by the same people, especially DST CEO Yuri Milner, and DST has a stake in DST Global.

“Initially, DST did fund those transactions,” said Tamas. “But we wanted to separate these investments from the Internet company to give investors the clearer differentiation.”

As to its future investments, Tamas said the company will likely fund start-ups that “check the boxes,” including exponential growth and social virality.

That means only two investments annually, as opposed to 10.

He also said DST would continue to fork over large sums–its invested well over $100 million in each of its U.S. deals.

“There is a perception that we pay high prices,” admitted Tamas, who noted its Facebook investment is now valued at much more. “But we have a global outlook on what we are investing in.”

DST is also a believer in getting some of that financing in the hands of founders and early investors, since it relieves financial pressure to sell or go public before a start-up’s time.

“We want to give the companies we invest in a year or two run,” said Tamas. “That is the sweet spot.”

He said, after its U.S. flirtation, that DST is now looking more in Asia and Europe.

But, even with its expansion and getting investments from well-known media giant such as Naspers, Tamas said he is not sure DST can shake the continued questions about the sources of its funding, especially given some of its initial investors are clearly part of the much-maligned Russian business oligarchy.

“We always have to explain and justify all of Russia,” said Tamas defensively. “Obviously, Naspers did its due diligence, as have others, and they feel comfortable with DST.”

Still, Russian issues will remain a concern for the long term. As noted in a recent report by Bank of America (BAC) investment unit Merrill Lynch, for example, on the Naspers-DST deal:

“We are also concerned that DST’s dominance in the Russian internet space (close to 70% market/mind share) may attract the scrutiny of the Russian government. The precedent with the other leading Russian internet company Yandex, when the government got a veto on sale or a golden share, signals that the government may not welcome a full takeover of DST by Naspers or Tencent.”

“We know the issues,” said Tamas. “But the best digital companies going forward are going to have to understand and operate in different parts of the world that are not just in Silicon Valley.”

Naspers, a South African international media group said one of its subsidiaries was taking a nearly 30 percent stake in Digital Sky Technologies.

Russia-based DST has made a splash in Silicon Valley by investing massive gobs of money in high-profile, social-focused U.S. Internet companies, such as Facebook, Groupon and Zynga.

Both Naspers and DST are already close, as co-owners of Mail.ru, a large Russian Web firm with email, social networking, gaming and entertainment businesses.

Naspers said it will be contributing its 39.3 percent stake in Mail.ru into DST, as well as investing $388 million in cash in it.

In April, another international multimedia giant, China’s Tencent, invested $300 million in DST, giving it just over a 10 percent stake in it.

And, drum roll…Naspers owns 35 percent of Tencent.

It’s not clear what to make of this developing international spiderweb of digital and media companies, except to ask: What will DST do with all that new money now?

Until all is revealed, here is an interview I did at the seventh D: All Things Digital conference about a year ago with DST’s partner Alexander Tamas and Facebook COO Sheryl Sandberg about the firm’s aspirations:

And here’s the official press release:

NASPERS MAKES STRATEGIC INVESTMENT IN DIGITAL SKY TECHNOLOGIES (DST)

DST to assume full control of Mail.ru upon share swap with Naspers

Johannesburg and Moscow, 14 July 2010–Naspers Limited (“Naspers”), the broad based international media group, and Digital Sky Technologies Limited (“DST”), one of the largest internet companies in the Russian-speaking markets, announces today that Naspers’s subsidiary Myriad International Holdings B.V. (“MIH”) will take a 28,7% stake in DST. The transaction will be effected by Naspers contributing its 39,3% stake in Mail.ru into DST and investing US$388m in cash. Concurrently, Mail.ru management and other minorities will also convert their shares into DST.

Upon the close of this transaction, DST will own over 99,9% of Mail.ru. Mail.ru is the leading communication and entertainment platform in the Russian-speaking internet world, with over 50m registered email accounts, leading market share in MMO games and one of the leading social networks in Russia.

Naspers and DST have worked closely together over the past three years as co-owners of Mail.ru and today’s transaction will enable them to further strengthen that relationship.

Chief Executive Officer of DST, Yuri Milner, said, “Naspers’s strategic insight has already proven to be valuable in our partnership and we welcome the expertise they will bring to DST. We are delighted to this transaction and look forward to creating further value through our relationship.”

Antonie Roux, head of Naspers’s internet operations, commented: “We have known DST and its management for years and we share a similar view and approach. We are excited to strengthen our partnership. This opportunity further expands our exposure to emerging markets and the fast-growing internet sector.”

]]> http://allthingsd.com/20100713/facebooks-russian-investor-gets-an-south-african-investor/feed/ 1 http://allthingsd.com/20100615/zyngas-most-lucrative-game-charm-the-investors/ http://allthingsd.com/20100615/zyngas-most-lucrative-game-charm-the-investors/#comments Tue, 15 Jun 2010 13:09:41 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=20523 Sure, Zynga can persuade consumers to pay up for virtual sheep and the like. But those transactions are worth only a few cents at a time. To get the big bucks, it looks to investors outside the U.S., who are happy to cut the company some very big checks.

Last year, the Facebook-centric game company raised $180 million from Russian investor DST. Now it is set to raise $147 million more from SoftBank, Bloomberg reports. A person familiar with the company tells me Zynga hasn’t actually closed the deal yet, but seemed confident that it would. A Zynga spokeswoman declined to comment.

]]> http://allthingsd.com/20100615/zyngas-most-lucrative-game-charm-the-investors/feed/ 0 http://allthingsd.com/20100418/groupon-grabs-135-million-from-dst-and-battery-valuation-above-1-billion-for-social-buying-site/ http://allthingsd.com/20100418/groupon-grabs-135-million-from-dst-and-battery-valuation-above-1-billion-for-social-buying-site/#comments Mon, 19 Apr 2010 02:07:24 +0000 Kara Swisher http://kara.allthingsd.com/?p=26948

Groupon, the social buying site that has become one of the hotter start-ups of late, has gotten a giant round of funding from the same Russian investors that backed social networking powerhouse Facebook and game phenom Zynga.

Digital Sky Technologies is the main funder of the round, but Battery Ventures is also participating.

The money, the company said, will be used to grow the business–and to speed far ahead of numerous rivals–as well as cash out employees and early investors.

Groupon is profitable and has 270 employees.

In December, Groupon nabbed $30 million in its second round of funding, led by Accel Partners.

The innovative Chicago-based service, which launched only a year ago, previously received $4.8 million in funding from New Enterprise Associates, as well as $1 million from an angel investor.

Groupon features a daily deal with a huge discount on a wide range of products and services–from spas to skydiving–in dozens of U.S. cities, including Chicago, Boston, New York and San Francisco, for large groups of potential buyers on the Web, through email or via social networking sites like Facebook and Twitter.

Using social tools, Groupon–a mashup term for “group” and “coupon”–tries to use collective buying power to get low prices and push customers to local businesses.

If it reaches the number of buyers it needs, which can be in the thousands, Groupon sells coupons to the consumers and collects a hefty fee for the sale from the businesses it sends customers to.

At the cost of discounting and paying off Groupon, small businesses get a crack at a lot of new customers–think of it as social networking lead-generation or perhaps, the “Social Shopping Network.”

Groupon grew out of a project of The Point, an online community launched in 2007 for organizing group action.

This kind of thing has been tried before, of course, centering on consumers who group together to get discounts on items by purchasing in bulk.

In Web 1.0, there were many group-buying sites, most of which failed badly. One of the more high-profile ones, Mercata, received $90 million in funding from investors, including Paul Allen’s Vulcan Ventures.

But now the group-buying space has been reinvigorated, with a spate of competitors, some of which are clear copycats of Groupon.

Here’s an interview BoomTown did with Groupon CEO and founder Andrew Mason, one of the more affable and level-headed entrepreneurs around–at least until this megafunding. (Don’t go changing, Andrew!)

I have been quite interested in the innovative Groupon, as I said in that post in March:

“The last time I really was truly bullish on a start-up and its founder–BoomTown’s motto is wait-and-see rather than hype-it-up–was AdMob’s Omar Hamoui. That turned out pretty well, with the sale of the mobile advertising site to Google (GOOG) for $750 million last fall. My 2010 start-up that passes the slightly-less-raised-eyebrow test is Groupon.”

Here’s the video interview with Mason:

Here’s the official press release:

GROUPON RECEIVES $135 MILLION FROM DST AND BATTERY VENTURES

Investment to Support Rapid Growth of Social Commerce Globally

Chicago/Moscow, April. 19, 2010–Groupon, the leading social commerce site, today announced that DST, a leading global internet investment group, will lead an investment round of $135 million in the Company. A portion of the investment will be used to fuel Groupon’s global expansion, and the rest will be used to facilitate liquidity for employees and early investors.

DST comprises the majority of the investment, with participation from Battery Ventures, which is also a new investor in Groupon.

Groupon leverages group buying and social media to provide its millions of customers big discounts on the best local businesses in more than 50 cities across the United States and in Canada. To date, customers have purchased over four million Groupons on deals ranging from spa treatments and golf outings to fine dining and skydiving and have collectively saved over $150 million on these deals.

“Our growth is a reflection of the positive impact Groupon is having on consumers and businesses at a very early stage of the market development,” said Andrew Mason, founder and CEO of Groupon. “We are very pleased and excited to welcome DST and Battery as shareholders and we look forward to benefiting from their vast knowledge and experience of the social media sector as we continue executing on our growth plans in North America and globally.”

“This investment underscores our view that social networking and community based activity will drive, shape and define the web’s evolution in the years ahead,” said Yuri Milner, Chief Executive of DST. “Groupon, with its strong management team, offering and vision, is pioneering social commerce and is redefining the local advertising space. We look forward to being long-term partners of a company that is on a path to becoming a global Internet leader.”

“We’ve followed the social commerce phenomenon for many years, and are thrilled to have the chance to back such a visionary management team,” said Roger Lee, General Partner, Battery Ventures. “They saw a massive opportunity very early, and have executed flawlessly to define it and take the leadership position. We think there is a lot of runway ahead, and are energized to support the team in their quest.”

Founded in November 2008, Groupon has been aggressively expanding to cities throughout the United States, with plans to be in 100 cities by the end of 2010. Earlier today Groupon announced that it has launched its service in Orlando, Fort Worth, Tucson and Toronto, its Canadian city.

]]> http://allthingsd.com/20100418/groupon-grabs-135-million-from-dst-and-battery-valuation-above-1-billion-for-social-buying-site/feed/ 2 http://allthingsd.com/20100412/chinas-tencent-to-buy-stake-in-russias-dst/ http://allthingsd.com/20100412/chinas-tencent-to-buy-stake-in-russias-dst/#comments Mon, 12 Apr 2010 19:10:22 +0000 Loretta Chao http://voices.allthingsd.com/?p=23805 China’s largest Internet company, Tencent Holdings Ltd., is purchasing a 10 percent stake in Digital Sky Technologies Ltd., a Russian investment firm that holds a stake in Facebook Inc.

Shenzhen-based Tencent, which popularized instant messaging in China and operates an online game portal and other Chinese Internet services, said it will invest approximately $300 million in Moscow-based Digital Sky, also known as DST. The companies plan to explore “new business opportunities” in the Russian-speaking Internet markets, said Tencent President Martin Lau in a joint statement Monday.

“Our teams share many common views and beliefs and a clear vision about the significant opportunities that lay ahead,” said Digital Sky’s chief executive, Yuri Milner, in the statement. Digital Sky is known for its stakes in Russian Internet companies including Mail.ru, one of the country’s largest Web sites.

Read the rest of this post on the original site

]]> http://allthingsd.com/20100412/chinas-tencent-to-buy-stake-in-russias-dst/feed/ 0 http://allthingsd.com/20091218/zyngas-mark-pincus-talks-about-big-funding-offer-ad-controversies-and-more/ http://allthingsd.com/20091218/zyngas-mark-pincus-talks-about-big-funding-offer-ad-controversies-and-more/#comments Fri, 18 Dec 2009 11:32:42 +0000 Kara Swisher http://kara.allthingsd.com/?p=22050

Just days after selling $180 million in private stock to a group of investors, including Facebook funder Digital Sky Technologies of Russia, Zynga’s Mark Pincus came to visit the BoomTown Worldwide HQ for a video interview.

The San Franisco-based Zynga creates and distributes online games, including Mafia Wars and FarmVille, which are played on social networking sites like Facebook. It claims 60 million active daily users.

While playing, users can also buy virtual goods with real dollars.

Zynga took the pile of money, Pincus explained to me, so it would not have to do what everyone thought it was set to do soon: Go public.

But with 700 employees and a reported annual revenue “run rate” of $300 million, the fast-growing start-up needed more options, he added.

Thus, rather than selling out or going public, Pincus went for megafunding, a path similar to the one Facebook took.

Along with DST, which accounted for the majority of the funding, investors include Andreessen Horowitz, Tiger Global and Institutional Ventures Partners.

Previous investors in Zynga are Union Square Ventures, Clarium Capital, Foundry Group, Avalon Ventures, Pilot Group, Kleiner Perkins, along with personal investments from Silicon Valley players such as Reid Hoffman.

Pincus will need all that cash given that the arena is heating up and consolidating fast.

Playfish, a competitor, was recently snapped up by Electronic Arts (ERTS) for $275 million in cash and $125 million more in stock and earn-outs, for example.

This is not a fate Pincus says he wants for Zynga, instead insisting he would rather create a powerful and innovative standalone gaming company of the future.

Obviously, Zynga is the big shot at that prize for the longtime entrepreneur, whom I met way back when I was a reporter in Washington, D.C., in the early 1990s, when Pincus co-founded another start-up, called Freeloader.

In our interview, Pincus talks about the new infusion of cash, controversies around questionable “offer” advertisements that appeared on Zynga’s site and more.

Here’s the longish video:

And here is a video interview I did with Pincus, back in May of last year:

]]> http://allthingsd.com/20091218/zyngas-mark-pincus-talks-about-big-funding-offer-ad-controversies-and-more/feed/ 2 http://allthingsd.com/20090821/dst-still-shopping-for-facebook-shares/ http://allthingsd.com/20090821/dst-still-shopping-for-facebook-shares/#comments Sat, 22 Aug 2009 00:01:42 +0000 Jessica E. Vascellaro http://voices.allthingsd.com/?p=14643 Russian investor Digital Sky Technologies appears to be hungry for a bigger piece of Facebook.

The firm just finished spending $100 million to purchase current and former Facebook employees’ shares of the company, on top of a $200 million direct investment into the social-networking site earlier this year. Now DST, known for its investments in social-networking sites in Russia, Poland and the Baltics, has approached a number of Facebook shareholders seeking to buy more shares, according to several people familiar with the conversations.

After wrapping up its official tender offer, which was closed this week, DST held about a 3.5 percent stake in Facebook.

Read the rest of this post on the original site

]]> http://allthingsd.com/20090821/dst-still-shopping-for-facebook-shares/feed/ 0 http://allthingsd.com/20090713/facebookers-start-cashing-out-with-new-100-million-investment/ http://allthingsd.com/20090713/facebookers-start-cashing-out-with-new-100-million-investment/#comments Mon, 13 Jul 2009 16:55:17 +0000 Kara Swisher http://kara.allthingsd.com/?p=15711

[UPDATED: With news that employees can sell up to 20 percent of their shares.]

According to sources close to the situation, current and former employees of Facebook are now going to be able to sell up to 20 percent of their common shares.

It is part of a $100 million add-on investment in the social networking company by the Russian investors who recently put $200 million into the company for preferred shares.

That investment a month ago by Digital Sky Technologies was valued at $10 billion, since those shares have various special rights, depending on what was negotiated.

The new tender offer by DST values the company at $6.5 billion for the common shares, or $14.77 a share. The last common share valuation of the company was around $4 billion.

The move has been expected for Facebook employees since DST made its first investment.

It will allow them to monetize shares, since the company is not likely to go public for at least a year or more.

Employees have 20 days to decide to take the offer or not and can only sell up to 20 percent of their stock–in other words, they cannot cash out completely.

“I can afford a down payment on a house now,” said one longtime employee, who is typical of many. “But not a really big house.”

But the top leadership of Facebook, such as CEO Mark Zuckerberg or COO Sheryl Sandberg, are not eligible to sell shares.

Facebook confirmed the DST investment, with a statement from Zuckerberg:

“While individuals must make their own decisions about participating in this program, I’m pleased that the price DST is offering is much greater than the price originally considered last fall. This is recognition of Facebook’s growth and progress towards making the world more open and connected.”

If fully accepted by those employees eligible, it will give DST 1.54 percent more of Facebook, for a total of 3.5 percent of the company.

That makes DST–based in London and Moscow–one of the bigger Facebook investors, with a stake larger than one owned by Microsoft (MSFT).

The software giant invested $250 million in Facebook for preferred shares in 2007, but the valuation was then $15 billion. That huge figure was due to a competing bid from archrival Google (GOOG) at the time.

In any case, neither DST nor Microsoft got a board seat or “special observer rights” in return for its money.

Here’s a video interview I did with one of DST’s top execs, Alexander Tamas, along with Sandberg, right after it made its first investment in May, while both were attending the seventh D: All Things Digital conference:

]]> http://allthingsd.com/20090713/facebookers-start-cashing-out-with-new-100-million-investment/feed/ 0 http://allthingsd.com/20090526/the-first-video-interview-with-facebooks-new-russian-investor-plus-coo-sheryl-sandberg/ http://allthingsd.com/20090526/the-first-video-interview-with-facebooks-new-russian-investor-plus-coo-sheryl-sandberg/#comments Tue, 26 May 2009 19:33:47 +0000 Kara Swisher http://kara.allthingsd.com/?p=13902

Because a lot of tech’s big shots are converging on our seventh D: All Things Digital conference, BoomTown managed to grab Facebook COO Sheryl Sandberg and Alexander Tamas, one of the key execs of the social-networking site’s newest megainvestor, Digital Sky Technologies.

Here’s my video interview with them about the $200 million that the Moscow- and London-based DST announced today that it had invested in Facebook, at a $10 billion valuation.

The pair are queried about the investment, the valuation, the advertising prospects for the Silicon Valley-based Facebook, competitors and when the IPO might come.

Sandberg also offers to buy the All Things Digital empire with Facebook’s piles of new cash. We said: Nyet! (with a shoe pounding on table for emphasis).

Here’s the video:

]]> http://allthingsd.com/20090526/the-first-video-interview-with-facebooks-new-russian-investor-plus-coo-sheryl-sandberg/feed/ 0 http://allthingsd.com/20090526/live-facebook-russian-investors-discuss-new-financing/ http://allthingsd.com/20090526/live-facebook-russian-investors-discuss-new-financing/#comments Tue, 26 May 2009 17:48:56 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=7748 Looking for lots of specifics about the $200 million at $10 billion valuation deal that Facebook and Digital Sky Technologies just announced? Then you have come to the wrong conference call, my friend. But for what it’s worth, Facebook CEO Mark Zuckerberg did sound fairly upbeat and confident during his chat with reporters Tuesday morning–the way you’d expect someone who just cashed a check for a couple hundred million to sound.

The big picture: Even though Facebook’s official valuation has slid from $15 billion–November 2007, when Microsoft (MSFT) invested–to $10 billion, Zuckerberg is OK with that, arguing that 1) that deal was done at the peak of the market and 2) the pact was never really a financial deal, but a way for Microsoft to partner up with Facebook–and, though he didn’t say it, to box out Google (GOOG). That sounds pretty reasonable.

Zuckerberg’s main talking points were that his company didn’t need the money, but it sure was nice to have, both to fund growth and make any M&A easier to pull off. And when it came to his new partners, he argued that DST’s existing portfolio, which includes several other social networks, would provide models/examples for his company as it continued to expand outside the U.S.

Earlier:

Facebook and its newest investors Digital Sky Technologies, are holding a teleconference to discuss the $200 million at 10 billion valuation deal the two parties just announced. I’ll be covering the call live.

Call starting “momentarily.”

On the call: Facebook Mark Zuckerberg, DST CEO Yuri Milner. Also, via phone (from D7!): Facebook COO Sheryl Sandberg and DST’s Alexander Tamas.

Zuckerberg reading statement that more or less tracks press release: “Advertising product” improving, “our business is doing really well” and we’re on track to create a “nice” business, and that’s why investors want in. DST approached us, has interesting profile and experience and insight into social networks. “We found their thinking and their leadership to be really impressive.”

Money provides “cash buffer” to support our continued growth, also possible other moves. No specific plans to talk about “but nice to have flexibility.”

Milner: “I realize not all the participants on the call are familiar with us.” Goes over DST portfolio. “We have now started to actively expand abroad.” We’re a holding company, have raised and invested more than $1 billion since 2005. Rattling off portfolio companies now.

Q&A:

What does this mean for possible IPO? Zuckerberg: “Our approach to financing has really been that we want to take money and work with partners”…”for a lot of start-ups, you get the feeling that the IPO is really the end goal…that’s not the case for us…we’re not rushing toward it…that’s really all I have to say about that today.”

What’s valuation for common stock? Zuckerberg: No comment. “There are different transactions that we’ve structured differently…we hope that there will be different things in the future…probably sometime in the next few months.”

What does this say about Microsoft’s $15 billion valuation? Zuckerberg: We did that deal at the peak of the market. That was part of a broader relationship. That investment was just one piece of it. This is also a relationship that we’re forming with DST…we hope we will work with other things over time.

“We feel really good about the progress we made…we feel this is  a good and fair valuation for us.” The Microsoft deal was at peak of market and was a strategic deal. “The world was in a pretty different place at that time.”

The international audience is 70 percent of our users. How do you monetize that? Zuckerberg: I have a few things to say, but want Yuri to talk, too. Milner: We have invested in five social networks in Europe. They have been able to monetize better than Facebook because they’re further along the curve than Facebook, which is a global company. But we think that Facebook will improve. Money will come from micropayments and advertising.

Zuckerberg: We can do advertising and have been experimenting with payments. Social networks in DST’s portfolio all monetize in different ways. Each is doing well, with a different model. We’re still growing. Online and direct advertising are growing the quickest, but over time, we expect to be able to build out a large number of these things.

What is your ad revenue going to be? Zuckerberg: A couple of months ago, we felt that everyone outside the company was underestimating our performance. We’ve been EBITDA-profitable for five straight quarters coming on six. Revenue growth has been 70 percent. Cash-flow positive sometime in 2010. That’s important because it means this investment is pure buffer. I realize those aren’t absolute numbers, but those are the ones we’re talking about.

Will DST be involved in management? Milner: We have our own businesses to run. We’ll keep in touch.

Questions about micropayments. Zuckerberg: We’ve tested a lot of things. It’s not a big part of our business, could be greater one day. They create a lot of value for users, and there are ways to monetize them. I’m looking forward to learning how these models are working.

Please talk about common stock/employee stock purchase plans. Zuckerberg: Going back to first question re. IPO. We want to make sure that we can continually make it so employees can be focused on the long term. We felt that if we let people have a little bit of liquidity, it can take some of the pressure off and let people focus on making company as good as it could be. We started to do this last year and had to hold off. Now we hope to be able to do it again.

Will that be the only way you are allowing employees or ex-employees to sell shares? Zuckerberg: Still talking about.

Is current Facebook ad business to be the main business going forward? Doesn’t mean it will be main business in the long term. You guys know everything that we’re talking about now.

Why aren’t you running big brand ad campaigns? We’re very interested in it. We have a big ad sales team. Building out offices internationally: U.K., France, a few more coming up. We think the best way to serve advertisers is to create ads that people interact with, that are “social and engaging.” I don’t want anyone to think that this isn’t a big part of our business, because it is.

Sandberg: Heavily engaged with brands. Ads specifically designed for Facebook, so they look different and behave differently than other ads on other sites, and that’s a good thing.

Preferred shares–are these are substantially similar to the ones Microsoft bought? Zuckberg: “I’m gonna duck that one.”

Does the company have any debt? Zuckerberg: [pause] There’s been some information that’s been public about debt we have for operating equipment. Beyond that, we do equity deals.

Will you do other investment deals? How many did you look at? Zuckerberg: He doesn’t really answer this question; instead he goes on to praise DST. Milner: We see things that other people don’t see, which is monetization that other social networks have been able to do. So we “kind of feel comfortable with that valuation.”

Is this largest foreign investment in Facebook? Zuckerberg: Um… [pause]. There’s been some public information about other folks we’ve worked with, but I think from reading some of the records you can get the answer to your question.

Other new deals? Zuckerberg: It was really at our option to find someone we were comfortable with. We didn’t feel like we needed to take an investment, and now we feel like we have the buffer we want.

Working on video chat product? More international products? Zuckerberg Yes. There are lots of things like that that we’re working on now. We want the site to be available in every country. We’re not translating the site. Users translate the site themselves. And a lot of the features are universally applicable.

Call finished.

]]> http://allthingsd.com/20090526/live-facebook-russian-investors-discuss-new-financing/feed/ 0 http://allthingsd.com/20090526/da-facebook-takes-200-million-from-russian-investors-at-10-billion-valuation/ http://allthingsd.com/20090526/da-facebook-takes-200-million-from-russian-investors-at-10-billion-valuation/#comments Tue, 26 May 2009 16:17:32 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=7743 Facebook is indeed taking money from Russian investor Digital Sky Technologies. As previously reported, the social network is selling $200 million of preferred stock at a $10 billion valuation; DST will also buy up to $100 million of common stock at a lower valuation later this year.

DST will not get a board seat or “special observer rights” in return for its money. The two companies are holding a press conference shortly, so we may be able to extract a few more details.

The $10 billion valuation is comedown from the $15 billion figure that accompanied Microsoft’s (MSFT) 2007 investment, but no one expected that figure to hold up–in large part that deal was driven by a bidding war with Google (GOOG) and not much else.

Facebook and its newest investors are conducting a conference call to discuss the deal; I’ll be covering the call live.

FACEBOOK RECEIVES INVESTMENT FROM DIGITAL SKY TECHNOLOGIES

Passive Investment Includes Stake in Preferred Stock, Common Stock and Support for Facebook’s Continued Global Growth

PALO ALTO, Calif. — May 26, 2009 — Facebook today announced that Digital Sky Technologies (DST), one of the leading internet investment groups globally with significant stakes in Eastern European and Russian internet businesses, has made a $200 million investment in Facebook in exchange for preferred stock, representing a 1.96 percent equity stake at a $10 billion valuation.

In addition, DST has indicated that it is planning to offer to purchase at least $100 million of Facebook common stock from existing common stockholders that would facilitate liquidity for current and former employees’ vested shares in the company. The details of the plan are expected to be announced to eligible participants during the summer. Consistent with Facebook’s practice with other recent investors, DST will not be represented on the Facebook board or hold special observer rights.

“This investment demonstrates Facebook’s ongoing success at creating a global network for people to share and connect,” said Facebook CEO Mark Zuckerberg. “We’ve worked hard to bring more than 200 million people — 70 percent outside of the U.S. — onto Facebook to share with friends, family and co-workers. A number of firms approached us, but DST stood out because of the global perspective they bring — backed up by the impressive growth and financial achievements of their internet investments. We’re looking forward to working with the DST team.”

“Our investment experience in other regions reveals the tremendous value social networking companies create as they redefine how people communicate and interact,” said Yuri Milner, chief executive of DST.  “By every important metric — user growth and engagement, technological innovation and financial performance — Facebook is on a similar trajectory, though on a much more global scale. We’re delighted to invest in Facebook, Mark and his management team as they make the world more open and connected.”

Based in London and Moscow, DST is a well-respected investor in a number of successful internet companies, holding significant interests in Russia and Eastern Europe, such as Mail.ru, Forticom and vKontakte.  DST’s main assets account for over 70 percent of all page views in the Russian-speaking internet and its social networks are the market leaders in more than 13 countries, addressing a combined population of more than 350 million.

DST is run by its three partners who have complementary backgrounds in operations, investments and finance: Yuri Milner, previously CEO of Mail.ru, the #1 Russian language website; Gregory Finger, previously head of the Moscow office of NCH, a multi-billion dollar hedge fund; and Alexander Tamas, previously co-head of internet and software coverage in EMEA for the Investment Banking Division of Goldman Sachs. With its advanced understanding of opportunities in technology and social media, DST is a good fit for Facebook and an insightful partner that can help unlock additional growth opportunities.

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