Facebook’s $15 Billion Valuation
Dec 12th, 2007 by Shaun Carter
Many people (including me) thought it was crazy when Facebook founder Mark Zuckerberg turned down a $750 Million buyout offer last year. At the time, analysts were saying that Zuckerberg and Co. were seeking around $2 Billion for the company - or about four times as much as MySpace was purchased for by News Corp in 2005. It turns out the company is worth much, much more than that.
It is easy to see how MySpace founders Chris DeWolfe and Tom Anderson are kicking themselves for selling out so quickly and for such a small valuation. Now they are certainly well off and wealthier than 99+% of the population, but they could have been billionaires, something the 24 year old Harvard drop-out Mark Zuckerberg has achieved three to five times over, placing him well into the Forbes 400 list of richest people in the US.
Some early investors of Facebook, such as Greylock Partners have seen there initial investments explode in value with the subsequent investments by Microsoft and Li-Ka-shing that put the value of the company at $15 Billion. Greylock provided $25 Million in venture capital to Facebook in 2006 that at the time valued the company at $550 Million. That means Greylock has seen more than a 2,700% return on it’s investment in only one year’s time.
So far the two investments in Facebook that value the company at $15 Billion are from Microsoft ($240 Million - 1.6%) and a private investor from Hong Kong who very recently paid $60 Million for a measly .4% of the company. It’s hard to say how much of the valuation estimation was based on the potential profitability of Facebook’s much hyped Beacon program that fell flat on its face as privacy advocates hailed it as an assault on the social networking site members’ privacy rights. Because Facebook is a privately held company, it does not disclose financial information, however most analysts agree that the company’s revenues are minimal and current profitability is negligible or non-existent.
I think Facebook will attempt a public offering rather than a sale to an existing company and I’m wondering how much of a hyped up event they could make it among investors. It is difficult to see what Microsoft’s intentions are with their small purchase and I think it is the first of several more Facebook stake purchases. Some analysts believe Microsoft’s bid was strictly made in an attempt to defeat Google’s own Facebook offer and prevent the Internet behemoth from extending it’s stranglehold.
Technorati Tags: facebook, mark zuckerberg, myspace, shaun carter, tom anderson, chris dewolfe, microsoft, google, beacon, forbes, news corp
