Facebook Obtains $500 Million in Funding

Published by: Frank Galvano on 3rd Jan 2011 | View all blogs by Frank Galvano
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Facebook Obtains $500 Million in Funding

The world's most popular Internet destination, Facebook, has reportedly secured $500 million in funding from a Russian investor and Goldman Sachs in a deal that values the social networking website at around $50 billion.  The deal ostensibly means that Facebook is now worth more than several huge companies like Yahoo!, eBay, and Time Warner.

As Goldman Sachs is considered to be among the most savvy investors on Wall Street, the deal indicates the growing power of Facebook, which has already been making tremendous headway on Internet giants like Google.

The new capital will give Facebook additional firepower to steal away employees from other tech giants, develop new products and services, and potentially pursue acquisitions, all that while Facebook remains a private company.  The deal will also allow the company's early shareholders, particularly employees, to cash in some of their stakes.

As Facebook obtained the new investment funding, a probe was recently launched by the SEC into the increased private market trading recently in a number of Internet companies, which includes Facebook.  Insiders say the probe is probably focused on whether some of these companies are improperly utilizing private markets to get around public disclosure requirements.

The latest deal could put additional pressure on Facebook to go public, something its executives have so far resisted.  Microsoft, Google, and others have been thusly pressured into IPOs after enjoying tremendous popularity on private markets.  A number of insiders, despite Facebook CEO Mark Zuckerberg's steadfast opposition to going public, say that an initial public offering for Facebook is coming in 2012.

2010 has brought a virtual explosion of interest in social media sites.  Online social discount site groupon, which itself recently rejected a $6 billion buyout bid from Google, is reportedly in the process of raising nearly $1 billion from major investors, and is valued at close to $5 billion.

The latest Facebook investment deal will likely spark some serious debate over how much the company would be worth on the public market.  The firm does not disclose financial performance numbers, but analysts estimate the company could generate as much as $2 billion in annual revenue.  Under the terms of the deal, Goldman Sachs has invested some $450 million in the company, and Digital Sky Technologies, a Russian investment firm which already has about $500 million invested in Facebook, sank another $50 million into it.

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