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Facebook Seeks Small Fortune To Make A Big One

[qi:018] Normally a company that is on track to bring in about $150 million in sales this year doesn’t need to go out and raise more money from investors. But Facebook isn’t a normal company, and Silicon Valley isn’t a normal place.

Kara Swisher over at All Things D reports that the company is contemplating raising a lot of money to fatten its war chest, as it fights off everyone from MySpace to Google, keep expanding and even keep acquiring smaller players.

Given the torrid pace of growth the Palo Alto-based company has achieved since it launched its platform (over 40 million members) and the hype around it increasing by the day, raising new money would be easy. And as Swisher reports, it wouldn’t cost them a leg-and-an-arm.

Facebook’s existing investors such as Accel Partners, The Founders Fund and Greylock have deep enough pockets to fund the company themselves, but there is enough money floating around what is being perceived as the hottest company since Google.

The company has raised about $32 million so far and is reported to have a valuation of around $525 million. Peter Thiel of The Founders Fund, one of company’s biggest champions (and early investors) was quoted in the media as saying $10 billion valuation would get his attention. Even if you discount these valuation numbers by half, Facebook can still get a lot of money by offering a tiny piece of Facebook heaven.

“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.”

13 Responses to “Facebook Seeks Small Fortune To Make A Big One”

  1. Musictomyears

    Users don’t pay for Google either and in terms of search do not even need to register. Yet Google is valued at billions of dollars. Facebook has a lot of power over advertisers because of the amount of information they have about each user. They can use this information to tailor an advertising campaign for specific demographics within their site. Companies will pay top dollar for this type of exposure so as Facebook has been collecting more users they are able to increase their the price of their ad space.

  2. There is something that i don’t understand.
    How can you make profit with Facebook (or otehr social web like Myspace, Spock, etc) if users don’t pay ? On what trade or on what sale of product will investors be paid ? There is not publicity on Facebook… How get they their dollars ? Thanks.

  3. Surely this move is all about leveraging potential investors – considering their current momentum/hype machine coverage, Facebook could easily raise the cheapest money, for whatever they may need it for, from doing another round of funding.

    Why lump your next strategic move on your revenue/profits, when you can just take cheaper money from desperate VCs?

  4. I thought they’d leaked the fact that they were already profitable? And, if they’re growing so fast, wouldn’t their profits increase next year? And, if things are going so well wouldn’t their current investor pool put in all the money they need? Who’s asking the tough questions of Geocities, um…er, I mean Facebook?

  5. You can’t tell whether or not to raise more money based on revenue alone. There are also other matrix as profit, market condition, etc. If they want to continue the momentum and accelerate it even faster, they need all the money they can get. Especially right now, when they are still hot. It’s all about momentum.

  6. I’m not sure I see why they really need to raise any more money at all either. Surely with that revenue and a massively growing userbase (in the UK alone it is rapidly gaining dominant market share), they can just carry on growing organically.

    The real risk I see is letting Application Spam keep getting worse, as I know some people are leaving facebook now as you keep getting stupid invites for stupid things.