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Will Zynga Use $180M Funding for Shopping?

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The good times are certainly back in Silicon Valley, thanks to late-stage investors willing to bet big on fast-growing Internet startups.

Earlier today, Zynga, a San Francisco-based social games company, raised a whopping $180 million in fresh funding from Digital Sky Technologies (DST), a Russian investment firm that first made a splash with a $200 million investment in Facebook this summer. The Zynga funding was reported in today’s The New York Times.

The company has been using aggressive tactics to bulk up its size and revenues. TechCrunch carried a series of exposés earlier this fall that laid bare the dirty underbelly of the social gaming sector. None of that seems to have impacted Zynga’s ability to raise fresh capital.

The 2-year-old Zynga, which was started by Mark Pincus, is valued between $1.5 billion and $3 billion, reports The New York Times, and is said to have revenues of $250 million. The company has more than 700 full- and part-time employees. It had previously raised $39.5 million from various Silicon Valley investors, including Institutional Venture Partners and Andreessen Horowitz. IVP, according to a report, is rumored to be buying stock from employees looking to sell some of their holdings. DST, I am sure, is betting that Zynga, like Facebook, is going to go public in 2010 and return big profits for the fund.

From what I’ve heard from Silicon Valley sources the maker of games such as Farmville and Mafia Wars is profitable. So this new cash is likely to be used for rolling up other social game makers that don’t have the bulk of Zynga. The company needs to keep getting bigger and distance itself from a growing number of social gaming startups. It also has to worry about Electronic Arts (s erts), which recently acquired Playfish for $300 million in stock and cash plus another $100 million in incentives.

The question is: Who is Pincus going to buy? Suggestions, anyone?

Photo courtesy of Lamenta3 via Flickr

7 Responses to “Will Zynga Use $180M Funding for Shopping?”

  1. possibly someone with licencing deals with some relevant brands in place? Honestly, I can’t understand the valuation Zynga received. I did a pretty rough analysis here:

    Maybe if they had the rights to make some games for some great brands, they could change their business model a bit so that they don’t have to rely on either a.) users buying virtual currency or b.) tricking users into signing up for scams

  2. $350k/employee should make a networked games company very profitable.

    Nigel’s right – content is what they want. Maybe some talent, but they have the money (and equity value vector) for talent now.

    But maybe they should take the cash and bid for control of Digital Sky. That would be fun to see.

  3. They should use the money to give some money back to “ayant droits” and minimize their legal risks or they could be soliciting a lot of lawyers with some troubles they may have with their concept of making games ;-)