Facebook Said To Reject Funding Offer

Not a lot of money is changing hands these days; there’s all sorts of evidence of funding slowdowns and stoppages, making for a "get while the getting’s good" situation. A new report claims that Facebook was offered funding at a $4 billion valuation, though, and then – this is the really interesting part – Facebook supposedly rejected the offer.

Eric Eldon writes, "Facebook chief executive Mark Zuckerberg just had a board-level conversation about possibly accepting money at a $4 billion valuation, but decided against doing so."

So why did Facebook decline the cash? One possible reason is that, bad economy or not, it just didn’t want to let things drop so much from the $15 billion level at which Microsoft invested in October 2007. A decline of that magnitude might scare away other parties and would be embarrassing, besides.

Another idea is that Facebook feels a workable advertising solution is finally within reach. If it could start generating a real cash flow, there’d be no reason to go to outside sources.

Finally, one more possibility is that Facebook’s long-rumored IPO is right around the corner.

Facebook representatives are keeping their lips sealed on all of these subjects.

There are 7 Comments. Add Yours.

James Standen
April 16, 2009 at 4:38 pm

From 15 billion the only way to go is down, unless they really do figgure out how to make some serious profits. I really hope they do find a model to make it work- they have the popularity side figured out, but there is that reoccurring problem with “free” that makes doing business hard. But I can’t help think that they are under a lot of pressure from all the various investors to make the equity event happen- lots of VCs who want to cash out.
Hicham Maged
April 17, 2009 at 12:10 pm

The drop is about quarter (25%) of Microsoft’s. I think it’s normal to decline this in the bad-economy atmosphere nowadays however maybe this is the top of the ice-berg and something is going on under the surface!
Guest
April 19, 2009 at 12:52 pm

The largest cost for operating facebook is the storage cost, esp. for photos and videos. I think facebook should look at a two tier model. Meaning offer the service free with advertising and a cap on memory/storage use. After that, offer a 2nd tier for about $24.95 annually, that would allow much more storage, and little or no ads.

In this model, up to 25% of its customer base may be willing to pay the extra $2.08 a month for storage and no ads. Which translates to 50 million users paying about $104 million a month, or about $1.25 billion annually. They would lose advertising revnue from this base, but still have advertsing for the remaining 75%, of about $300 million annually. So, they could make roughly $1.5 billion annually on a mixed subscription and advertising model.
- Guest
  April 19, 2009 at 4:28 pm
  
  very nice idea.
Pre-settlement Funding
June 3, 2009 at 5:49 pm

Wow, that is very interesting… It will be very exciting to see what happens… Hopefully they make the right decisions and continue to innovate…
Replica Designer Handbags
June 15, 2009 at 3:06 am

hope they do find a model to make it work and make the right decisions .
San Francisco injury attorney
April 9, 2011 at 4:09 pm

I believe they didn’t want to be embarrassed either. Seeing the economy is so bad it’s probably smart to hold off. I hope they make the right choices and stay ahead of the curve.