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The Facebook Feeding Frenzy

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More Investor Cash for Facebook…

Yesterday we learned that Microsoft bought 1.6% of Facebook for $240 Million. Today there is another large investment – it’s been rumored that Facebook got an additional $500 million from two New York hedge funds.

Part of that deal is that Microsoft will do more advertising on the site. Facebook has a jaw-dropping $15 billion valuation. This is incredible. Together the new investments are for about the percentage that Microsoft owns.

Elizabeth Corcoran from Forbes Magazine broke the story yesterday and the news spread faster than the California wildfires (which, thank goodness, are slowing).

Facebook was seeking $750 million from the get-go and are at $740 and have only given up about 5% of the company. And we don’t know their revenue but it’s based on advertising. Estimates put their revenue at $100 million for last year.

Young and Rich

Facebook was started by then-Harvard student Mark Zuckerberg and was originally called The Facebook.” It’s not even four years old – being started in February 2004. It started as just a space for Harvard students. In one month more than half of the undergraduates at Harvard registered on the site. That May they got $12.7 million in venture capital from Accel Partners that May. A year later they bought the domain name facebook.com from the Aboutface Corporation for $200,000 and dropped “the” from its name.

Fantastic Valuations

People are rightly speculating about a bubble for internet companies. eBay says they paid too much for Skype, but that hardly dampened anyone’s enthusiasm. However, some companies make it, and apparently Facebook is seen as one of them.

I like this quote by venture capitalist Michael Moritz of Sequoia Capital (as quoted in the Washington Post):

“These times of overenthusiasm lead inevitably to lots of bedlam and carcasses strewn in the road,” he said this week. “But a handful of companies will live through it and become superb companies that will be around for the long haul. And that’s what living and working and investing in Silicon Valley is all about.”

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