A few days ago, we reported that Facebook turned down an investment term sheet that placed their value at $8 billion. But it was apparently the board seat the investors wanted and not the valuation that was the hold up. Now that valuation number has jumped to $10 billion thanks to an offer from some new investors, sources tell The Wall Street Journal.
Specifically, Digital Sky Technologies, a Russian tech investment company wants to invest $200 million in the social network, according to the report. That would place its preferred stock value at $10 billion. The company would also buy between $100 million and $150 million in common stock at a $6.5 billion valuation. It’s not clear if Facebook has responded in any way.
Also not clear is if DST would want a board seat with the investment. But one could imagine that would be a sticking point once again. Though perhaps Facebook will like the $10 billion number — which is closer to the $15 billion valuation it got from Microsoft’s investment in 2007. If Facebook were to accept these terms, and give away a board seat, at least we know what one is worth: About $2 billion.
Facebook’s revenue is the key point in all of these investments/valuations. Internally, the company believes it will make $400 million this year, but it has been telling investors that the number will be closer to $550 million. Perhaps the Russians are biting at that.
Here’s Facebook’s canned response on the matter: “Facebook is a private company, so as a matter of policy, we don’t typically share details about our financial plans or comment on rumor and speculation.”
i want a board seat, $2 billion? sure thing.
Why is it 9/10 idiots that use their twitter handle also have the most ridiculous fucking comments?
Oh, that’s right… because Twitter is all about trying to get people to follow you. So idiots like the douche above me say whatever “clever” thing that comes to mind just to get more idiots to click his little Twitter link and follow him.
Bravo. Go back to Twitter.
Whereas your reply is truly clever.
sensible business makes sense now. fb always put ads on their site, right from the beginning.
Ferris Bueller, you’re my hero… no really, twitter can die.
LOL Jeff.
(For everyone else, follow me!)
Actually, a comment like Parker’s would probably be applauded crazily on Slashdot.
haha
What a roudy bunch we have here, I don’t understand what all the hype is about regarding TWITTER, people must be running out of useful things to do with their time…
can this russians invest money in me
BEER fails to show us how women really look like
http://www.epic.../load/8-1-0-390
Aweseome, russian hackers rock!
I feel like having a Russian Vodka. I think i have better things to spend my money on that this.I have seen there advertisers and i do not know about you guys but it is get rich scams or attorneys who want to represent you in ticket court.I for the life of me have not seen any real players advertisinf in FB. But here is apge to look at http://www.bueno.com very well organized and it comes with the first real social tool we used before FB.
MG or Mike…if you were a VC, what would you value the company at?
How do you get 2 billion for a board seat?
It’s not $2 billion for a seat, it’s investing at a valuation $2 billion greater than a valuation whereby a board seat wouldn’t be parted with
I think he meant deck chair.
Valuations all over the spectrum. No one has a clue what FB is worth yesterday, today or tomorrow, including insiders. Kindof like housing market except non-tangible asset.
I’ll give you a clue. It’s worth much, much, much much less.
and may I ad much less…Oh, I have a bridge for sale in NYC if any one of the evaluators is interested
the “ad” much less is intended
$10 Billion for what? Way to overvalued! But if YouTube can $1.65 Billion then $10B for FB why not?
$10 billion for facebook, what a farce, you could change many peoples lives with that sort of cash…. what a bunch of greedy oligarchs.
This is mere hype and an improper valuation. Till today, face book hasn’t figured out how to make revenue out of their model. Youtube was similar to this valued at 1.6 billion. Tech startups can quickly face new competition and loose the edge on number of users. So I dont think face book is even worth 600 mill. 10 billion is valuation on steroids.
Facebook is capturing too much behavioural data to be compared to youtube. Something will happen in the next couple of years and it will turn into a google-style cash machine.
Wow is this true? Seems like FB’s hitting the skies already. Poor other social networks, they’ve been swept away by FB’s popularity.
haha
myspace->facebook->twitterc
I wish i could meet the losers into facebook. Why, my childhood friends parents logged onto faecebook for the first time this week, it has SOooooo jumped the shark
How the worm has turned. Now the Americans are the ones running the companies with dubious financials and the Russians are the feckless investors overburdened with dumb money to burn…
Even at $500 Million in revenue, this is a 20x revenue multiple valuation…way too high by any standards…no doubt that growth potential is still tremendous, but shouldn’t profitability matter at some point?
Not if you never reach the point where it would. What if Facebook can continue to show steady growth for the next 50 years without turning profit? Imagine if they can keep getting investors to pump in money for 50 years, all hoping for that big payoff in 2059. You see, ibmonkey, it will never matter if they actually make money….
What I’m afraid of is that Twitter and Facebook will lead to the death of the tech boom if people aren’t careful. That’s the nightmare scenario. Twitter is sold for $700 million, and the buyers never recoup. Facebook never manages to turn profit (and gets so much capital that no one is capable of buying it), and its slow death sends a hurricane of hurt through the tech industry.
I’ve met weirdos from the future, and they were quite insistent the most talked about and popular start-ups from this era, Facebook and Twitter, are ironically what kill Web 2.0.
this site is worth quite a bit. It’s much easier to connect with people further and make more connections. You can know more people with current technology with just a click of a button.Genius.
What is FB?
i dont get it, if facebook is making $550millionPA, then why on earth would they want to sell any equity? Whats the point of raising $300mil when in effect, all its going to do is water down their earnings when they inevitably go for an IPO. What cant they do with $550mil, that they can do with $850mil. Either they arent as financially sound as they would like to be, or mark zuckerberg is getting a taste for the high life!
I honestly don’t think that FB is making any “profits” (net revenue after expenses, depreciation, interest, and taxes). They could, if they break out the sketchy advertising a little bit more. That 550$mil a year sounds like valley echo-chamber kool-aid talk. It sounds like gross revenue instead.
good point. last I read, Zuckerberg was living in a sparsely furnished apt, w/a mattress on the floor. Does anyone know if he lives differently now?
Well, why do people sell their stocks ? If facebook earns so many millions , they can innovate new things, earn more and make more money. Isn’t it?
Facebook will turn down the investment, to their own detriment. Why, because the decision makers have no business sense and 5 years ago they were flipping burgers. They will live to regret it. Facebook will go the path of MySpace and we know the game is over for Myspace. When the founders of Facebook make a new company, they will accept a fraction of what they are currently being offered. Live and learn!
why would FB sell themselves out? it looks like they made a ton of money already without giving up any meaningful share in the company already by acting pricey. Compared to myspace which was sold for 580 million when it was much more popular at the sale time, FB made 240 mil from MS for in exchange for a 1.6% share and another 200 million based on this article for another 2-3% share of the company. besides i am not sure there are any offers out there to buy the company for say the 10 billion valuation.
the most money they were offered was 1 billion from yahoo… but they already made half of it for ~5% share in the company. these guys are much more smart than people give them credit.
HAHAHAHAHA WHAT A FRIGGIN JOKE. $10 ….. what?
Look dude, try as much as you want with fake ass investors your shit is not worth no fucking $10 billion. get back in your seat and take out your notebook.
You are 1.65 billion low and 2.5 billion high. Eat shiiit.
LOL. OK, so sell really quick at anywhere near 3 bil. If you are lucky of course. I love this shit.
Indeed. Good God, if they get the 200 million from this Russian Company they’ll turn the Russian Roulette on steroids game they’re playing into a Russian Roulette game on acid, speed, and Barbados circus flu.
I guess the economy is turning around.
Wow… Xcellent for Facebook
Facebook is a risky investment for anyone.
We all know thier secret plan to destroy Israel will one day be leaked, causing a public relations nightmere and forcing everyone to go over Myspace.
Why do you think they had to go all the way to Russia to make a deal? The Kremlin is in on it too…
The data they collect make it awesome for targeted advertising – let’s see them monetize that. But in all honesty – why are they going to avoid what happened to friendster and myspace? the google profiles, for example, seem like a potential facebook killer (at least in terms of targeted advertising), which makes the 10B valuation seem risky since that number seems to presume Facebook’s not being challenged in this arena.
the valuation for FB goes up and down faster than ron jeremy’s wang
OMG! what a big investment! Facebook is really spreading around the world
I really wish TC would do a back of the envelope calculation story on Facebook’s revenue. It’s not rocket science. Do a little of your own in-house testing on their ad platform in different niches. Extrapolate for their page views, etc. Add up revenue from other sources. There is no magic going on there, just a lot of uniques and page views full of air.
I’m sure after you go through that exercise, you’ll be asking yourself how in the hell are these kind of numbers being bandied about.
Anyone throwing good money after bad down the FB blackhole is a complete fool. All the original investors are hoping someone else will bail them out.
That’s just a sinking ship man. Don’t get too close or you’ll be pulled under with the rest of them.
You’re asking too much of TC’s bloggers. I don’t think that’s part of their skill-set.
if this is twitter must be worth the same NOW.
These investors are banking on a Google type IPO within the next year. Facebook better go public or sell because the way this industry works something better is going to come along soon. If this goes through Facebook will be not to far off $1 billion in investments. There will be a lot of very angry investors if in 2 years they are in the same shape Myspace is in now. At least Myspace sold when they had the chance (albeit probably too soon).
But if they have an IPO, then it will be revealed to everyone that they have no profit, quarter after quarter. Do you really want to live in that world?
Value for an equity holder, as Buffett would put it, is a function of discounted distributable profits, and, frankly I’d like to see the hockey stick financials for FB that can support 10 big ones, and the assumptions behind them.
MG, if this Russian tech company invests in them, you have to make the headline: Facebook plays Russian Roulette–literally
Techcrunch can’t resist headlines like that.
I wish Facebook would go public with a $10 b valuation, so that I could profit from it by shorting it, big time.
in the interest of fair disclosure, I should note that http://www.worstpizza.com valuation is still the same, and we haven’t arbitrarily raised ours to like 5 billion yet!
If I had to pick between investing in Facebook or investing in WorstPizza, I would pick WorstPizza.
Pizza never gets old!
I dont beleive that value of FB could be 10 biilons – even if Russian company will really invest 200 m…
I am sure they will soon start a premium service and charge for it
still like the valuation, fb is much better than linkedIN
Interesting that there is no mention that DST also invested into the most popular social network in the post Soviet Union space and that social network(vkontakte.ru) happens to be a clone of facebook.
did they? i think they own it actually.
lol at this whole thing from 2-3 billion to 10 billion what have they done to increase value. last i heard they were losing value due to twitter
$10 billion worth of air. I think it’s more like $1 billion max.
With your valuation only as good as the latest transaction, this is kind of silly.
Facebook has too much xXx $ gUaP $ xXx
Look at the bright side of things. When all these companies go IPO, these are great companies for shorting. Just look at OpenTable. Once, the market tops, hedge funds will swarm in and make a kill. It’s a wonderful world of free market!
seems everyone thinks the $10b valuation is too much .. here is another way of looking at it ..
google’s market cap: $125b
google’s revenues: $10b
google’s price to sales: 12.5x
google’s growth rate in the past 3 months: 8% according to alexa
facebook’s market cap: $10b
facebook’s revenues: $500m
facebook’s price to sales: 20x
facebook’s growth rate in the past 3 months: 23% according to alexa
so facebook’s p/s ratio is less than double google’s even though its growth rate is nearly 3x.
i understand there are significant assumptions in this 5 minute analysis, but many commentators on this post seem to be blurting out numbers with no concept of any valuation methods.
What you neglect to mention is the operating costs FAR exceed the revenues for Facebook.
I don’t understand how the company can “pitch” investors on $550 million in revenue yet only believe internally that they will earn $400 million. That’s a huge difference and the year is already half over.
Facebook has faced their books and know they don’t make a profit and never will.
The users on Facebook are only there until the next hype hits the Internet.
Impressive, but I see more and more fake members and spammers on facebook every day. Hope they won’t end like myspace.
Social networking is a fickle business, it only takes a real competitor to come along and it will really suffer, facebook is a fad that for lack of a decent alternative people are sticking to, however another month or so will bring out that alternative that will obliterate that valuation, if I was the CEO I would bite the Russians hand off before it’s too late, however I think it’s pre-IPO Hype.
Succees in life is about starting something creative..you never know how ir will end up
Russian investment in FB makes an interesting precedence – it puts a value on each unique monthly visitor at $100 a head. Let’s put this into perspective. Just imagine that all websites would be able to be valued at that rate… there would be plenty of millionaires in the online business! I guess, the point is that the “size does matter” and not many are in the position to command that premium.