Breyer declined to go into the financial details, but a knowledgeable source confirmed reports that
Out of all of Facebook’s backers, Breyer comes out looking the savviest, having led the company’s first institutional round in April 2005. “When we [Accel Partners and Breyer personally] invested $12.7 million at $78 million pre-money, the valuation was roundly criticized,” he says.
At least on paper, Accel’s 11% ownership stake is now worth $1.65 billion and Breyer’s personal stake of 1% is worth $150 million. VCs from Facebook’s second round in April 2006 also saw the value of their stakes soar.
Facebook founder and CEO Mark Zuckerberg’s owns somewhere between 20% and 30% of the company, making his stake worth between $3 billion and $4.5 billion.
Why does a social networking website need $240 million? “Given our growth, there are significant amounts of money to be spent on building out the worldwide technical and operations infrastructure,” Breyer says. “Also, some of the proceeds will certainly be used for acquisition currency.”
It is conceivable that some of Microsoft’s cash will make its way into other venture-backed startups. “We’re looking for companies that can help us continue to evolve our platform—companies that build important embedded applications that would be addititive to Facebook’s applications strategy,” Breyer says. “Not surprisingly, we’ll also be looking at excellent entrepreneurs who are building international and global applications in other geographies.”
Breyer notes that Facebook has not yet compiled a formal list of acquisition targets, but “there is the beginning of a list.”
It is unlikely that Facebook will acquire makers of popular widgets that run on its platform. “The bias is to try to have the makers of third-party applications be independent, scaling companies,” Breyer says. “First and foremost, we want to keep Facebook as a system that can be reprogrammed and customized by outside developers and for there to be clear ways for developers to monetize their applications.”
Facebook may also help its developers by acquiring technology providers. “There may be technology acquisitions that enable better services to third parties that could be potential Facebook acquisitions down the road,” Breyer says. “We want to provide an open, frictionless platform for developers.”
Breyer declined to comment on a blog post last week by Forbes reporter Elizabeth Corcoran that claimed two unnamed New York hedge funds had each invested $250 million in addition to the Microsoft investment.
However, a knowledgeable source says that it was untrue. The report may have surfaced because Facebook had been “talking to a number of PE and financial investors, such as hedge funds, prior to the detailed discussions with the strategics,” the source says. “The company may very well raise additional money, but there is no urgency. It feels very well capitalized.”
While Microsoft has been rumored to be in talks with Facebook for months, the source says the actual deal took about one month to six weeks to come together. It was so important to Microsoft that CEO Steve Ballmer was intimately involved in the negotiations, the source says.
The source notes that Yahoo and Google also expressed interest in the deal, and it came down to Google and Microsoft as the finalists.
If all goes well, Facebook could be ready to go public in 2009. “There’s no urgency to tap the public markets,” Breyer says. But he adds that the company’s goal is to be operationally and strategically ready to go public sometime in 2009. Over the next year and a half, Facebook will focus on expanding its board, adding to its senior management and monetizing its platform, Breyer says, “so that, if we desire, we’ll be in a position to go public in 2009.”
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