Russian firm invests $200M in Facebook

A Russian investment firm has invested $200 million in Facebook, giving the social networking company a cash buffer during the recession and pegging its value at $10 billion.

Digital Sky Technologies, which has invested in other Russian-based Internet companies as and, will take a nearly 2% stake in Facebook in exchange for preferred stock.

The new valuation is $5 billion lower than when Microsoft Corp. invested $240 million in Facebook, in return for a 1.6% stake, in 2007.

Asked about the lower valuation, Facebook CEO Mark Zuckerberg said Microsoft invested when “we were right at the absolute peak of the market.”

Zuckerberg said, on a conference call last week, that the Microsoft deal was more of a strategic partnership where the two companies partnered on advertising and search, whereas Digital Sky made a straight financial investment. Founded in 2005, Digital Sky has raised and invested more than $1 billion in over 30 companies, according to the firm’s website.

Facebook did not need to raise additional funds, but welcomed Digital Sky’s investment as a “cash buffer” that will help it grow comfortably, said Zuckerberg, 25, who founded Facebook in a Harvard University dorm room five years ago.

He noted that Digital Sky’s founders Yuri Milner and Gregory Finger have experience running Internet properties in Eastern Europe and Russia, and they have “a deep, advanced understanding” of social networking technology.

Since Facebook was founded, the social networking site, where people can create personal pages, post pictures and exchange messages, has seen explosive growth. The site boasts at having more than 200 million active members, double the number it had in August. About 70% of its members are outside the United States.

The company, which makes most of its money through advertising, has said it is on track to increase revenue by 70% year-over-year, and to become cash-flow positive by 2010. —Anupreeta Das, Reuters