Background
o The Facebook group announced that it raised between $10 million to $12 million in first-round financing led by Accel Partners on April 15, 2005. As a part of the transaction, Jim Beyers, a Managing Partner at Accel Partners, joined the company's board. The post-money valuation of the company was $100 million.
o Facebook, Inc. announced that it has raised $27.5 million in its third round of funding led by new investor Greylock Partners on April 19, 2006. New investor MeriTech Capital Partners and existing investor Accel Partners invested in the transaction. The postmoney valuation of the company was $525 million.
o Facebook, Inc. announced that it will raise $240 million in an equity round of funding from new investor Microsoft Corporation on October 24, 2007. As a result of the transaction, Microsoft Corporation will now hold 1.60% stake in the company. The round was raised at a post-money valuation of $15,000 million.
o Facebook, Inc. announced that it has raised $200 million in funding from Digital Sky Technologies Limited on May 26, 2009. Digital Sky Technologies Limited invested in preferred stock and acquired 1.96% stake, valuing the company at $10 billion.
Questions
1. Briefly describe the type of financing that was being used here and why it was used for each round of funding.
2. Speculate as to what the money was used for after each successive round of financing. Facebook was raising money to finance certain projects.
3. Provide an explanation behind the company's bubbly corporate valuation during this time.
4. Determine how outside investors were valuing this company. (can compare other similar businesses.)
5. Estimate the company's major financial numbers (revenue ,net income, or other financial metrics) during each of the four rounds for financing.