Conflicting reports, none confirmed, are circulating today about Facebook’s latest attempts at raising funding. TechCrunch says that Facebook has been shopping itself around at a $4 billion valuation somewhat unsuccessfully, while VentureBeat says they just decided not to accept funding at that level.
In October 2007, Facebook announced a major deal with Microsoft—1.6% of the company for $240 million, placing the overall valuation at $15 billion. However, in the intervening eighteen months, the company’s speculated value has fallen off, being projected as low as $5 billion last June. By October 2008, many sources thought Facebook was headed for financial ruin.
TechCrunch’s story is that Facebook is having trouble coming up with new funding:
the company has been pitching hard for new cash at a much reduced valuation, hoping for at least $4 billion. And some investors are biting, but perhaps not at that price. A source with knowledge of the possible transaction tells us that General Atlantic may have submitted a term sheet at “around a $2 billion” valuation.
Also troubling is the potential costs of taking such funding and accepting such a low valuation: “In addition to the direct dilution to stockholders from the new money, old investors at the $15 billion valuation may need to be made whole.”
VentureBeat, on the other hand, reports that the company’s financial future may be very bright. In addition to allegedly rejecting a $4b deal, they have $200 million in the bank,
So there’s a good chance costs aren’t outpacing revenue. Facebook made under $300 million last year, was a little shy of breaking even, and at first expected to make towards $400 million in revenue this year. But the company said in late March — incidentally at the time that chief financial officer Gideon Yu left the company — that it was beating projections by 70 percent. I’ve confirmed that this run rate has the company possibly breaking half a billion in revenue by the end of the year.
VB also reports that FB may be revealing more information about its infrastructure soon, possibly to allay reports that their operating costs for their 200 million active members outpace their revenue.
What do you think? Is Facebook barely keeping its head above water, or is it smooth sailing for the most popular social network on the Internet today?