Goldman Sachs Invests $450 Million in Facebook


Facebook is reportedly receiving a combined total of $500 million in new investment money with $450 million coming from Goldman Sachs and another $50 million from Russia’s Digital Sky Technologies.

This is all happening based on a jaw dropping $50 billion valuation of Facebook.

Speculation as to what is going to be done with this money runs a wide range.

From Mashable

The first thing Facebook’s likely to do with its $2 billion in new funding is to cash out some of its existing investors and employees. The social network previously did this when DST bought $200 million in Facebook stock from its employees. Some of its early investors may also reach into the $2 billion pot and cash out.

Once that’s done, it’s all about growth.

The $2 billion number in the last quote? That comes from another funding effort that will be headed up by Goldman Sachs. In true Wall Street fashion there are special code words.

Goldman Sachs will help Facebook raise an additional $1.5 billion through a “special purpose vehicle” designed to allow outside investors to indirectly invest in the company.

Since there is speculation about just how much more room Facebook has in allowing further investment without requiring it go public this is an interesting aspect of the story but one that we will probably never really know.

Another more practical angle on what might be on the horizon

From Search Engine Land

Imagine that Facebook were to become convinced that having its own search engine was a key to delivering a better user experience overall, as well as generating new ad revenue. One obvious and immediate possibility would be to buy Blekko, which has pushed social integration with Facebook Likes further than Microsoft itself.

So while the rest of the economy is still in chaos and stuck in neutral on its best day, Facebook is looking good. Interestingly enough, it is looking good with help from a company that took $10 billion in TARP funds back in 2008 when its chief executive said it wasn’t in real trouble (it paid back those funds in about 6 months just before executive bonus season) and it recently paid $550 million in fines for misleading investors.

With a culture like that and the way Facebook views its users privacy these bedfellows are not strange at all. In fact, they appear to be ‘two peas in a pod’ and one can only imagine what lies ahead for the Wall Street robber barons and the Internet’s privacy barons. Sounds like fun!

So remember, that when you are using Facebook it may make sense to think of that great phrase “Your tax dollars hard at work!”.

What’s your take on what’s next for Facebook? Is a search engine in the making? Will that IPO finally happen? Will a select few get very rich?

Let us know your thoughts.

  • http://www.cxoadvisorygroup.com Stephen Davis

    Is Facebook really worth a $50 Billion valuation? (TAKE OUR POLL) http://linkd.in/fpFDma

    • http://www.frankthinking.com Frank Reed

      @Stephen – That seems to be a pretty big question floating around but I honestly can’t say yes or no. There are so many variables that come into play. One that makes Facebook a bit different is that it has a track record of success (despite many remaining questions) and there is a huge user base. How active they REALLY are is the thing that is what really matters. Personally I have never clicked on a Facebook ad and hate that they are there. In other words, I ignore them completely. I doubt I am the exception or the rule.

      So in the end, what needs to be considered is what can Facebook do to get its revenue to the point that the valuation is reasonable and how quickly can it do it? Lots of questions and very few answers at the moment.

  • http://www.blackentrepreneur.com Brian

    The search engine aspect is interesting, but I would have to guess that the wide use of Facebook Connect across so many sites has to be the trojan horse for something else. Not sure that something else equates to a $50 billion valuation, but I would assume that the people investing the money and reviewing the financials are more capable than I am. Shall be interesting to see how it plays out.

    @Frank – No one ever admits to clicking on ads. Everyone says they never click on google ads, but google will do $28 billion in revenue from no one clicking on those ads. Someone is clicking them on Facebook and Google.

  • http://www.localhost99.com Paul

    I think facebook have a lot of plans for this year and it will eventually dominate the web..

  • http://www.fastupfront.com Garry

    That’s a heck of a lot of money! Why not put it towards something a little more useful?!?!