So says Kara Swisher at allthingsd.com, and I wouldn’t be surprised, despite the fact that it’s likely to do $150 million in revenues this year. You raise money when you can, not when you absolutely have to, and there’s no hotter potential investment today than Facebook. So the idea that it could raise much more than the already sizable $25 million it raised last year makes sense, given that all that revenue probably isn’t producing much if any cash flow yet.
The obvious candidate, besides current investors Accel Partners, Greylock Partners, and Meritech Capital along with early investors such as Peter Thiel, is Microsoft. The software giant apparently accounts for half of Facebook’s revenues thanks to an ad deal. But I have to think Facebook would want to avoid an even deeper tieup with Microsoft, which could discourage other potential acquirers in the admittedly unlikely event that a Facebook IPO doesn’t happen in the next year or so.
There are dangers, as well, in raising so much money and building such a huge valuation. Last year’s funding already had raised the valuation to $525 million, and this one sounds like it would catapult Facebook into the multibillion-dollar range, if you can believe that. For one, you tend to spend it, sometimes on nice chairs, marginal employees, and the like that end up being a net negative. For another, you have to somehow fulfill that enormous valuation, and that can force you to do dumb things like slap ads in the wrong places to boost revenues.
I’m betting CEO Mark Zuckerberg & Co. are smarter than that, though. And in the absence of a great IPO environment during the current market mayhem, Facebook could certainly use the money for acquisitions and international expansion. After all, it’s supposed to be the next Google, right?