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Facebook raises $25 million; says never intended to sell

Matt Cohler, Mark Zuckerberg (CEO)
Facebook, the popular Palo Alto social networking site, has raised $25 million in venture capital from some Silicon Valley investors, putting to rest for now speculation that it was considering acquisition offers.

Much of the following runs in the Mercury News tomorrow:

Greylock Partners, of San Mateo, led the latest round, and is joined by Palo Alto's Meritech and existing investors Accel Partners and Peter Thiel, an investor and former chief executive of PayPal.

Facebook rocketed to prominence two years ago after gaining a lock on the college social networking market, where students use the site to peruse the activities, romances and other interests of friends and fellow students.

The company has risen to the seventh most-visited site, by page views, according to comScore Media Metrix. It had 7.56 million page views in March, a 37 percent increase from February.

"It has never been our intention to sell the company," said Melanie Deitch, Facebook's director of marketing, adding that the latest funding puts the rumors of such a sale to rest. Late last month, Business Week reported the company had turned down a buyout offer for $750 million and was looking for as much as $2 billion, citing analysts saying that Viacom, owner of MTV, might make a good match.

David Sze
David Sze, the venture capitalist who led the investment for Greylock, said earlier statistics from comScore showing a decline in unique visitors in February were an aberration, and that the company's internal statistics show continued robust growth. Indeed, the March statistics showed resumed growth on this metric too.

We've mentioned David Sze's penchant for wonkish analytical circle- and matrix-drawing before here. We asked David where Facebook fits within his "matrix." He responded that Facebook is a "winner-circle" company. (Sigh, guess you had to be there.)

Sze said Facebook has only "scratched the surface" on its efforts to expand in new markets, including international and post-graduate communities. Facebook launched a product for high schools last year, and recently launched a version of its site for mobile devices. It also introduced photo-sharing several months ago. Facebook's Deitch said comScore data shows Facebook is the largest photo-sharing site on the Web (which is pretty impressive; we haven't seen the data, but we'll check to confirm this).

Greylock's Sze said he feels good about Facebook's management team. He cited the moves by several executives to join the company, including Owen Van Natta, former Amazon vice president of business development, and Matt Cohler, who had previously worked at LinkedIn.

The company will eventually turn to developing three revenue streams, Sze said. Those include local advertisers, such as pizza companies or bookstores that want to post an ad for a local college audience; banner advertisers seeking to reach Facebook's demographic type nationally; and sponsored groups, such as large companies sponsoring an online forum to interact with students.

(Photo above of Zuckerberg and Cohler by Karen T. Borchers)

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Interesting investor. Remember Greylock's last investment in this space - Student Advantage was the talk of the private equity scene / NASDAQ darling and eventually loser in the space. Sze may help this work out differently, but what no one has indicated is what the real value of the company is and why it will remain an enduring business instead of just another temporary distraction in students lives.

Josh Aaron on April 20, 2006 10:25 AM
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