Friday, August 19, 2011

Who Owns Facebook?

Facebook, looking at planning a $US100 billion IPO next year, is it all froth. The valuations have jumped every other month thanks to bits and pieces being transacted in pre-IPO shares market. To invest in Facebook on sites like SecondMarket or SharesPost you needed to be "qualified as a sophisticated or professional investor" with about $US2.5 million in net tangible assets or $250,000 annual income over the last three years "for a start".

Would I be buying pre-IPO Facebook shares at US$65 billion valuation. My gut feel is YES. There is one Google, and there is one Facebook. I am not saying Facebook will end up with the same valuations as Google, but I think the momentum is there and the shares could go to US$150 billion valuation post IPO. Then I would sell if I had the shares - euphoria is predictable, riding the trend is risky but OK if you can stomach it, but always have in mind the exit strategy.

On its most recent valuation, Facebook has grown by $US15 billion in January to be worth about $US65 billion. Just last June Facebook was worth $US23 billion. The $US65 billion valuation was determined after one of Facebook's early investors, Interpublic, recently sold half of its 0.4 per cent share in the social networking site for $US133 million. But given that Facebook, which now has 750 million users, is a private company, it is difficult for smaller investors to get in. Facebook is widely expected to be preparing for a $US100 billion initial public offering (IPO) next year.

Bono's investment firm Elevation Partners - named after one of U2's famous songs - bought a $US210 million stake in Facebook in November 2009. That stake is now worth $US975 million - a more than fourfold increase. U2 frontman Bono's investment firm has made a profit of almost $US800 million on shares in Facebook in just a few years, but average punters looking to get in before the social network goes public should keep dreaming. 

Mark Zuckerberg

Status: Founder, CEO
Age: 26
Residence: Palo Alto, CA
Education: Two years at Harvard University

Facebook stake: 24%
Value: $20.4 billion

Selected TIME Magazine's "Person of the Year" in 2010, Mark Zuckerberg has been credited for connecting the world via Facebook. Is Zuckerberg the next Global Kingmaker? After Egyptian dictator Hasni Mubarek resigned, a Google executive based in Egypt credited Facebook as the catalyst for the revolution. Last Summer, British Prime Minister David Cameron promoted his video chats with Zuckerberg as evidence that he's a "wired" leader-- go figure. And President Obama's strategists credited Facebook as the foundation for the campaigns' massive youth-vote effort. Raised in Dobbs Ferry, NY, Zuckerberg began writing software while in middle school and by the end of high school, he had co-written a music recommendation program called Synapse Media Player, which Microsoft and AOL reportedly offered Zuckerberg a million dollars to further develop. "Zuck" however turned them down and ran off to attend Harvard. While in his ivy covered Cambridge dorm, Zuckerberg created Facemash, a website that compared students' photos side-by-side in a fashion similar to HOT or After disciplinary action from the school's administration, Zuckerberg shut down Facemash and began "thefacebook," initially only available to Harvard students. Zuckerberg has since defended the site in intellectual property disputes and spurned buyout offers from Viacom, Yahoo! and other suitors. The 26 year old remains CEO of Facebook, and (according to Forbes magazine rankings) is now tied with New York City Mayor, Mike Bloomberg, as the 10th richest person in the U.S.

Accel Partners

Status: Venture Capital Investor
Founded: 1983
Location: Palo Alto, CA

Facebook stake: 15%
Value: $12.75 billion

Though too young to drink alcohol, it must have been the $400 bottle of wine Jim Breyer offered Mark Zuckerberg at a posh Silicon Valley restaurant that helped seal the deal forAccel Partners' $12.7 million investment in Facebook. Breyer, a managing partner at Accel, was hot for a big deal to impress Accel's less than enthusiastic limited partners. Then Associate, now Accel Partner, Kevin Efrusy, got the inside lead on an early stage financing of Facebook by walking up to the firm's Palo Alto offices, uninvited, on April Fool's Day, 2005. Efrusy's due diligence uncovered Stanford users of Facebook who not only used the website, but literally obsessed over it, even missing their classes to "poke" friends. After a week of back and forth that saw another Facebook suitor, the Washington Post, get the cold shoulder, Accel finally nailed a deal that valued Facebook at $98 million. The $12.7 million investment gave the firm a 15% stake, and also included million dollar bonuses for Zuckerberg, Parker and Moskovitz (unusual in a VC round).

Dustin Moskovitz

Status: Former Employee
Age: 26
Residence: San Francisco, CA
Education: Two years at Harvard University

Facebook stake: 6%
Value: $5.1 billion

Man, was this guy lucky to be Mark Zuckerberg's roommate? Currently the youngest U.S. billionaire, Dustin Moskovitz was one of the original founding Facebook cadre. Born in Washington D.C., Moskovitz met his fellow co-founders at Harvard University in 2004 where they developed the social networking site from their dorm room. Moskovitz was an economics major before dropping out of college to relocate to Palo Alto, CA to work on Facebook full-time. Credited as both Vice President of Engineering and Chief Technology Officer, Moskovitz led the technical staff, oversaw the major architecture of the site, and was responsible for the company's mobile strategy and development. He left Facebook in 2008 to start Asana, a company that builds project management software to help companies collaborate. Moskovitz was able to garner the title of "United States Youngest Billionaire" over Mark Zuckerberg because he is eight days younger than his fellow co-founder.

Digital Sky Technologies

Status: Corporate InvestorFounded: 2005
Location: Moscow, London

Facebook stake: 5%
Value: $4.25 billion

Russian Internet holding company, Digital Sky, grabbed 1.96% of Facebook stock in May of 2009 when it spent $200 million at a $10 billion valuation. Digital Sky, which is largely backed by a wealthy Russian oligarch, is the owner of Facebook clone VKontakte, the largest social network in Russia. Under the direction of Managing Partner, Yuri Milner (pictured), Digital Sky has also amassed sizeable positions in Zynga and Groupon, and is reportedly in talks to buy a substantial stake in Twitter. DST followed its initial stake in Facebook with large block purchases of stock from existing Facebook shareholders and employees. Digitial Sky also joined Goldman Sachs in 2010 for the investment bank's multi-hundred million investment round, with DST ponying up $50 million for yet another .1% of the firm (at a $50 billion valuation). DST's total stake position is approximately 5%.

Eduardo Saverin

Status: Former Employee
Age: 28
Residence: Miami, FL
Education: BA/BS, Harvard University

Facebook stake: 5%
Value: $4.25 billion

One of the three original founders of Facebook, Eduardo Saverin was a Harvard classmate of Mark Zuckerberg. Acting as the business partner of "The Facebook," in 2004, Saverin concentrated on developing advertiser relationships while Zuckerberg focused on product development. When Facebook moved its operations to Palo Alto and Sean Parker gained more influence, Saverin ended up on the losing side of a power struggle. Initially granted a 30% stake in Facebook, Saverin's position was whittled down as institutional investment rounds diluted his shares. Saverin was born in São Paulo, Brazil to a wealthy Brazilian Jewish family and was raised in Miami, Florida, the state where he initially incorporated Facebook. In 2006, Saverin graduated magna cum laude from Harvard University with a B.A. in Economics, and is currently living in Singapore. Saverin has been spreading his bucks around and is a major investor in a new social network called Qwiki, as well as Jumio, an online and mobile payment product.

Sean Parker

Status: Former Employee
Age: 31
Residence: San Francisco, CA
Education: High School Graduate,
Oakton High School,VA

Facebook stake: 4%
Value: $3.4 billion

Part tech genius, part bad-boy, Sean Parker has displayed uncanny foresight and comprehension of Internet business strategy. However, his fondness for hard partying and run-ins with the law have also left him as the odd-man out in business ventures. At the age of 16, Parker's Virginia home was raided by the FBI when he was caught hacking systems of Fortune 500 companies. In 1999, at the age of 19, he co-founded the file sharing (and wrong-side-of -copyright-law) music service, Napster. At a trendy Chinese restaurant in New York in 2004, Parker met Facebook co-founder Mark Zuckerberg and became a mentor and advisor to the rising entrepreneur. Much like Napster, Parker was able to foresee Facebook's success and societal contributions only months into its inception. Acting as the company's first President, Parker negotiated a deal with Facebook's first investors Peter Thiel and Accel Partners, giving Zuckerberg absolute control of the board of directors. Ousted from Facebook in 2005 for a drug-related arrest, Parker went on to become Managing Partner of Founders Fund, a San Francisco-based venture capital shop. Parker still acts as an informal advisor to Zuckerberg.

Peter Thiel

Status: Angel Investor,
Member of Board of Directors
Age: 43
Residence: San Francisco, CA
Education: JD, Stanford University

Facebook stake: 3%
Value: $2.55 billion

"Just don't f**k it up," is what Peter Thiel told Mark Zuckerberg when the two finalized Thiel's investment in the cash-strapped startup, according to Facebook chronicler David Kirkpatrick. In late 2004, Thiel became Facebook's first significant outside investor when he put up $500,000. Initially structured as a loan, the financing later converted to a 10.2% equity stake in the company. Born in Frankfurt am Main, West Germany, and raised in Foster City, California, Peter Thiel has been credited for launching and/or funding some of the most innovative startups of the last decade including PaypalYouTube, and LinkedIn. Thiel maintains a seat on Facebook's board of directors and, in addition, serves as president of Clarium Capital, a hedge fund, and is a Managing Partner of VC firm, The Founders Fund. Thiel is known for being a package of contradictions due to the fact that he is a gay, Christian, entrepreneur, venture capitalist, libertarian, lawyer who, in 2010, launched theThiel Fellowship, offering $100,000 in cash to aspiring entrepreneurs under the age of 20 to drop out of school and pursue their business endeavors. Due to selloffs and dilutions, Thiel's original stake in Facebook has been reduced to 3%.


Status: Corporate Investor
Founded: 1975
Location: Seattle, WA

Facebook stake: 1.6%
Value: $1.36 billion

Beaten in search by Google, and wary of Google's acquisitions in web video (YouTube) and banner advertising (Doubleclick) , Microsoft CEO Steve Ballmer (pictured) was willing to do whatever necessary to get in bed with Facebook, and seal the Seattle software goliath's foray into Web 2.0. Though interested in acquiring Facebook outright, an idea Zuckerberg nixed, Microsoft (NASDAQ: MSFT) opted for a complicated arrangement that included an advertising partnership and a small stake in the social network. Microsoft invested $240 million in the Fall of 2007 at what appeared to be a nosebleed $15 billion valuation, which garnered Ballmer a 1.6% position. Eager that the investment not appear inflated, Microsoft welcomed the participation of Hong Kong billionaire Li Ka-Shing in the Series D round. Terms also precluded Google from making an investment in Facebook. The deal looked pitiful when DST bought a larger stake at a $10 billion valuation less than a year later. However, Facebook's current $75 billion valuation means Microsoft's stake in privately-held Facebook has outperformed its own publicly-traded stock 5x.

Greylock Partners

Status: Venture Capital Investor
Founded: 1965
Location: Menlo Park, CA; Cambridge, MA

Facebook stake: 1.5%
Value: $1.275 billion

One of the oldest VC firms in the country, Greylock got its piece of the world's hottest tech company by getting in on Facebook's $27.5 million Series C round. Meritech Capital Partners also participated in the financing along with existing investors Peter Thiel and Accel, who chipped in additional funds. With this financing Facebook was valued at over $500 million, five times the amount when Accel first invested. Greylock, founded in 1965, traces its roots to founders Bill Elfers and Dan Gregory, who both worked at the country's first institutional venture capital firm, American Research & Development, in Boston.

Meritech Partners 

Status: Venture Capital Investor
Founded: 1999
Location: Palo Alto, CA

Facebook stake: 1.5%
Value: $1.275 billion

Meritech Capital Partners gained its Facebook shares by participating in the company's $27.5 million Series C round. Joining Meritech in the transaction were Greylock, Accel and Angel investor Peter Thiel, with the round valuing Facebook at over $500 million. Meritech Capital Partners was founded in 1999 in partnership with Accel Partners, Oak Investment PartnersRedpoint Ventures and Worldview Technology Partners, and currently manages more than $2.2 billion in capital.

Elevation Partners

Status: Venture Capital Investor
Founded: 2004
Location: Menlo Park, CA

Facebook stake: 1.5%
Value: $1.275 billion

Once pilloried with the moniker "world's dumbest VC investor," Elevation Partners may shut up some of its critics with its stealthy purchases of Facebook stock. Using markets designed to provide liquidity for privately-held shares, Elevation has reportedly cobbled together a 7.5 million share position. Its $210 million investment aggregated shares when the valuation of Facebook was $14 billion. Not too shabby for the firm whose high-profile investments in Palm and Forbes Magazine deflated rather than elevated. Elevation, which sports U2 rocker Bono as an investment partner, manages $1.9 billion.


Joan Doe said...

If facebook plays it right, they could potentially be the next search engine.

I'did go long on this stock.

facebook has an enormous data on what people are sharing, what are they comments on a particular website and videos. You only share/comments on articles that are good, interesting, and off quality.

Human AI is better than Robot AI(google search engine AI).

Facebook needs to launch a search engine to kill off google, i say in another 3 - 5 years time. They are buying time, collecting as many info as they can. Maybe Microsoft will spin off bing as a search company with facebook as the primary share holder.

saf said...


What company is recommended for trading US stocks ? I have opened a eTrade account. But the fee is fairly high at US$19.90. My fren in US recommended Scottrade, but its not available for Malaysian...


The Leakers - Helmed by the often brilliant Herman Yau Nai Hoi (whom I believe was from Malaysia who became a great success in HK films). 7...