Facebook: Who Else Wants to Invest at $15B? No One?
It's been three weeks since Facebook's Mark Zuckerberg took a desperate Microsoft to the cleaners with a $15 billion valuation. It's been 2.9 weeks since Forbes reported that Facebook had raised an additional $500 million from …
Context & Ripple Effects
Three weeks after Mark Zuckerberg took Microsoft's $240 million at a $15 billion valuation, Silicon Alley Insider is stress-testing the mark: if that price were real, who else would pay it? The only candidate answer in circulation is Forbes' report of an additional $500 million raised — still unconfirmed, and unconfirmed is the operative word when the entire valuation rests on one strategic buyer's check.
The skepticism lands on a company that has spent October defining itself in capital terms: its stock options are already a story about paper wealth awaiting a real price, and Zuckerberg has publicly staked the company on the sanctity of the social graph as the asset justifying the number.
First-order effects
- Facebook's $15 billion valuation currently has exactly one transaction behind it — Microsoft's — so every employee option grant and every negotiation with future investors is priced off a single strategic buyer's premium rather than a market.
Second-order effects
- If no independent investor validates the price, later rounds must either match Microsoft's premium with new money or reset the mark downward, and Microsoft's position strengthens either way as the only buyer who has paid full freight for ad-partnership leverage over the social graph.
Third-order effects
- Private valuations set by lone strategic buyers are becoming the benchmark numbers the whole social-networking sector gets measured against — a pattern where one hypersized check from an incumbent forces every subsequent investor to either underwrite the incumbent's logic or argue the company down.
The trend: Strategic incumbents are becoming the price-setters for private web companies, with single-buyer premiums like Microsoft's $15 billion Facebook mark standing in for actual market discovery.