Kleiner Perkins Caufield & Byers (KPCB), a Silicon Valley venture capital firm, is about to invest $38 million in Facebook as part of its $750 million digital growth fund. The investment is being made at a valuation of $52 billion, according to two unnamed investors cited by VentureWire. While the stake is not that significant (doing the math shows that it's really just 0.00073 percent of the social networking giant), the resulting valuation is definitely something to write home about.
Less than a month ago, Facebook announced that it had raised $1.5 billion at a valuation of approximately $50 billion, but that it had no immediate plans for the funds and would simply continue to build and expand its operations. The transaction consisted of two parts: in January 2011, Goldman Sachs completed an oversubscribed offering to its non-US clients in a fund that invested $1 billion in Facebook Class A common stock, while in December 2010, Digital Sky Technologies, The Goldman Sachs Group, and funds managed by Goldman Sachs, invested $500 million in Facebook Class A common stock at the same valuation.
This new $52 billion valuation shows a few things. First off, Facebook is still growing, which is hardly a surprise. Secondly, it makes the company's stock look a lot less volatile than it actually is. In secondary markets, Facebook's valuation is changing by the billions every few weeks, but such drastic changes are only possible because the company is not yet public.
Frankly, the price seems a bit low, given how small the investment is. It's quite possible that KPCB got such a low price for the shares because negotiations to buy the stock began a while ago. Nevertheless, the valuation for the private company is huge given that the social networking website is only seven years old.
KPCB has backed some of the biggest names in tech, including Amazon, AOL, and Google. The company never put any money into Facebook, but now it's trying to cover some lost ground, after investing in other social Web companies like Groupon, Twitter, and Zynga. The last one has been one of KPCB's most successful investments in recent years. Given how much Zynga depends on Facebook for pushing its social games (think CityVille, FarmVille, and Mafia Wars), it makes sense for the investment firm to help the bigger fish out as well.