Simon’s Blog

Is Facebook worth $6B+? If so, should Facebook sell now, or sit tight? Well, it’s strange, but it’s true… people are actually advising Facebook not to sell for $6B. Fred Wilson says - selling the Company would be a huge mistake.

To consider whether that’s good advice, let’s do some back-of-the-envelope calculations… Facebook has raised a total of $38.2M since the first investment in 2004. Now, I don’t know what percentage of the company the investors own, but let’s be ultra-conservative… Let’s say the founders have given away only 20% of the company to their investors (lucky founders, if that’s the case!). Even with this conservative estimate, investors would get over a billion dollars back from their invesment - a 30X return. Given that the bulk of this money was put to work only a short time ago (the last round was $25M), that’s a pretty great result.

But forget about the multiple for a second, and think about the actual “quantum of cash”. The amount of cash returned would probably be enough to return the funds of the VCs involved. Think about what that means for a second. I’d be amazed if a VC would turn down an opportunity to return their entire fund from a single investment. Now, turn your attention to the founders, and think about the money they’d personally make in the above trade-sale scenario.

What does all this say to me? It’s pretty simply really - it says that no-one has offered $6B for Facebook. And as for the idea that Facebook isn’t even for sale, and that an IPO is the only exit investors are prepared to consider… come on! VC-backed companies are always for sale - because all VC investments are soluble in cash, no exceptions.