Dec 12, 2012 VC
Using Venture Capital Method Valuation To The Facebook And Microsoft Case

Many of you remember that Microsoft paid $ 240 million for 1.6 percent of Facebook . That was a huge amount of money for a company that is not generating THAT much money for the valuation.

Sometimes, a company invest in a startup for strategic reasons.

Anyway, let’s use the Venture Capital Method to see what is the post-money valuation (don’t remember what’s post-money valuation? read my past article about it again.)

Information that we have:

- Microsoft paid $ 240 million for 1.6%

The math is very simple to calculate the post-money valuation: 1.6%(TOTAL) = $ 240 M then, TOTAL = $240M/0.016

We have a whooping $ 15 000 million or $15 billion post-money valuation!

When a reporter says that the company was valued at $15 B, he was saying the post-money valuation.

In this case, we didn’t need to know the number of shares held by the existing shareholders because we know the percentage Microsoft got from this transaction which was 1.6%. However, we do not know the real number of shares.

I found another website that has more information about the percentage each of the shareholders has of Facebook.

"That’s obvious too with the $240 million cash investment (with more to come from other greedmonger private investors, of course, in another round now being arranged by Facebook) that bought Microsoft exactly 1.6% of Facebook.

That puts Microsoft behind Greylock Partners’ and Meritech Capital Partners’ 1.7%, Founders Fund’s 5% and Accel Partners’ 11% Accel partner and Facebook board member Jim Breyer also has a personal 1% stake, now valued at $150 million€“and Zuckerberg’s 20% (not the 30% that has been widely reported), which is now worth $3 billion."

Organizing the information:

- Greylock Partners’ and Meritech Capital Partners’ 1.7%

- Founders Fund’s 5%

- Accel Partners’ 11% (Chim’s comment: pay attention to this, in the next posts I will show you why this number decrease from 15% to 11%, but they got a lot of money!)

- Accel partner and Facebook board member Jim Breyer also has a personal 1%

- Zuckerberg’s 20%

If the information is correct, then each of their pre-money valuation would be:

- Greylock Partners’ and Meritech Capital Partners’ 1.7% (of $ 15B) = $ 255M

- Founders Fund’s 5% = $ 750M

- Accel Partners’ 11% = $1.65B (Chim’s comment: again pay attention on this. They invested $XXXX amount and they ‘got’ this billion here, more info in the next posts.)

- Accel partner and Facebook board member Jim Breyer also has a personal 1% = $ 150M

- Zuckerberg’s 20% = $ 3B

Let me check for one thing: $240M + $255M + $750M + $1.65B + $150M + $3B = $ 6 billion.

Where or who is holding the remaining 9 billion? Who knows.

In the next post, I will share some findings about how VC makes money with concrete information.

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