Facebook - Investment Journey


Facebook is an online social networking service that enables its users to connect with friends and family as well as make new connections. It provides its users with the ability to create a profile, update information, add images, send friend requests, and accept requests from other users. Its features include status update, photo tagging and sharing, and more. Facebook started with three methods of producing revenue.
  * Local text ads (from the college and local businesses), running at $15-20 per day
  * Traditional banner ads, sold on a national basis
  * Sponsored groups – examples included Apple, EA, etc.
Today Facebook’s revenue relies heavily on display ads on Internet and mobile. The emerging ones are sponsored feed entries and Facebook Connect.
In April 2005 Facebook received $12.7 million in funding from Accel Partners at a valuation of around $100 million. Facebook continued to grow opening up to high school students in September 2005 and adding a photo sharing feature the next month. The next spring, Facebook received $25 million in funding from Greylock Partners and Meritech Capital as well as previous investors Accel Partners and Peter Thiel. The pre-money valuation for this deal was about $525 million. Facebook subsequently opened up to work networks eventually amassing over 20,000 work networks. Finally in September 2006, Facebook was opened to anyone with an email address. Facebook continued to receive funding most notably in January 2011 receiving $1.5 billion and valuing the company at $50 billion. A year later in February 2012, Facebook announced that it was filing for its long-anticipated initial public offering. The company went public on May 18, 2012 opening in NASDAQ with shares trading at $42.05. The revenue growth of the company from 2005 to 2013 is illustrated in the chart below:

Valuation of Facebook from its inception till it went IPO is depicted below:

In the subsequent sections first four funding...