Reuters - Facebook has $200 million investment from Russian firm

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Facebook has $200 million investment from Russian firm

Tuesday, May 26, 2009 6:26PM UTC

By Anupreeta Das

NEW YORK (Reuters) - Facebook has received a $200 million investment from a Russian Internet investment firm that values the social networking site at $10 billion, seeking a cash buffer as it grows rapidly through the recession.

Digital Sky Technologies, which has invested in leading Russian web properties like Mail.ru and Vkontakte.ru, will take a 1.96 percent stake in Facebook in exchange for preferred stock, the two companies said on Tuesday.

Digital Sky also plans to buy at least $100 million of Facebook common stock from existing stockholders to provide liquidity for current and former employees with vested shares of Facebook stock.

In recent months, Facebook has held discussions with several groups interested in investing in the company, Chief Executive Mark Zuckerberg said on a conference call.

Digital Sky won because its founders Yuri Milner and Gregory Finger have strong experience running Internet properties in Eastern Europe and Russia, and "a deep, advanced understanding" of social networking technology, Zuckerberg said.

"Ultimately (it was) this deal and my comfort with Yuri and the team," said Zuckerberg, who founded Facebook in a Harvard University dorm room five years ago.

In 2007, Microsoft Corp invested $240 million in Facebook, which valued the company at $15 billion at the time.

GROWING COMFORTABLY

Founded in 2005, Digital Sky has raised and invested more than $1 billion in over 30 companies, according to the firm's website.

Milner, who attended Wharton Business School and was CEO of Russian web portal mail.ru, said Digital Sky hopes to bring its expertise in making money off other web properties to Facebook.

It was "a very simple exercise of applying what we've learnt in other parts of the world to Facebook," he said, adding that he was comfortable with the $10 billion valuation.

Facebook, which now has more than 200 million members, will use the $200 million as a "cash buffer" to help it grow comfortably, Zuckerberg said.

He reiterated that the social networking company was on track to increase 2009 revenue by 70 percent year-over-year, and would become cash flow positive by next year.

The Digital Sky investment will also give Facebook the flexibility to pursue strategic options, although the Palo Alto, California-based firm has not been very acquisitive so far.

(Reporting by Anupreeta Das and Alexei Oreskovic; Editing by Derek Caney and Gerald E. McCormick)