Facebook sells 10% to pay for rapid hardware growth?
Update: A comment from Brandee Barker, Corp Comm at Facebook which provides some clarification:
The Times story is referencing funding information from more than a year ago. Per my comment in the article, Facebook has raised more than $37 million in venture capital to support our growth, including systems operations. We now have several data centers with thousands of servers and, of course, our investors have a stake in the company.
Times Online reports that Facebook was forced to sell about 10% of its share due to the fact that it didn't have enough hardware infrastructure to deal with the rapid growth of users, and we're talking about 1.7+ billion user photos, 2.2+ billion friends tagged in user photos, 160 terabytes of photo storage used with an extra 60 terabytes available, 3+ billion photo images served to users every day and 100,000+ images served per second during our peak traffic windows.
The owners of Facebook, the fast growing social network, were forced to sell a significant share in the company because they did not have enough computers to cope with the site's rapidly increasing number of users, Times Online has learnt.
Facebook's founders, who have always resisted a buyout, were forced to dilute their stock by as much as 10 per cent a year ago when it became apparent that they had not bought enough hardware to accommodate the growing subscriber base, a well-placed Silicon Valley source said.
The sale means that Facebook's chief executive, Mark Zuckerberg, one of the most talked about internet entrepreneurs of the moment, who turned down on offer reportedly as high as $1.5 billion for his company form Yahoo! last year, will not cash in as heavily as he might have done, should he decide to sell or list.
Facebook is understood to have issued an urgent call for funding last year when it realised it had not to leased enough servers to store the rapidly increasing amount of data uploaded by its subscribers which now number 24 million, including 1.4 million in the UK.
Greylock Partners, the Silicon Valley-based venture group, is thought to have invested as much as $25 million in a funding round valuing the company at $250 million in order to finance the purchase of the necessary hardware.
"It was a major stuff up," a source close to Greylock said. "The management should have realised about the expansion and didn't."
The source added that at the time of the investment, about a year ago, Facebook was not as popular as it is now, suggesting that the owners would not have been in a position to be choosy about the dilution of their stock in return for funding.
Greylock's holding in Facebook, which is understood to be as high as 10 per cent, will translate to a significant windfall if, as is widely expected, the site decides to list.
Another Silicon Valley source said: "Everyone was surprised at the time because Facebook had no obvious need for more capital, but if this is the case, it does seem to explain why it called for more funds."
A spokesman for Facebook said: "As typical of most start-ups, Facebook began looking for venture capital in 2004 to fund its growing business. The company has received $37 million in venture capital through three rounds."
Facebook announced last month that it was opening up its platform to developers, such as Amazon, to write applications catering to its user base, reassuring its subscribers that "we're not about owning the content."
On the subject of a buy-out, now considered by most Silicon Valley observers to be out of the question, Mr Zuckerberg, 23, has said: "We've always said that FaceBook should remain independent, and this move strengthens that."
4 hours ago the article was rapidly taken offline...
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