Russian internet company Digital Sky Technologies (DST) has snapped up a small stake in Facebook for $200m (£125.5m) in a deal that values the five-year-old social networking site, which has yet to make a profit, at $10bn.
Facebook founder Mark Zuckerberg said he wanted to use DST's experience in making money from its millions of social networking users across Russia and Eastern Europe to help propel his business, which has over 200 million users worldwide, into the black.
"These guys really have a unique profile, they are not the traditional investors that you get at a stage like this," said Zuckerberg. "They have a lot of experience that they can bring."
DST, run by Russian entrepreneur Yuri Milner, has also indicated that it is willing to spend at least another $100m buying out existing Facebook shareholders as part of a plan that would allow current and former staff to sell some of their shares.
The deal represents something of a comedown for the Harvard drop-out: when Zuckerberg raised a slightly larger amount from Microsoft in late 2007, Facebook was valued at $15bn.
But Zuckerberg said the Microsoft deal, which included giving the software company the right to sell advertising on the site, happened "right at the absolute peak of the market".
"Relative to the economic conditions for when the Microsoft deal happened and the context of that being more of a strategic partnership than a straight financial investment, we feel really good about the progress we have made (since then)," he said. "We think this is a fair and good valuation for us."
The deal will cement the position of Zuckerberg, who celebrated his 25th birthday two weeks ago and owns the vast majority of the firm, as one of the world's youngest paper billionaires.
Zuckerberg stressed that his company did not need DST's cash to meet his plans of reaching a cashflow positive position sometime next year. Instead, the $200m was a "buffer" against further fluctuations in the market. The deal would also give Facebook access to DST's experience across its five social networking sites in 13 European countries.
These sites – such as Russia's Vkontakte.ru – make money from the traditional model of online advertising but have also experimented successfully with micro-payments, allowing users to buy and sell items with the site taking a slice of the revenue, and other subscriber payment mechanisms.
"One of the things that was most interesting to me about DST's portfolio is they have a large number of social networks and each of them monetises in different ways and all of them effectively," said Zuckerberg. "The bottom line is each of those (sites) is doing well with a different model."
While Facebook's revenues – which are undisclosed but set to rise more than 70% this year – are currently generated mostly by advertising, Zuckerberg said over time he hoped to have many more ways of making money from users including micro-payments.
DST's $200m investment in Facebook's preferred stock will give it a 1.96% stake but no board representation. The company was one of a number of potential investors to have approached Facebook over the past few months, but the valuation placed on the social networking site by the Russian group is rumoured to have been the highest of the lot.
There has also been a lot of speculation recently that Facebook, already one of the most expensive start-ups in history, is working towards a stockmarket flotation as early as next year.
But Zuckerberg shows no sign of wanting to rush into the public markets. "For a lot of start-ups you get the feeling that the IPO (initial public offering) is really the end goal and that is not really the case for us.
"We view that as one milestone along the way and as such it is not something that we are really rushing towards, it is something that we will do when we are ready for it, and that we do not see happening on the immediate horizon."
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