With its $500 million infusion from Goldman Sachs and other investors, Facebook is now flush with cash, and a market value of about $50 billion, giving it the financial muscle it needs to compete with better-heeled rivals like Google.
And Facebook hopes for an even bigger advantage from the deal, the ability to delay an initial public offering. That would allow it to remain free of government regulation and from the volatility of Wall Street. It would also allow Mark Zuckerberg, the company’s chief executive, to retain near absolute control over the company he co-founded in a Harvard dorm room in 2004.
This strategy was unthinkable in Silicon Valley just a few years ago, when hundreds of start-ups with scant revenue and no profits, like Pets.com and Webvan, raced to go public, and investors eagerly lined up to buy their shares.
Lots of people would stand in line to buy shares in Facebook, but for now, only an exclusive few — wealthy clients of Goldman Sachs will be able to. On Monday, Goldman sent e-mail to certain clients, offering them the chance to invest in the company.
That offer is the latest sign of the emergence of active markets in the shares of closely held companies. Those markets are helping successful start-ups like Facebook develop the financial wherewithal to compete in the big leagues of Business. They have also become an avenue for venture capitalists and start-up employees to cash in their stock, turning many overworked engineers into instant millionaires.
And so a young mogul like Mr. Zuckerberg, the world’s youngest billionaire at age 26, can enjoy many of the benefits of going public without having to tie the knot with Wall Street. Other hot technology companies like Twitter, Zynga and Groupon are also tapping secondary markets to keep stock market investors at bay. They are in no rush to go public and no longer need the bragging rights that a stock offering used to bestow.
“This is a topsy-turvy world,” said Scott Dettmer, a founding partner of Gunderson Dettmer, a law firm that has advised venture capitalists, start-ups and entrepreneurs since the 1980s. He added that even a few years ago, “there were all sorts of business reasons to go public, but for entrepreneurs it was also a badge of honor.”
Perhaps more than any company founder, Mr. Zuckerberg, who declined to comment for this article, has frequently expressed his lack of interest in Wall Street, though Facebook is clearly not above taking its cash. He passed on opportunities to make a killing, for example, when, at age 22, he rejected billion-dollar offers for Facebook.
And Facebook hopes for an even bigger advantage from the deal, the ability to delay an initial public offering. That would allow it to remain free of government regulation and from the volatility of Wall Street. It would also allow Mark Zuckerberg, the company’s chief executive, to retain near absolute control over the company he co-founded in a Harvard dorm room in 2004.
This strategy was unthinkable in Silicon Valley just a few years ago, when hundreds of start-ups with scant revenue and no profits, like Pets.com and Webvan, raced to go public, and investors eagerly lined up to buy their shares.
Lots of people would stand in line to buy shares in Facebook, but for now, only an exclusive few — wealthy clients of Goldman Sachs will be able to. On Monday, Goldman sent e-mail to certain clients, offering them the chance to invest in the company.
That offer is the latest sign of the emergence of active markets in the shares of closely held companies. Those markets are helping successful start-ups like Facebook develop the financial wherewithal to compete in the big leagues of Business. They have also become an avenue for venture capitalists and start-up employees to cash in their stock, turning many overworked engineers into instant millionaires.
And so a young mogul like Mr. Zuckerberg, the world’s youngest billionaire at age 26, can enjoy many of the benefits of going public without having to tie the knot with Wall Street. Other hot technology companies like Twitter, Zynga and Groupon are also tapping secondary markets to keep stock market investors at bay. They are in no rush to go public and no longer need the bragging rights that a stock offering used to bestow.
“This is a topsy-turvy world,” said Scott Dettmer, a founding partner of Gunderson Dettmer, a law firm that has advised venture capitalists, start-ups and entrepreneurs since the 1980s. He added that even a few years ago, “there were all sorts of business reasons to go public, but for entrepreneurs it was also a badge of honor.”
Perhaps more than any company founder, Mr. Zuckerberg, who declined to comment for this article, has frequently expressed his lack of interest in Wall Street, though Facebook is clearly not above taking its cash. He passed on opportunities to make a killing, for example, when, at age 22, he rejected billion-dollar offers for Facebook.
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