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In the book “Founders at Work”, there’s an interesting interview during which Paul Graham is asked by Jessica Livingston about what worried him the most while at Viaweb. He states his biggest concern was “Running out of money. That was the big worry. Running out of money and having to go and get more funding. Getting funding is very painful. It’s so much harder than actually making a successful company.”
For Facebook that appears to be the case as well as the company has begun considering new term sheets according to Techcrunch and Venturebeat. The meat of the story is that Facebook received an offer at somewhere between $2 and $4 billion. The rest of the story is essentially rehashed news which is that the company is on track to generate $400 to $500 million in revenue this year.
While both reports state that the company has around $200 million in the bank, the site’s costs are obviously growing rapidly as they are adding almost a million users a day, expecting to surpass 215 million users tomorrow based on our best estimates. Facebook is also seeing significant growth in advertising but it’s not growing as quickly as its user base.
While some less informed journalists may question Facebook’s viability as a sustainable business, most industry insiders have no question that Facebook will generate a substantial business over the coming years. The only question is how fast they will grow and if they will reach profitability quick enough that they don’t come close to running out of cash in the bank.
It’s going to be a close call as to whether or not the company files to go public or accepts another round of funding. Whichever route the company chooses it will most definitely be an interesting few months ahead. I would argue that the company needs some serious upgrades to their advertising platform before it can truly become a breakthrough business model but despite the lack of upgrades, growth appears to be significant.
While Facebook may be looking for new funding opportunities, the company is anything but desperate at this point.
Facebook has been a revolution for the past few years. But the way the economy is going, the claws of recessions are closing in. It might be predicted that only big G funded Orkut can survive the economic turmoil. No doubt we still have faith in Facebook. But the social networking sites might just be in a shock when people are not interested in making friends as they are haunted by thoughts of making sustainable money in times of economic slowdown.
J Kingston
Facebook has every chance to work- but I think its a bit mired in venture capitalists right now. Having and IPO and getting it all behind it might be the best for it- although it is admittedly a hard time to do it, and the “killer model” has not emerged as to how to get the level of profitability they should have given their position.