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Social Networking - Tuesday, May 26, 2009

Mail.ru Backer Invests $200M In Facebook

The big Memorial Day tech biz story is that a relative unknown investor, Digital Sky Technologies (DST), has ponied up $200M for a stake in Facebook that values the social networking big at $10B. The US media has focused on why Facebook took this investment and what to make of the valuation. But why would DST invest so much, and come away with no board seat?

DST has invested in Russian portal Mail.ru and boasts of the reach that its investments holds in Russia and Eastern Europe. So the Facebook investment extends the reach. Moreover, the investment helps bridge he gap to Silicon Valley so that if and when a DST portfolio company like Mail.ru faces a liquidity event, DST is a player in Silicon Valley with some clout.

To put the deal in context we think about the purchase by Russia's SUP of LiveJournal which was divested from Six Apart. Would you rather own all of LiveJournal, which has been big in Russia, or a small part of Facebook? We like Facebook's prospects better.

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