We've been joking about the press stories covering college social networking company Facebook. It certainly looked like the company was following the office Skype System For Inflating Your Purchase Price(TM), by first getting some reporter to believe that they were actually holding out for a multi-billion dollar buyout offer, and then following that up with one of the company's existing VCs trying to justify that crazy valuation to the press as well. The whole question of $2 billion valuations seemed a bit silly -- and apparently the process didn't turn up the hoped-for sucker fast enough. Instead, the company has simply gone back to the VC trough and picked up a mere $25 million (along with the laughable claim that the company wasn't really planning to sell). It's worth noting that the original lead investor, Accel, is not the lead on this round. If they were, I doubt you would have seen them talking up the high valuation. So, here's the question: if they were trying to sell out for $2 billion (or even the $750 million that the rumor mill claims they were offered), at what valuation is the $25 million investment? You don't have to be much of a gambler to bet that it's significantly less than those numbers that were being bandied about... but the rumor mill probably didn't hurt valuation discussions with the new lead either.
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