Facebook "Definitely" Raising Capital This Year; Google Considered Acquisition

Last October we wrote about how Facebook’s breakaway growth combined with a declining advertising market was forcing the company back to the capital markets.

The company has been all over the place with on record comments about fundraising since that post.

In November Founder Mark Zuckerberg firmly said “No” in response to the question ““Do you need money?”

But in December Zuckerberg told me the company was open to raising more capital, but only at the previous $15 billion valuation:

We discussed Facebook fundraising issues and valuation. He said some of the speculation was true and some wasn’t. he confirmed that Facebook’s $15 billion valuation round was still open and that CFO Gideon Yu was open to new investors at that price. But he denied that Facebook was pitching for new money at a lower valuation. “We’re not actively going around trying to raise money from a lot of different people. It’s more just a follow on to that [previous round].”

Fast forward to last month, when Facebook board member Peter Thiel told BusinessWeek the company did not need to raise any more money and had sufficient cash to continue at its current growth rate. And then yesterday BusinessWeek reported that Facebook is looking to raise new debt capital to replace a $100 million line of credit.

So Are They Raising Money Or Not?

Yes, they are.

eMarketer projects Facebook revenues of $230 million in 2009. Our sources say this is way low, and that Facebook will hit at least $300 million in 2009 revenues. But the costs of running this ginormous company are staggering. Facebook may be burning though $20 million or more per month, even on top of revenues.

The problem with Facebook’s growth is that it’s all international, and those users just aren’t as profitable to the company (see our model from last summer).

Our sources tell us that Facebook probably has around $300 million left in cash. If growth were to freeze at this point they’d have 15 months or so of runway. With their staggering growth rate, it may not last that long.

We’re hearing they plan on raising money sometime this year to give themselves enough cushion to get to an IPO, or at the very least get through the economic downturn. Our sources say they’re pitching the company at a $10 billion valuation, but would be “thrilled” with a $5 billion valuation.

Google Thinks Facebook Is Worth $2 Billion.

We’ve also heard that there have been very low level conversations between Google and Facebook around an equity investment or outright acquisition. But these conversations never made it to the senior execs at Facebook. Perhaps because Google’s internal modeling may have valued Facebook at just $2 billion. There’s no way Facebook is going to take that valuation without a fight.

So what will happen? Our guess is Facebook will take as much debt as they can to give themselves some breathing room. If revenue growth is as healthy as we’re hearing it is the company may be able to justify a higher valuation when they inevitably do take more equity funding. The big question is, what exactly will Facebook’s next valuation be?

Update: A new source now tells us that Facebook’s internal revenue projections for 2009 are over $400 million, much of which is driven by the self serve ad system. We’re also getting confirmation on Facebook’s $300 million in current cash.