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San Francisco: News that Facebook is seeking additional funding from hedge funds and private equity groups following an investment by Microsoft this week illustrates the degree to which Mark Zuckerberg, the website's 23-year-old founder, is determined to buck convention in his quest to turn the social network into the next internet giant.
The $240 million financing round with Microsoft valued the internet upstart - which has yet to turn a profit - at a staggering $15 billion.
Facebook said its immediate plans for the cash include hiring 400 new staff, buying more computers and investing in developing a new advertising system. But the scale of the investment round, at $500 million or more, points to Facebook's ambition to join the ranks of the world's biggest internet companies.
However, some technology financiers have questioned how easy it would be to convince other backers to buy into the company at such a high valuation. "It would be the highest valuation of any private equity [deal] in history," said one Valley financier who said he had been approached by Facebook.
By shunning an IPO in favour of private financing, Zuckerberg may be seeking to emulate Google, the internet search company, which put off an IPO for several years until it had a firmly established revenue model.
During the dotcom boom, the situation was typically the reverse, with promising start-ups seeking to go public as soon as possible in order to raise money for future growth and provide liquidity for their backers.
Although Facebook's social networking technology has attracted more than 49 million active users, the company has yet to perfect its sales model.
Facebook is expected to reveal a new ad system featuring improved targeting next month. For the time being, it relies on an existing ad deal with Microsoft and an advertising system called "flyers" - which allows advertisers to target users according to their specific interests and group affiliations - for most of its sales.
For all the recent buzz and attention, some analysts have predicted that Facebook is set to bring in just $100 million-$150 million in sales this year.
The fact that Zuckerberg was able to draw such a high valuation underscores his growing power in Silicon Valley. It also demonstrates the degree to which Microsoft is desperate to hold on to its advertising relationship with Facebook after being beaten to several big internet advertising deals by its rival, Google.
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