The real power behind Facebook

Mark Zuckerberg may be its public face, but a coterie of early investors will be the real winners from a $100bn float

They are an unlikely set of friends. Yet the Russian physicist, Hong Kong tycoon, Silicon Valley billionaire and Wall Street veteran have been getting on famously since they all became members of the same exclusive club.

As Facebook prepares for a $100bn (£64bn) stock market flotation, a select band have already been given the chance to invest. In fact, they may be considering selling shares just as everyone else gets the chance to buy them.

Since Mark Zuckerberg set up the social media phenomenon in 2004, its ascent has been swift. People scoffed when Facebook's notional value reached $50 billion. When it debuts on Nasdaq, expected this spring after an intention to float announcement that could come in the next few days, it should be worth twice that amount. The only way its value has kept rising is by letting outsiders buy its stock. Facebook has needed little capital to fund its expansion.

But by selling stakes to investors from Hong Kong, Russia and in Silicon Valley, Facebook has been able to alleviate the pressure from long-serving employees keen to cash in. Certainly Mr Zuckerberg is one of those founders in no rush to collect. In 2006, he turned down a $1bn offer from Yahoo, a web firm whose star has tumbled as Facebook's has risen. He will be rewarded with a paper fortune worth $25bn.

Investors lucky enough to be invited into the inner circle also had to keep the faith that the company wasn't just an internet flash in the pan.

The statistics are certainly impressive. Facebook has more than 800 million active users, defined as those that check in at least once a month. Most log in more frequently, with half going on daily. There are over 30 million users in Britain.

If you believe the hype, the new wave of hot internet stocks to brave the public gaze in the past year, such as professional networking website Linkedin, have merely been the warm-up acts. That, at least, is what Facebook's early backers hope.

Four winners reaping the rewards

Yuri Milner

Yuri Milner, 50, is the shaven-headed Russian who attracted derision when his investment vehicle, Digital Sky Technologies (DST), sank $200m (£127m) into Facebook three years ago. DST's total outlay on Facebook has been more than $1bn. His 10 per cent stake will be worth close to $10bn when it floats. He tuned up his skills at America's Wharton School of Business. Returning to Russia, he set up a fund which backed what became Mail.ru, the country's largest email provider.

Li Ka-shing

The business activities of Li Ka-shing, 83, have never lacked vision. Hutchison Whampoa, his conglomerate, has been built on bricks not clicks, with his charitable foundation mainly responsible for internet investments. Hutch has become one of the largest foreign investors in Britain, owning the port of Felixstowe. His estimated 0.75 per cent stake in Facebook has risen in value sixfold, turning a $120m outlay into a paper fortune worth $750m.

Peter Thiel

Born in Germany but raised in California, Peter Thiel, 44, has become one of the best-connected business angels in Silicon Valley. He made his first fortune as co-founder and chairman of PayPal, the online payments firm that was sold to auctioneer eBay for $1.5bn four years after it was set up. Thiel became the first significant outside investor in Facebook, initially loaning $500,000 to Mark Zuckerberg that converted into a 10 per cent stake and was diluted to a reported 3 per cent. That still works out at a value of $3bn, a 6,000-fold return.

Steve Ballmer

It could have been the most profitable decision that Steve Ballmer has taken in 12 years as the chief executive of Microsoft. The computing giant paid $240m for a 1.6 per cent stake in Facebook in 2007, striking a deal to sell advertising outside the US for the company at the same time. That investment is worth $1.6bn today, a sevenfold increase. For Ballmer, 55, it shows he could keep up with the internet kids, even in a small way. Last year he scaled up Microsoft's internet and mobile activities at a stroke with an $8.5bn deal to takeover Skype, the internet telephony service that was once part of eBay.

Arts and Entertainment
TVShow's twee, safe facade smashed by ice cream melting scandal
News
newsVideo for No campaign was meant to get women voting
Sport
Wayne Rooney talks to the media during a press conference
sport
Arts and Entertainment
tv
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
News
i100
News
Down time: an employee of Google uses the slide to get to the canteen
scienceBosses are inventing surprising ways of making us work harder
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

PMO Analyst - Risk - Banking - London - £350-£400

£350 - £400 per day: Orgtel: PMO Analyst - Risk - Banking - London - £350 - £4...

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?