Inside Facebook

On the heels of rumors of a possible investment this weekend, Facebook has just announced this morning that it has indeed raised a $200 million round of financing from Russian Internet investment firm Digital Sky Technologies. DST will receive 1.96% equity stake in the company in the form of preferred stock at a valuation of $10 billion.

In addition, DST plans to purchase “at least” $100 million of Facebook common stock from existing stockholders that would give current and former employees a chance to cash out some of their vested shares. DST will not get a seat on the Facebook board of directors.

“This investment demonstrates Facebook’s ongoing success at creating a global network for people to share and connect,” says Facebook CEO Mark Zuckerberg.  “We’ve worked hard to bring more than 200 million people – 70 percent outside of the U.S. – onto Facebook to share with friends, family and co-workers.  A number of firms approached us, but DST stood out because of the global perspective they bring – backed up by the impressive growth and financial achievements of their internet investments.  We’re looking forward to working with the DST team.”

DST is a large Internet holding company in Russia and eastern Europe. The company estimates that its portfolio companies, including Mail.ru, Forticom and vKontakte, cover 70% of all page views in the Russian speaking Internet.

DST CEO Yuri Milner was previously CEO of Mail.ru, the most highly-trafficked website in Russia. Milner’s partners are Gregory Finger, previously head of the Moscow office of NCH, a large hedge fund, and Alexander Tamas, previously co-head of internet and software coverage in EMEA for Goldman Sachs.

“Our investment experience in other regions reveals the tremendous value social networking companies create as they redefine how people communicate and interact,” said Yuri Milner, chief executive of DST.  “By every important metric – user growth and engagement, technological innovation and financial performance – Facebook is on a similar trajectory, though on a much more global scale.  We’re delighted to invest in Facebook, Mark and his management team as they make the world more open and connected.”

Facebook CEO Mark Zuckerberg has been characterizing recent financing rumors as preliminary in public comments as recently as last week, when he told the Reuters Global Technology Summit, “If there’s an investment to be done on very good terms, we will consider it if for no other reason than to have more buffer if we want to do something in the future.”

The $200 million investment from DST brings Facebook’s total debt and equity financing raised to date to at least $640 million. In addition to the $200 million announced today, Facebook raised $240 million from Microsoft in 2007 as part of a preferred equity investment and strategic alliance that valued the company at $15 billion, $100 million investment from Chinese billionare Li Ka-Shing in early 2008, $100 million loan from TriplePoint in May 2008, and an undisclosed investment by Germany’s Samwer brothers early last year.