Venture Capital Investments in Social Networking

by Jonathan Parker

  • 14 Jun 2012
  • PE

The recent Facebook IPO was one of the most widely anticipated in recent years, especially among those in the venture capital industry, who were keen to observe the reception afforded to the shares of the largest social network in the world. Facebook is just one of a number of companies operating in the social networking field that have received venture capital financing. An overview of recent activity in the sector outlined below:

  • There have been over 800 private equity-backed venture capital financings announced in the social networking sector since 2010, representing an aggregate value of more than $8.3bn. Over 40% of these financings were classed as either angel/seed investments, or series A rounds, while 12% of deals fell into the series B category. Around 6% of financings have been at the series C stage, and just 4% at series D or later.
  • Since 2010, the most prevalent year for venture capital investments in social media-related companies was 2011, when over 360 financings were announced at a total value of $5.2bn. The previous year saw the announcement of around 300 financings with an aggregate value of over $2bn, while 2012 to date has seen 160 financings valued at around $1bn.
  • More than 80% of the number of social networking-related financings since 2010, and 90% of the aggregate value, has been invested in US-based companies. As a result it comes as no surprise that the most active investors in the field, based on the number of financings in which they have participated, are also US-based. These include SV Angel, Redpoint Ventures, Lerer Ventures, Union Square Ventures and 500 Startups.
  • One of the most notable financings since 2010 was a $1.5bn investment in Facebook by DST Global and Goldman Sachs, announced in January 2011. The investment was made at a valuation of $50bn, and helped to contribute to the Q1 2011 peak in quarterly aggregate value of financings. The same quarter saw the announcement of a $485mn investment in Zynga by Fidelity Investments, Kleiner Perkins Caufield & Byers, Morgan Stanley and T Rowe Price.

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