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Facebook Receives Funding Offer At $2 Billion Valuation

Facebook has been looking for a new round of funding for several months now, but it's not getting any interest at the $15 billion valuation set by Microsoft in 2007. Rather, Michael Arrington hears that the company is now hoping to attract investors at the much-reduced valuation of $4 billion. However, according to one of his sources, General Atlantic recently submitted a term sheet at "around a $2 billion" valuation.

Will Facebook accept the offer? "They may be forced to," says Arrington, who points out that due to ridiculous growth, Facebook is burning as much as $20 million a month in cash. "They likely have less than two years runway left, and possibly significantly less if they continue to add new users by the tens of millions," he says.

Arrington also points out that taking money at such a significantly reduced valuation also has its costs: "In addition to the direct dilution to stockholders from the new money, old investors at the $15 billion valuation may need to be made whole." Indeed, anti-dilution provisions usually require some sort of compensation for investors who buy in at a higher valuation, and Facebook raised $375 million at the $15 billion valuation. This might be why Facebook is having such a hard time raising new money.

Read the whole story at TechCrunch »

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