Assignment 2: The Facebook Deal Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Assignment 2: The Facebook Deal Case Solution

1. Briefly describe the type of financing that was being used here and why it was used for each round of funding.

Facebook uses equity funding, as it is used to increase funds in order to run the operations of the company in return of a certain percentage of shares in the company. The Equity funding has several stages of funding;the first stage of the equity financing is followed by the Series A, B, C and so on according to the need of the funds by the company. The fund raisers in the different series are either angel investors or the Venture Capital firms. Lastly, the equity financing ends with an IPO.

Facebook has implemented the complete cycle of the equity financing. However, the funds collected by Facebook in the given timeline have started from the Series A. Facebook has raised funds from Angel investors and Venture Capitals firms. At first, Facebook raised funds from the Accel Partners in Series A. Series A is known as the first stage of funding, which is revealed during the initial stages of a company.

The third round of investment from Meritech Capital Partners and Grey lock Partners is known as Series B. The second and third stage of fund raising in equity financing are referred to Series B as the company, in this stage, usually achieves its milestones and proves itself as a stabilized and strong company. This stage is known as the venture stage as two big venture capitals get involved in the fund raising. The funds from venture capital ensure the viability of the company.

Moreover, the equity stage of funding is taken into place by the investment of $240 million of Microsoft Corporation, which is known as will be referred as Series C. This stage is known as Series C due to the entrance of private equity companies in Facebook. The funds raised in this stage are used for achieving future objectives and they require the mentor ship and collaboration of private equity companies in order to grow.

Lastly, the stage which comprises the funds of $200 million from Digital Sky Technologies Limited (DST)is known as expansion capital stage. The reason for this phase named as the expansion capital as the company is referred as the mature company and need to expand the capital of the company. However, investment from the DST is known as equity preferred investment which does not require seats for the DST in the board of directors.

2. Speculate as to what the money was used for after each successive round of financing. (Don’t forget, Facebook was raising money to finance certain projects.)

The money raised in the first stage is usually in cash, the reason of fund raising is to support the operations of the company at its initial stages for the development of the business. The cash is used for multiple purposes throughout the product upgrade, marketing and hiring processes.

In the third stage, the investment from the Meritech Capital Partners and Grey lock Partners was used in order to smoothly run the operations of the company. Facebook acquired the networking of the Venture Capitals for their ease in making future decisions.

The funds from Microsoft Corporation were used in order to meet the future milestones. Moreover, the company gained strategic alliance with Microsoft. The funds were used in order to restructure the operations and to expand the capital of the company.At the end, Facebook reached its maturity stage and was more likely to be funded by any private equity investment rather than the venture capitals....................

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