(Bloomberg News) Facebook Inc.'s initial public offering is poised to create some 850 new millionaires, spawning a new class of angel investors looking to help other startups build on the popularity of the biggest social network.
While not all of the young and rich will plunge a portion of their wealth into emerging Web and mobile companies, investing has proved to be popular among early Facebook alumni. Instagram Inc., Spotify Ltd. and Flipboard Inc. are all backed by that group.
Even in an already frothy market, their capital and advice are in high demand because entrepreneurs need all the help they can get when it comes to reaching Facebook's 900 million users, said Aydin Senkut, an early Google Inc. executive and the founder of Felicis Ventures. Assuming Facebook holds its initial valuation for six months after the IPO, about $9 billion of restricted stock and options will be vested and available to sell by current and former employees.
"The most important thing is the experience and connections they're bringing to the table," said Senkut, who left Google to form his Palo Alto, California-based firm in 2005. "In terms of the money, certainly it will be beneficial, but we already have a lot of money."
It starts with the money. Facebook, based in Menlo Park, California, raised $16 billion in its IPO last week, valuing the social-networking site at $104 billion. That's the biggest on record for an Internet company at its debut, and more than four times Google's value when the search engine went public in 2004.
Facebook rose 0.6 percent to $38.23 at the close in New York on May 18, its first day of trading.
Millionaires In Waiting
Of Facebook's 3,700 employees, about 600 will become millionaires, according to PrivCo, a research firm that specializes in private companies' financial data. An additional 250 former employees are millionaires or soon will be, the New York-based firm estimates.
Those looking to grab an early piece of the next billion-dollar company will be jumping into an increasingly competitive market. Venture investing in the U.S. surged 25 percent last year to $29.1 billion, with $11.9 billion of that in Silicon Valley, according to the National Venture Capital Association. That doesn't include many of the seed deals that are not registered with the association.
"Add to that a whole bunch of new individuals coming in with a whole bunch of wealth that they'll deploy into the entrepreneurial community and it will make it even more competitive," said Ted Schlein, a partner at Menlo Park-based Kleiner Perkins Caufield & Byers. His venture-capital firm raised a $525 million fund last week.
Facebook Alumni