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Should Facebook Venture into Venture Capital?

There comes a point in your life when you need to decide what you want to do – what you want to be.  Some people have known since they were kids, others change their mind hundreds of times.  The same goes for companies, especially the successful ones.  Facebook Inc (NASDAQ:FB) is growing up, and the company is now almost 10 years old.  It’s time to make some decisions.

Facebook Inc (NASDAQ:FB)

Facebook is still growing, boasting an addition of almost 200 million years between 2011 and 2012.  With this massive growth comes a massive bank account, which opens up options that most companies never get to consider.  One of these options is starting a venture capital fund.

Google Inc (NASDAQ:GOOG) decided to go this route back in 2009 when they launched Google Ventures, a venture capital arm of Google that invests in startups in the industries of consumer internet, software, hardware, clean-tech, bio-tech and health care.  Now, Google has a goal to invest about $100 million every year in both seed-stage and late-stage startups.  Since the creation of Google Ventures, the company has invested in hundreds of different startups and has proved the addition to be a valuable asset to the company as a whole.

Facebook has potential to start it’s own VC fund, just as Google did, and this fund will provide the company with several different opportunities that will benefit the corporation internally and externally. 

VC Fund is “an investment fund that manages money from investors seeking private equity stakes in startup and small and medium-sized enterprises with strong growth potential”.  When a company or organization starts a VC fund, the goal is that the fund will create enough high-risk/high-return opportunities so the threat of losing money is minimal.  This, of course, depends on who you EIRs are and how good they are at evaluating the potential of startups seeking investments.

This theoretical Facebook VC Fund (FBVC) could be the antidote to higher employee retention for the company.  Over the past year, Facebook lost several employees who brought a ton of value to the corporation:  A few big names being product manager Just Shaffer and engineering and product lead Greg Badros.  Also, executive Chamath Palihapitiya has been recruiting talent from Facebook to serve as EIRs for his own VC firm.  Rumor is that Shaffer is starting his own VC fund and Badros left to focus on personal investments.

Along these same lines, many Facebook alums and current employees are active in seed investing.  Hundreds of these employees have invested in seed startups on AngelList, the online startup website that lets companies promote themselves with hopes to gain funding.

It seems that Facebook talent is looking for new areas to explore, and venture capital provides them with investment opportunities they don’t get at Facebook.  If the company were to ad a corporate VC arm, this talent would have access to venture as investors while staying within the company parameters.  Facebook could also make certain employees LPs of a fund alongside the company, as opposed to Google Ventures, where Google serves as the firm’s sole LP.

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