Please ensure Javascript is enabled for purposes of website accessibility

Facebook Is Getting Into Venture Capital

By Evan Niu, CFA – Jun 12, 2020 at 9:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investing in startups is the social-networking giant's latest method of staying ahead of the curve.

It's not uncommon for tech companies with deep pockets to get into early-stage venture capital investing. Alphabet's Google Ventures, Salesforce Ventures, and Intel Capital are among the most prominent and active corporate venture capital arms within the tech sector. Even relatively newer companies like Slack have established similar funds to invest in start-ups.

Facebook (META -0.54%) is now reportedly exploring a push into venture capital. It's surprising that it's taken the social-networking behemoth this long.

Mark Zuckerberg speaking on a stage

CEO Mark Zuckerberg. Image source: Facebook.

Investing in experimentation

Axios reports that Facebook has been scooping up tech investing talent to lead a new fund that will be part of its New Product Experimentation (NPE) team. Facebook had created the NPE division last summer to test out ideas for new products and services that could potentially compete with just about everyone. So far, the team has released a handful of new apps, most recently including CatchUp (audio calling) and Kit (smartwatch messaging).

In a recent job posting that has since been filled, Facebook said it was looking for someone with a decade of experience in the tech industry who will be tasked with managing a multimillion-dollar fund that would invest in start-ups, according to the report. It's unclear who Facebook has hired or how much money will be in the fund.

Facebook had over $60 billion in cash on the balance sheet at the end of the first quarter, although some of that cash has since been earmarked for the company's massive $5.7 billion investment in India's Jio that was announced after the quarter ended.

Corporate-venture divisions typically fall into one of two categories: general purpose investing (like Google Ventures) or incubating start-ups that support the company's ecosystem (like Slack Fund). Facebook's new initiative appears to be the latter. The company had previously set up fbFund in 2007, a $10 million fund that provided micro-seed capital to Facebook developers.

In a statement to the outlet, Facebook said, "In the same spirit that the New Product Experimentation (NPE) group is charged with product experimentation, the team is also experimenting with ways to support external start-ups, including with capital."

Staying ahead of the curve

It's also worth noting that Facebook is always on the lookout for nascent apps or trends within social media that could become the next big hit. At times, the company has resorted to spying apps that were ostensibly offering VPN services to see what users were up to -- and the insights gleaned often shaped monumental decisions, including the acquisition of WhatsApp.

At the same time, regulators have been scrutinizing small acquisitions made over the past decade that may have been below the reporting threshold as part of broad antitrust investigations into tech companies. The concern is that large companies might acquire a small start-up that could otherwise grow to become a viable competitor.

Creating a new venture arm is yet another way that Facebook wants to stay ahead of the competition.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Facebook and The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook,, and Slack Technologies. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$135.68 (-0.54%) $0.73
Alphabet Inc. Stock Quote
Alphabet Inc.
$95.65 (-1.82%) $-1.77
Intel Corporation Stock Quote
Intel Corporation
$25.77 (-2.31%) $0.61
Salesforce, Inc. Stock Quote
Salesforce, Inc.
$143.84 (-2.02%) $-2.97
Alphabet Inc. Stock Quote
Alphabet Inc.
$96.15 (-1.98%) $-1.94
Slack Technologies, Inc. Stock Quote
Slack Technologies, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.