Pinterest, a site for sharing and discovering images, has sold $200 million in stock to new and current investors for less than 10 percent of the company, valuing it at $2.5 billion, the company just confirmed to Business Insider.
The Wall Street Journal first reported rumors of a new financing earlier this month, placing the valuation between $2 billion and $2.5 billion. AllThingsD's Kara Swisher reported the financing earlier on Wednesday.
"Our focus is on helping millions of people discover things they love and get inspiration to go do those things in their life,” Pinterest cofounder and CEO Ben Silbermann said in a statement. "This investment gives us more resources to help realize that vision."
Valiant Capital Management, a hedge fund which owns large stakes in Apple and Google, is leading the round. Valiant founder Christopher Hansen was an early investor in Facebook as well.
All of Pinterest's current investors, who include venture-capital firm Andreessen Horowitz, are back in; this is the company's largest financing yet. Pinterest has raised a total of $339.5 million to date. Its last round came in May, when investors put $100 million into the company at a $1.5 billion valuation.
The funding represents a growing trend for fast-growing tech companies to add private-equity investors into the mix, as their valuations soar past the levels where venture-capital firms, traditional startup backers, feel that they can comfortably make the kind of returns they need.
By signing up private-equity investors now, Pinterest boosts its prospects of eventually going public, by having friendly, long-term investors in place at the time of an IPO.
Yet an IPO seems far off for Pinterest, which has no real financials to speak of—just a history of amazing runaway growth after a slow start.
Last month, Pinterest had 28 million monthly unique visitors according to ComScore. Sources say its traffic is growing "hundreds of percent[age points] every year." Last March, the site had about 17 million monthly unique visitors. An investor told us last year they personally thought Pinterest was worth $5 billion back then.
Yet Pinterest still isn't generating revenue. It hired Tim Kendall, a key architect of Facebook's monetization strategy, just under a year ago. And Pinterest CEO Ben Silbermann has given indications that he is thinking very seriously about how to make money from the images and links its users post.
If you're not sure why investors are stumbling all over themselves to pour money into an image-discovery site, here are a few reasons:
- Investors think Pinterest could be the next Facebook. They see it as an entirely new platform, especially for e-commerce and advertisers. It drove more traffic to sites in February than Twitter, YouTube, LinkedIn, and Google+ combined.
- Growth isn't slowing. Far from it.
- The path to monetization is clear. "It's so commerce- and goods-driven," says one investor. This Pinterest backer acknowledged that pictures of cupcakes and sunsets are hard to monetize, but points out that many of the photos come directly from stores like Pottery Barn. Even taking a cut of referral traffic could yield significant revenue.
- Copyright is a non-issue. Pinterest has drawn criticism for allowing users to post copyrighted photos. Investors think Pinterest is a strong enough company that it will figure out any legal issues it faces, and it has hired legal experts from Google, whose YouTube site dealt with similar issues early on.
Update: An earlier version of the story misstated the total Pinterest had raised and the valuation of its previous round.
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