Because Greylock led a group that provided the $27.5M worth of financing. Greylock received 1.5% but the other firms including Meritech Capital Partners, the Founders Fund and Accel also received shares in the company. In total, FB gave around 5% of the firm for the 27.5M in financing.

Greylock overpaid based on the valuation at that time?

I'm doing a research paper on Facebook. In 2006, Greylock Partners bought a 1.5% stake in Facebook for $27.5million. If you take $27,500,000 divided by 0.015, you should get the overall valuation. That math gives me a little more than $1.8billion. This would make sense because Zuckerberg asked Yahoo! for $2 billion in late 2006 however just about everywhere I look, it says Facebook's valuation at the time was $500 million, give or take.

What am I missing? Why do I estimate nearly 4 times higher?