Quora, a Palo Alto-based knowledge (read: Q&A) community has raised a whopping $50 million in Series B funding from co-founder Adam D’Angelo along with Facebook early funder Peter Thiel, Northbridge Ventures and Matrix Ventures. D’Angelo, who was chief technology officer of Facebook, has put $20 million of his own money (big props for that) in Quora while others chipped in the rest.  D’Angelo co-founded the company with Charlie Cheever in 2009 and currently has about 30 employees.

The company’s valuation is said to be $400 million, which only adds to the hype around the company. About a year ago, I had heard the company was getting investment interest at valuations in excess of $300 million. The company has thus far raised $61 million in total. Surprisingly, in the most recent announcement, there was no mention of previous investor Matt Cohler of Benchmark Capital, another early Facebook employee. (Matt Cohler emailed and let me know that Benchmark did indeed participate in the round.)

And what is the company going to do with this much cash? Well, grow its team, build out its infrastructure and do stuff most normal companies do. On Quora, D’Angelo writes:

We intend to use some of this funding as a cushion in case of macroeconomic changes. More than half our series A funds from two years ago are actually still in our bank account today. We could have waited longer to raise this round, but we wanted to extend our runway. That lets us keep our focus on long-term growth and quality, and lets us avoid making short term tradeoffs like many other companies.

And then there is some laughable explanation that they will have huge Amazon Web Services bills so they need the money.

We project a large portion of this money to go to EC2 and other AWS bills. It might be replaced by whatever the most appropriate place for us to run our infrastructure is in the future but as of today it’s looking like EC2.

Appdata puts its usage through Facebook Connect at about 180,000 monthly-active users and about 20,000 daily active users. I am sure they get a lot of traffic from the Web, but it can’t be enough to justify the nosebleed valuation.

The question here is why does this service merit such a high valuation? I mean, its traffic at best can be described as middling. There is lot more fly-by traffic from search engines, but is that enough to justify their valuation? Its mobile applications is meh and more of an afterthought. The design of the service is forgettable. Some members of the team have left to work for other companies such as Pinterest and Facebook. The only thing that is actually good about the service is some of the content contributions and the discovery of content.

Now in comparison, Instagram was a startup that snagged $50 million on $500 million (rumored) valuation before being acquired by Facebook. It had great mobile expertise. It had more than 30 million members and it had a very engaged daily audience. It was content that appealed to many people and it was growing so quickly that Facebook had to buy it.

When you compare Quora’s lack of traction with another Q&A community, Stack Exchange, which liberally shares its usage data, you are left scratching your head, asking yourself, what am I missing? Of course, there is the timing. Facebook is going public soon and that essentially raises the value of anything related to Facebook, merited or not. The way I see it, it is a deal that is being done because it can be done. Or as The Wall Street Journal says, it is Facebook mafia at work.

Updated on May 16, at 8.22 am with  a statement from Matt Cohler, who intimated that Benchmark Capital did indeed participate in this round of funding.