Twitter, which just recently turned down a half billion dollar acquisition offer from Facebook (albeit to be paid mostly with Facebook stock), is dipping back into the venture capital market, we’ve heard from a source with knowledge of the deal. They’ve signed a term sheet with at least one venture fund to raise a new round at a $250 million valuation. We are still gathering information on how much they’re raising and from whom.
It’s likely they’ll raise more than the $20 million in capital they’ve taken in over two previous rounds. Their last round, raised in June 2008, was a $15 million raise from new investors Spark Capital and Bezos Expeditions. Union Square Ventures and Digital Garage increased their previous investment.
Rumor is Twitter hit up more than a few venture firms to pitch the $250 million valuation, and got more than one “no.” But someone’s bit, perhaps encouraged by Twitter’s breakneck growth and the interest from Facebook. That means Twitter gets a new cash injection and time to figure out its business model at an even more leisurely pace.
Update: We’ve heard from two sources the venture firm that signed the term sheet is IVP.
It is very good news and this could be the start of a new change … congratulations
Twitter is the way of the future, people collaborating with one another across the globe.
CONGRATS ! ! !
Yes Great News Indeed..I think controversies like password hack of Obama, Spears etc..has also helped twitter establish its feet that a company is ready to fund a whooping quarter billion dollars..Wow!
Anyone questioning Twitter’s business model needs to remember that in order to become instantly profitable all they have to do are two things:
#1 – Integrate search.twitter.com into the main site
#2 – Partner with Google and show ads down the right side of searches/tweets
A lot of people say Twitter is a solution to a problem that doesn’t exist but I disagree – someone came up with the analogy that Twitter is currently how Google was when it was known as “Backrub” – a brilliant idea with no way to monetize it.
Also remember that VC’s expect 1 in 20 investments to cover their losses from the other 19, and my bet is Twitter will more than cover that – I’d say several thousand times over if it is ever acquired.
Think they haven’t thought of that? Naaa. That’s small potatoes. Here’s how they make a serious Google-like cash:
- Charge a fee to post http links in tweets.
See, Twitter is a giant marketing platform. That’s it value.
I think I’ll do a blog post about it.
I agree with your assessment Mitchell. I think it has a lot of potential. It would be a good strategic buy for Google.
That’s a lot of cash! I like Twitter as much as the next guy but what sort of things are they going to sell or offer as a service?
I thought he said he didn’t know how much cash was being raised…$250M is the valuation.
not sure i understand your question/statement? valuation definitely is not equal to cash being raised.
assume the 250M is a post number. though anyway you slice it, that’s a hefty valuation (when bounced against revenue or profits).
Glad for them
I love twitter and all… have faith in that… but when are they going to have a business model?
In a down economy wouldn’t you think they would start thinking about that… quite honestly I really think these high priced valuations lazy, but im not a professional so don’t bash me over it :) lol.
Forget bashing you, I agree 100%. The huge majority of social websites have a hard time making money and Twitter hasn’t even tried to make money yet. Throwing around those kind of dollars just seems crazy.
Why/how are they burning thru’ so much money?
I am with Andrew, how could you possibly need 20M to run Twitter? How many employees do they have?
Raising 20M?
Jeez… Someone is buying a whole lot of Aeron chairs…
Kidding.
Mostly.
It’s the Skype of the year!
Not sure, Skype had a revenue model. Twitter is interesting though.
“..figure out its business model at an even more leisurely pace.” You’ve nailed it for me!! Long gone are the days of generating sales and managing cash flow. I think many start-ups see acquiring V.C. funding as making a sale.
LOL!
Andrew: Just because they raised more money doesn’t mean they’ve burned through what they had. ;)
That’s great for them. As far as their business model goes, I know the company I work for along with numerous others would have no problem paying a monthly fee for professional services. Similar to the LinkedIn Pro accounts.
i get alot of spammy members following me. you know the tinyurl gang. 250 million for listening in on the writing on a wall?
http://www.vato...s-about-twitter
hopefully they will come up with a “truly unique” strategic custom social offering to keep users glued to the site for one reason or another. i am a businessman that has yet to get any truly productive work done at twitr.
But damned if you don’t keep trying!
That’s super good news….
I was wondering…
Where do companies (like Twitter) find the Venture
Capital Potential Contacts…
Is there a Directory of them somewhere..??
Forum ?? Board ??
Twitter DM or eMail w/resonse welcome…
~Patricia Kaehler
.
hey – i think you could probably start with http://www.thefunded.com. I haven’t really used it myself, but think you’ll probably find good contacts there.
cheers,
greg
Some additional time to tune their real business model (maybe around their API)… because I can’t believe they’re going to bet on services such as “Suggested People to Follow” even with a huge fee from each to get some cash back.
maybe time for a twitter store like apple .. or charge those API request ….
wow that’s insane !!! What’s their business model ??? How they will make money…. unless this is donation lool
**** To twitter: I hope you won’t do a YouTube of yourself *****
This is beyond insane. It makes the antics of Bernie Madoff look like childs play compared to what these VCs are doing. It was impossible that Twitter would ever justify the original $20M that was pumped into them. Sure, they’ve bought themselves some time to find a business model, but they’ve also increased the amount of revenue they have to produce by an order of magnitude.
There’s nothing to figure out for the business model. Have you used Twitter search? Great. Now look at what Google did with their search and apply it to Twitter search. Hello business model!
I think they should think something else …twitter search is not google search.. you don’t expect to do the samething….
Ehh… sorry to state the obvious, but who uses Twitter to search for anything? Google ads on search work because you go to Google when you are looking for something. You don’t go to Twitter to search for things… except for you apparently.
Actually, I do. Not usually, not nearly as much as I use Google, but I’ve used Twitter search when I needed an answer to something recent – too recent for Google to have the answer. I actually wrote a blog entry about it late last year – http://www.dani...-google-killer/ – describing how I was looking for an answer to an iTunes 8 question on the day of release. Google didn’t have the answer. Twitter did.
Twitter Search is getting increasingly important, especially when it comes to breaking news. Google is good for finding documents of the past, and Twitter is getting better at finding reactions from the present.
Indeed, even though the tool is called “Twitter Search”, the application is alerting. And that’s certainly a place where Twitter could try to follow the AdWords model.
A lot of people don’t even know twitter search exists though.
There is no search box on there main page (which you think would be a given) and no adverts for it.
So any potential business model there is pretty much non-existant
Good point, Holden: many do not know search is available. But, this next year, search.twitter.com will be incorporated into Twitter. Keep watching that “Find People” tag become just “Find.”
Questions for me:
1) when will Twitter charge corporations for accounts and 2) when will we start seeing labeled ads in our content streams and 3) is there a third I haven’t considered?
“Hi, we’re Twitter. Give us $20 million please.”
“Hi, I’m a VC. I have $20 million to give you, but I’d be insane to give it to you when you’re clearly not making any money and seem to have no prospects for earning my investment back”.
“Of course – well, here’s our business plan. Please don’t publicize it, all the comments on sites like TechCrunch, all those people speculating, is doing wonders for our branding.”
So true.
“Of course – well, here’s our business plan. Please don’t publicize it, we know it’s weak, but we need all the comments on sites like TechCrunch, with all those people speculating someone is sure to post a viable business model for us.”
haha, you two guys have the best answers here for sure :) I wonder if ev@ is actually reading this :)
Your previous funding number is off by millions of dollars according to more factual Reg-D filings.
No doubt,Twitter’s the future billionaire.One of the best tech platform.Best tech search(not Google and Yahoo!).
if digg couldnt get 200 million i doubt twitter can. i dont see google buying them for that price maybe yahoo or microsoft but not google.
That means that each person on Twitter (if the number of six million registered is right) is worth about $42. Hey, @ev, I want a commission! :-)
Actually, @ev should be asking you to pay him!
If it wasn’t for you, twitter would have been able to make do with a standard server.
Now they have to go in for funding so that they keep up with ur followers and tweets :P :P
The costs are offset by how many people I’ve brought into Twitter over the years. We’ll call it even. :-)
And given there are 1.1 billion tweets or so thus far, each one has been worth approximately 20 cents. Or as one commenter stated… their 2 cents are worth 20. Nice investment.
Scoble: A bank makes about $35 to $40/account /year.
Normally banks have profitable business models (until 2008).
Still Twitter seems way over valued or they should be into financial markets like trading CDO’s?
$42/user! this is much bigger than the old .com days.
I’m going to guess it’s mainly Charles River Ventures, adding to their existing stake. They always seem to be involved in the massively overpriced rounds (Geni, Eons, etc).
Maybe this will allow them to open up the firehose more without getting throttled.
15 million in less than a year, wow!
That Jaiku source code is looking mighty good right now.
I really feel Twitter would have done well with the Facebook stock.
Facebook IS the equivalent to social networking to what Microsoft were to software companies in the 90’s, meaning:
Every time you type in the top of your profile “YOURNAME is “watching the Super Bowl WHOOHOOO”, isn’t this Twitter? I mean it could be more or less if and when they extend it to 140 characters.
I really hope these guys well and find some more great ideas to add to the Twitter infrastructure.
I think there’s a lot of value to a service like Twitter with the overwhelming volume of users and daily usage. But it’s hard to imagine what the business model would be. My speculation has been that they’ll eventually be acquired and become a part of another prominent social network, like Facebook for example.
Can they spend some of that new $$$ on getting us OAuth?
@allison davis, does your company use LinkedIn Pro? Do you/anyone have an idea what percent of LinkedIn accounts are paying?
love twitter.. yay
Great news for Ev, Biz, Jack, etc. Twitter is in the process of fundamentally changing the way in which large numbers of people find, communicate and interact on the web. A solid business/revenue model will eventually be rolled out this year, and the subsequent round of funding should put their post-money valuation at that time in the $1 – $2 Billion range.
Congrats on the $$.
I really hope Twitter takes steps to encourage more value-creating user behavior. LinkedIn learned from early mistakes, and now I see noticeably less link spamming than a year ago.
In particular, LinkedIn no longer lets you sort by the number of connections; it no longer shows a person’s number of connections prominently; and it simply reports that a person has 500+ connections rather than precise numbers above 500. The net effect of these changes is to discourage frivolous link collection.
Twitter, unfortunately, is still in early days where many people are obsessed with accumulating large numbers of followers. People like Loic Le Meur and Michael Arrington encourage this behavior by arguing that a person’s number of followers is a useful measure of their authority or influence.
I’ve proposed an alternative measure of influence, modeled on Google’s Page Rank. It might not be the perfect measure, but at least its use would encourage value-creating user behavior because it encapsulates the reality of attention scarcity.
For more details:
http://thenoisy...og-to-pagerank/
Just what exactly is the problem you see with “frivolous link collection”? Personally I don’t see how it can matter how or why someone acquires followers, how many they have, or whether or not they are allowed to display that number.
I’m having trouble understanding how Twitter has almost burned through $20M in funding. What the are they spending on? There has been no material improvement in twitter for a long time.
I’m betting that any VC that funds at a $250M valuation will only do so on condition that seasoned mgt is brought in…
I don’t know how anyone could give them more money after seeing what little they did with the last round. In my opinion, Twitter has made backwards progress since last raising money. Yet, 3rd parties have been doing all the things Twitter should have been.
Too bad about them turning down Facebook — I like Twitter, but I think it would be ideal as part of Facebook.
twitter compels towards idiocy… if this is this the best you people can do you deserve your economy.
This proves that Web 2.0 is still here, and that it should not be confused with the current economic downturn.
This is great news. A valuation in the area of 200+ million is believable. They will most likely get a few investors to bit based upon the growth statitics and engagement numbers.
We hear that twitter search advertising is also coming to the homepage in about 10 days. http://www.twit...rch-advertising
I did a few mockups of what the advertising might look like on twitter here over a week ago.
They have many opportunities to monetize and i fully detail these ideas here. http://www.twit...asion-has-begun
I wish them well and hope they get additional funding. People need to understand twitter is much more than a social network. It is a communication CHANNEL.
Cheers!
agree with Julie that its changing how people communicate – and with Daniel and Brandon re: search – the first “news” i saw on the Hudson plane crash and Oakland protests/riots was all twitter based. (news sites lagged, twitter and flickr were all up in it!)
twitter has a unique value to customers that fb and linkedin are almost designed to prevent. far more democratic- you don’t have to know someone to follow them. (clearly there is downside to this w/ all the spammy people) but the upside is access.
from the bus model standpoint, they have 2 value centers – the network of users (specifically links between them) and the content – whats said and what’s shared. yes 3rd party apps offer better ways to interact with it, but twitter owns the “it”. search monetization is compelling – if it can launch w.out disrupting the user experience ( and extend into the 3rd arty apps) then it’s promising. otherwise i’d expect something more data mining like to surface
http://twitter.com/nimbuzz
Like many, I can’t help but wonder as to what are the future plans for Twitter that would require so much money. I hope they will act soon as their competitors, like Plurk, are fast catching up. Although I must admit that Twitter’s search feature is very good compared to its competitors and very useful when capturing buzz info.
I’m amazed idiots are still investing in a fluffy company with no business model. A time waster web app. with $250 million valuation? Wow…I got a pet rock I’d like to sell you!
I think Twitter is just starting to hit it’s stride, recent growth has been phenomenal and more public organisations as well as companies are starting to use it as a quick alert system, PR tool and CRM.
Twitter has done well to build such a thriving user base and it has enthused a lot of third parties to create APIs some of which are frivolous but some are quite useful.
However, they don’t seem to be heading towards becoming self sufficient and excuse me for saying it, profitable, like a real business. When companies raise money too easily they can become lazy about being efficient and profitable. Hence some of the surprise that they got through their last round of funding so quickly does not surprise me.
Too many new technology companies seem to have as their primary goal; to get venture capital and after that – to get more until they make the big killing – selling the company to an “investor”.
If you become popular enough there always seems to be some big corporation willing to spend big bucks to grab more “eyeballs” but they often don’t know what to do with them when they get them. Look at how many companies Google purchased that they are now closing down or casting adrift (e.g. Jaiku) and there are a lot of others that have closed down recently, been sold and downsized (e.g. Live Journal) or face difficult times ahead and trouble getting more funding.
Twitter must use the money it gets this time wisely or it may find the next round won’t be so easy to get and after the financial crisis there may not be any corporate suckers left to buy it either.
For a C round at a top-tier startup like this, they probably won’t want to give away more than 10% (probably 5% if they know what they’re doing) – their B round was already 15M on top of 80M (i.e. 12%), if my memory is correct. This means if they’re targeting a $250M valuation they’re only looking to raise $12 to $25M in cash.
They have a small employee base so most of their costs must be in the variable costs of paying for servers and SMS fees, which is scaling with traffic. Their traffic ramp is exponential, so it would imply that another $25M will last approximately only as long as the period of time between their first two rounds – i.e. ~1 year each – thus giving them just one more year to figure out a sustainable business model if they close this round.
That sounds like it’s cutting it close, since no one really seems to have any good ideas on how to do it yet – so they basically have to (1) come up with a brilliant idea and (2) implement it at scale, all in the next year – and that’s if they successfully close this round. I’ll bet they are really sweating over there.
Sorry to say, but why is Twitter needin’ to be raisin’ the capital in the first place? They’ve established penetration beyond the Geek-set. I mean if they can penetrate into the Iowa frat crowd, they should have figured a way to properly have monetized they’re product by now.
Twitter rocks, and Techcrunch is benefiting ….
twitter is worth between a half billion to a billion today, the 250 million number is suprisingly low
Apparently the marketplace does not agree with you that twitter is worth $500M to $1B.
The marketplace thinks twitter is worth $250M.
Based on what, your expert evaluation? Explain to the rest of us, where you derived those numbers from.
It`s definately good for Twitter, fresh money – fresh ideas. Hope to see them soon. Good luck!
They are rapidly pricing themselves out of an exit.
To all those what are asking what twitter spending all the money on, the answer is paying for SMS termination.
Twitter is not a tier 1 aggregator, that means they have a deal with someone like mBlox, simplewire or OpenMarket who have direct carrier connectivity.
250 ,- mio. Is fine. We at http://www.Spirofrog.de are willing to pay for a company account!
We use it every day http://www.twit...r.com/spirofrog
Try Yammer.com you can a corp account and security
“Twitter gets a new cash injection and time to figure out its business model at an even more leisurely pace.” >> Sure, but Twitter also commit to an even bigger exit. I’m not so sure that these last investors will get 10x returns from the investment. The early ones will – maybe even more.
Well I liked the fact that twitter has raised more funds,I hope these would be utilized to make some much needed improvements to web-based twitter.I have mentioned the same in my post as a feature wishlist: http://www.abhi...better-twitter/
twitter is at least the core news src for humanity. mike this site is painful on a mobile …
I love that I am worth $42, I feel like I have made it :)
It’s potential is enormous.!
As a social tool I think it still has some work… as an online app its doing wonders!
Although, for it to become truley embedded into cultural values it needs to focus more on “integration”.
$500,000,000
three dudes turned down half a billion for their new start up?
Big mistake, they must be sniffing glue!
“They don’t even had a Business Modell”
Okay, but it isn’t so difficult as many of you guys think. Twitter Advertising starts in 10 days, but I didn’t even thought so far, on my blog I mentioned 3 way to monetarize slowly: http://sandrostark.de
1. Pro Account with twitpic and Twitvideo
2. In-Stream, Keyword sensitive Feed advertising
3. Pro Account with 160 characters ;)