The big news yesterday was that Twitter raised another $100 million. Today, Twitter CEO Evan Williams confirms in a blog post that the company did indeed close a new round of funding. The new investors in the round are Insight Venture Partners and T. Rowe Price. Existing investors Institutional Venture Partners, Spark Capital and Benchmark Capital also put in more money. Update: Morgan Stanley is also a new investor in this round.
Williams did not disclose the size of the round or the valuation, but as we first reported earlier this month the valuation is believed to be $1 billion.
This latest round brings the total amount raised by the company to $155 million over the past two years.
Let the idiot comments begin.
“Why are VC’s investing in a company which makes no money?”
It’s a gamble on an acquisition. Acquisition = ROI for investors. Acquisitions can occur when a company has little or no revenue.
There, there’s no need for anyone to ask.
That’s not investing that’s speculation.
Yep. Your point?
Most VCs don’t invest to simply share profits. They want an exit.
What’s the point of generating rev? It’s already exitable. Smart move of them for not doing any ads this year. Keep the speculation going.
Speaking of acquisitions – my money is on Twitter’s first one to be Brizzly. Any one want to take that bet?
I’ll take that bet!
Must be nice! They are burning through that cash right now. I believe they are still more focused on building members than making money right now.
James F.
TwitterBackground.com
James, please stop adding your URL to each of your comments. Thank you in advance.
Or leave a smarter comment and you will be forgiven
.
@Robin: Why doesn’t TC work with Disqus to create a smarter comment system that would require a registration of some sort.
…or Intense Debate.
Being a tech blog, you would have thought they’d embrace such improvements
because login for comments is stupid and pushes away casual viewers.
…evidence that it pushes away casual users?
Robin,
How does this funding process happen in Silicon Valley? Each funder expects a return based on the interest on the amount he is investing on, right? And this is calculated on an annual basis. So with all the funding twitter has been receiving till now, how are they paying off this interest rate? Are they accumulating all the dues? Which means the company that takes over will need to cover and pay up all these principal investment amounts + interest due, and then focus on making profit?
Please note – twitter is yet to make any revenues. It is a company in huge debt – that is what it means if you are getting loads of funding and is yet to make any money.Hope they don’t ask for a bail out package from Obama.lol
Joshi, where are you located?
Do you understand the difference between “equity” and “debt financing”? What you’re referring to is not an equity but a debt financing. Twitter uses equity financing.
Holy crap, that’s a lot of money. Congratulations.
They must have some big things in their pipeline. As facebook has moved into the direction of twitter, perhaps they’ll start moving into FB’s turf.
Wow! Very ig gamble for these investors. Nothing, not even an investment in Twitter, can make NY-based entrepreneurs excited about Insight Venture Partners, home of Kanoodle.
As the first comment dictates – and what’s their defined revenue model?
Do you remember one of the first social networking sites, TheGlobe.com? How did it burst?
Yes, I hear you; acquisition = ROI for investors, yeah right!
http://princesi...revenue-stream/
the 100 million can easily pave way to help twitter restructure their rev model and in turn, their platform to cater to that rev model. ppls invest in companies because they believe in the vision of the product, not necessarily the product on hand. FB had to change a couple time (with ppls shouting back*) before they got it right. who’s to say twitter wont succeed?
…
That’s just the way it is. If Twitter exits for >$100mm, the investors have made an ROI, regardless of revenue.
Don’t get me wrong – I think Twitter is nothing more than a feature that’s attempting to solve a problem that Facebook has already solved. In fact, I think it parallels MySpace in many ways, minus the popularity.
With that said, I do think the chance of Twitter exiting in the ~$700mm range is quite high.
Umm the valuation was 1 billion, not 100 million. So for an ROI Twitter will need to exit for more than a billion dollars.
Those official “Trend” links must cost a lot. Not everything needs to look like an ad to be an ad.
Also I bet their business model includes a lot of revenue generation with:
– Entreprise API for accesing the live feed and analytics.
– Analytics dashboard (See Nielsen + Facebook, there’s a huge pile of money everymonth there) for all marketing analysis interested companies
– And last but not least, Search Engine (or search engine deals)
People please stop believing twitter is not making money, it’s a cash cow, open your eyes.
Any idea what their burnrate is? Do they spend anything on advertising?
BTW- I think their acquisition of summize so early was one of the smartest buys in the past few years. That search capability will likely play a big role in any future rev stream.
This clearly is not a CrunchPad update
twitter is dot com bubble/ballon
That’s nothing. 37Signals is worth $100 Billion: http://bit.ly/TghNO
That’s just the way it is. If Twitter exits for >$100mm, the investors have made an ROI, regardless of revenue.
Don’t get me wrong – I think Twitter is nothing more than a feature that’s attempting to solve a problem that Facebook has already solved. In fact, I think it parallels MySpace in many ways, minus the popularity.
With that said, I do think the chance of Twitter exiting in the ~$700mm range is quite high.
Would have to be at least greater than $140mm to break even (as this is not the first time Twitter raised a bunch of money) and I’m pretty certain the term sheet for the $100mm investment had to defer some greater percentage of the exit to the initial investors so Twitter would have to probably exit for at least $160mm for IVP to actually start making any money. Someone like Google or Facebook will probably buy them for $500mm though and this will all be over. Hopefully the team over there will make some money on that because the salaries are totally not competitive.
Don’t you mean greater than $1 billion?
If I invested $10 million into Twitter at a $1 billion valuation, then I own 1% of the company. If the company then sells to whomever for less than a $1 billion, then my 1% stake is less than when I invested?
It’s not quite as simple as that. The investors likely have shares with liquidation preference which covers them in case there is a sale at a lower valuation.
Evidence that it pushes away casual users?
I do like these numbers but you Can start Hundreds of Start Ups with that amount
Where do I invest money for the failure of Twitter. Twitter is going to fail hard. It’s the new fad that is going to go the way of Friendster and now Myspace, especially when Facebook can easily add the feature to search everyone’s status updates which makes twitter useless.
@RD If I had to register I would not leave comments and I read the site daily. My opinion is that others would probably not register either if they wanted to leave a small comment here and there.
That seems pretty obvious to me… not sure how you can prove it though.
If compulsory registration was mandated for comments it would drastically lower the amount of drive by commenting, effectively end serial defacement via URL blasting, and generally raise the level of dialog.
Maybe.
If you typed into a comment form to get this far you likely noted the “Commenting Options” to the right of the textarea. Yes, that’s right. FBC.
Running a report on FCB use vs. regular open form use would be a good use of intern cycles.
And to make this perfectly on topic: How much of a crap storm would there be if TC supported Twitter OAuth in “Commenting Options”?
With $100M infusion we have only yet begun to see the depth to which Twitter is going to dig into making developers crave the platform.
Jay,
I couldn’t agree more…well said!
Great, congrats to the Twitter folks.
Now does this mean that we won’t ever see one of those “we’re busy” pages again? Ever?
Does T. Rowe Price really believe that it can earn a VC type return (let’s say 5-8x invested capital) on this investment? This suggests that Twitter would offer investors liquidity at $5 billion – $8 billion. Hmm.
Johnny don’t bring math and technical knowledge into this. This is TechCrunch after all.
Holy crap, 100 million?? I STILL dont understand the point of twitter.
here’s what’s happening again: http://wasoobi.blogspot.com/
Worth is not established by revenue, its established by what people will pay for something. Revenue is very important to a startup, but as just one predictor of what people will pay, it is not required to establish investment value. Another predictor is rapid growth and huge market momentum.
Investment at the early funding stages are often made by guesstimates of what the next round of investors will pay for a piece of your earlier investment. Not to sound too cynical, but this is often referred to as the “greater fool theory of investing”. The company doesn’t necessarily have to become a traditional revenue producing company for my investment to be valuable. I just have to find someone who is a greater “fool” than I was to buy a portion of my investment at a higher price in the next round of funding. This is rational and very profitable if things go your way.
Another way to look at this from the risk side is that old saying “I don’t have to outrun the bear, I just have to out run you”. This approach to investing can mitigate risk since you can still make money on your investment if the profits get delayed or even never materialize. In the end this is all more rational than it seems because mitigating risk is what fuels innovation.
The biggest concern is that talking about a $1 billion valuation without also talking about the Term Sheet for the investment could be seen as a market manipulation. While it is becoming increasingly common practice, it still may be viewed as hyping a company value for investment purposes. Even before the all the SEC regulation apply (which they don’t yet), this is one practice that is likely to catch the regulator’s eye some day. There may have been a 100 million investment, but there is a big difference between 100 mil in cash and 100 mil commitment with lots of milestone and conditions. Twitter leadership would do well to continue their low key approach to valuation and not get too caught up in what be an amazingly exciting time for them.
I’m starting to think this is all a pyramidal scheme. This $100 million are to pay off those who invested $55 million previously!
Who wants in the next round?
I wonder why twitter is not kicking in the advertisements on web. Definitely some big brains behind the idea. But given that there are ex-google employees involved its strange to see no adds. LOL
Wonder why USV wasn’t in this round.
They’re too small to join in at this level.
A $1 billion valuation on Twitter is cheap. It implies that the investors believe that net profits will reach something like $50M/annually at some point. If, for example, they just turned on contextual ads, within a a year or so they’d be making that or more quarterly – not annually.
For Twitter (and Twitter’s investors), this makes a lot of sense if one assumes that they roll up the choicest portions of the third-party twitter ecosystem into their core (through M&A), refine their API approach to this newly aggregated/federated platform and then cultivate a deeper, richer ecosystem around same.
Then, when the tree needs a good “pruning” again, start the M&A process anew.
For more fodder on this one, check out:
Twitter Financing: Pruning the Garden with $100M Shears http://bit.ly/1902st
Mark
Did you see this on facebook:
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i ‘ll be damned if they did not just spent all their leftover cash to bribe zuck
Did you notice that Morgan Stanley MYSTERIOUSLY appeared on the blog post all of a sudden? Hmmm…
Twitter will be fine… Although they may not be making any money at the moment, they stand to make tons in the future… It sounds like they are in the brainstorming phase as to how they are going to monetize their site.
that’s a lot of money good job twitter
i have blog on twitter http://www.byteat.com i think twitter now is the best.
Tentu anda benar
I really dont get twitter at all. To me it is just a place that everyone tries to spam their site or say something offhanded. I use it to expand my site and everyone who follows me does the same. It is just a spam free for all. Speaking of spam I am at http://www.dishler.com for the best in LASIK vision correction.
Venture Capital and Twitter – Analysis and Discussion with David Menlow of IPOFinancial.com on Twitter raising money:
http://equedia....ise-100-Million