Venture capitalists buy into Twitter ‘for 100m’

Twitter, the social networking site used by everyone from Oprah Winfrey to British royalty, was said at the weekend to have received venture financing that values the company at about 1bn.

Twitter received 100m in the deal, according to two people at the weekend who wanted to remain anonymous because terms of the agreement are private. It announced the investment on its blog without citing an amount.

The investors included T Rowe Price Group, Insight Venture Partners, Spark Capital, Institutional Venture Partners and Benchmark Capital.

Given a 100m equity investment, a 1bn valuation would mean that investors acquired a 10% stake, said John Taylor, vice- president of research at the Arlington, Virginia-based National Venture Capital Association.

Twitter and the people familiar with the deal did not say how investors arrived at the 1bn figure. Setting the value of a company involves assumptions about how investors will earn a return, possibly through an initial public offering or acquisition.

The company could use its latest investment for acquisitions and product development, said Charlene Li, an analyst with Altimeter Group in San Mateo, California. Twitter could be preparing for a possible initial public offering , instead of being bought by a larger company, she said. The site has yet to report any significant revenue.

“It’s interesting to see, almost 10 years since we had the first internet bubble, that we’ve now got billion-dollar valuations on companies that haven’t defined how they’re going to monetise their traffic,” said David Garrity, principal at GVA Research in New York. “It would be nice to see how the company is going to, one, generate revenue , and two, generate profit .”

A 1bn valuation would make the site about the size of bookseller Barnes & Noble and about twice the size of online travel agent Orbitz Worldwide.

Twitter had more than 50m in funding from earlier investment rounds. The company, founded in 2006, is now preparing a revenue plan. It intended to add services for businesses that would generate sales in the fourth quarter, co- founder Biz Stone said this month.

Founded by CEO Evan Williams with partners Jack Dorsey and Stone, Twitter rejected an offer to be acquired by Facebook last year, Todd Chaffee, a general partner at Institutional Venture Partners, said earlier this year.

The site attracted 25-million users last month , compared with 2, 2-million a year earlier, according to Nielsen in New York. Embraced by celebrities such as Britney Spears and Ashton Kutcher, Twitter lets people post messages of up to 140 characters.

Twitter’s investors planned to retain it as an independent media company, Li said. “They could still be acquired by somebody, but when you get into valuations at that level, acquisitions get harder and harder.”

T Rowe Price’s involvement in the deal suggested that Twitter might be a safer bet than it appeared, venture-capital firm Greycroft Partners MD Alan Patricof said. “It’ s hard to argue with the growth they’ve had in the number of users,” Patricof said. “This company is unbounded at the moment. No one knows what it’s going to do.”

The latest investment round comes in a slow period for the venture-capital industry.

Reuters

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Venture capitalists buy into Twitter ‘for 100m’

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