By Brian Womack and Joseph Galante
Sept. 25 (Bloomberg) -- Twitter Inc., the social-networking site used by everyone from Oprah Winfrey to British royalty, received a “significant” round of venture capital financing from firms including T. Rowe Price Group Inc.
Other investors include Insight Venture Partners, Institutional Venture Partners, Spark Capital and Benchmark Capital, Twitter said today on its blog. Twitter’s previous round of funding was $35 million in February, bringing its total at the time to more than $50 million. The company has yet to report any significant revenue.
The company could use its latest investment for acquisitions and product development, said Charlene Li, an analyst with Altimeter Group LLC in San Mateo, California. Twitter also could be preparing for an eventual initial public offering, rather than trying to be acquired by a larger company, she said. The Wall Street Journal reported this week that Twitter was close to raising $100 million in funding, valuing the company at about $1 billion.
“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 monetize their traffic,” said David Garrity, principal at GVA Research LLC in New York. “It would be nice to see how the company is going to: one, generate revenues, and two, generate profits.”
Revenue Plan
A $1 billion valuation would make Twitter about the size of bookseller Barnes & Noble Inc. and about twice the size of online travel agent Orbitz Worldwide Inc.
Twitter, founded in 2006, is now preparing a revenue plan. It intends to add services for businesses that will generate sales in the fourth quarter, co-founderBiz Stone said earlier this month.
The products might include an “analytics dashboard” that would help companies monitor Tweets about their business, or verified corporate accounts on Twitter, he said. The San Francisco-based company also is leaving the door open for advertising, Twitter said on its blog earlier this month.
Twitter attracted 25 million users in August, compared with 2.2 million a year earlier, according to Nielsen Co. in New York. The site, embraced by celebrities such as Britney Spears and Ashton Kutcher, lets people post messages of up to 140 characters.
“Where you have audiences, you will make money,” said Ellen Siminoff, a former Yahoo! Inc. executive who last year co- founded education Web site Shmoop University Inc. in Mountain View, California.
Venture Slump
The latest investment round comes in a slow period for the venture capital industry. Venture investments declined 51 percent last quarter to $3.7 billion from a year earlier, according to PricewaterhouseCoopers LLP and the National Venture Capital Association.
Venture capitalists have put fewer dollars into early-stage startups and invested most of it in their existing portfolio companies to keep them afloat while the IPO and acquisitions markets remain blocked.
Twitter, founded by Chief Executive Officer Evan Williams with partners Jack Dorsey and Stone, rejected an offer to be acquired by Facebook Inc. last year,Todd Chaffee, general partner at Institutional Investors, said in an interview earlier this year.
Twitter’s investors plan to retain it as an independent media company, he said.
“They could still be acquired by somebody, but when you get into valuations at that level, acquisitions get harder and harder” because the investors are looking for an exit price that is “higher than anyone would be willing to pay for it,” Altimeter’s Li said.
To contact the reporters on this story: Brian Womack in San Francisco atbwomack1@bloomberg.net; Joseph Galante in San Francisco atjgalante3@bloomberg.net
Last Updated: September 25, 2009 13:57 EDT
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