

Twitter Closing New Venture Round At $1 Billion Valuation - rokhayakebe
http://www.techcrunch.com/2009/09/16/twitter-closing-new-venture-round-with-1-billion-valuation/

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tjic
One thing I saw in the comments:

> If they still have 30 million in the bank of the 55 million, why are they
> raising more money?

Answer: it's always easier to raise money when you don't need it.

~~~
andreyf
_it's always easier to raise money when you don't need it._

Oi, that doesn't necessarily mean it's a good idea. What Twitter desperately
need right now is a way to make money (and taking it from VC's don't count).
If they want to justify a $1 BILLION valuation, they need a clear way to make
_a lot_ of money.

My prediction: they're looking to buy a company that they think will make them
money. While one might hope Benchmark Capital might pass down some wisdom from
AOL's botched "best acquisition EVAR" fiasco, I have a bad feeling about this.
As it stands now, my feeling regarding their technical competence tells me the
hypothetical merger will be tougher than anticipated, and history will see
Twitter as the shining example of the "Web 2.0 bubble".

~~~
steveplace
You can't have a bubble at these valuations. Twitter may be a little frothy,
but the industry is nowhere near exuberant.

~~~
TrevorJ
You really think Twitter is worth one billion dollars? Why?

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steveplace
Probably not. I don't particularly care about a single company, but they are
not going to mark the _end_ of a bubble. It might be the beginning, but we
have yet to see sentiment and valuations that would lead me to believe that a
crash in tech is coming soon.

------
dryicerx

        1. Big User Base
        2. Big Money Invested 
        3. ???
        4. Profit!

~~~
matthavener
Possible answer for #3:

[http://www.byrnehobart.com/blog/facebook-is-profitable-
again...](http://www.byrnehobart.com/blog/facebook-is-profitable-again/)

~~~
axod
I think a lot more people use twitter from 3rd party clients, than use
facebook from 3rd party clients (As a %).

Facebook the website is a lock-in, and a place that can be easily monetized.

Twitter has the complication that for a ton of people, twitter is just the
network and not the client. Monetization of a network seems pretty hard to
me... far harder than monetizing a client.

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tptacek
What company could Twitter acquire that would make them money a couple
quarters down the road?

Consider that if Twitter has a huge valuation edge over (say) Yelp, they're in
a position to finance an acquisition at favorable terms. Twitter's ability to
execute those acquisitions could in turn feed back into its valuation.

~~~
immad
If Twitter did that it would be some sort of weird hedge fund doing hype-based
leveraged Buy Out.

~~~
tptacek
Companies raise funds to buy other companies all the time. It's called a roll-
up.

~~~
fallentimes
See: Kayak, Sidestep

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bdr
For Twitter to turn down Facebook's acquisition offer, they must have a damned
good plan for beating them in the "status" war, because FB is on the attack
and gaining ground.

What is that plan?

~~~
charlesju
Facebook wants to aggregate status between friends. Twitter wants to aggregate
status between topics. This fundamental difference drives extremely different
models for using micro-updates and subsequently renders Facebook and Twitter
as non-competitors.

~~~
natrius
What makes you think Facebook doesn't want to do topics also? You can already
make things you post visible to everyone. It's not a huge leap.

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URSpider94
A $50MM round at a $1 billion valuation means that the VC's are collectively
getting 5% of the company for their investment. Does anyone else think that's
an unusually tiny share?

~~~
rjurney
It probably says a lot about the dogshit alternatives VCs are looking at as
the inflated dot com leftover VC industry is about to come crashing down -
acquisition market dried up, no IPOs in sight... buying a piece of twitter at
a gagillion dollar valuation would look pretty good to most VCs.

But personally, I think its a good investment because I think twitter is
disruptive.

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netsp
When VCs put up this much money at this high a valuation are they still
looking for 5-10X returns?

~~~
sachinag
No.

Early-stage VCs look for 5-10X returns. Investors in this round are growth
equity investors. They use IRR metrics. 30% IRR is generally considered a huge
success.

~~~
netsp
But surely they need a pretty high tolerance for risk. Twitter still has a
reasonable chance of just fizzling out. It could just be a fad and it could
just fail to find a business model.

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javery
People are building more and more onto the platform and relying on it more and
more, this is ultimate lock-in at the moment. Whenever they want they can
start charging companies for API access, search access, access to the data,
access to the live stream, etc.

I think they are just biding their time (they have the money) to grow it as
much as possible and then either sell it off or start flipping the switches.

~~~
moe
_I think they are just biding their time (they have the money) to grow it as
much as possible and then either sell it off or start flipping the switches._

And I think they are just cashing out before the bubble pops and have
absolutely no idea where twitter could be going nor why people are throwing
money after them in metric kiloton bundles. Ofcourse they have to keep pulling
bullshit like "realtime search" outta their rears because the "stake"holders
want to hear _something_. But all I have seen in that direction was, at best,
feel-good babble and not any remotely tangible vision.

"Flipping switches" is not an option either because people would simply flip
their own switches - towards the next best clone.

~~~
javery
Yeah, like everyone switched away from Windows the minute they started milking
their platform. Or how everyone switched off Gasoline when it hit $4/gallon.
Or how everyone stopped paying for Cable when the cable companies jacked up
the prices even more. Once they own the network that everyone is using it will
be almost impossible for imitators to take it away.

~~~
moe
You're not seriously comparing twitter to these things, are you?

What will they do when a competitor offers to "keep your account in sync with
twitter" (tweets and followers)? Forbid it in their TOS ofcourse - and that's
the beginning of the end.

Also get over the "everyone is using" myth. Last time I checked the number of
twitter accounts was in the ballpark of 0,1% of the internet population. Based
on their publicized, inflated figures mind you - likely including all dead and
double accounts.

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DarrenMills
Perhaps if they start bleeding due to bandwidth and maintenance costs, they've
got some serious bank set aside until someone figures out a way to make
Twitter a highly profitable venture? Okay, maybe not. But I'd like to see the
break down on what exactly their dropping $30 mil on. That's a lot of money
for a such a simple idea that is already a household name with no real
competition.

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andreshb
Only they know what they are doing, and so far, it's gone very well for them.
I am left without words.

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nir
Funny how this is happening the same week we discover Google now supports (or
works on) real time search: <http://blog.omgili.com/?p=108>

