Twitter set to raise $100 million, valuing it at $1 billion, despite no revenue

Twitter, the wildly popular social messaging phenomenon, is poised to seal a $100 million venture capital round from as many as seven investors. That would value the company at a cool $1 billion, a number first floated last week. Not bad for an outfit that has yet to earn a cent and or even announce how it plans to make money.

This latest round includes new Twitter investors T. Rowe Price, the mutual fund giant, and private-equity firm Insight Venture Partners, according to The Wall Street Journal. Other investors include Spark Capital and Institutional Venture Partners, which are both previous Twitter backers, according to the paper.
The Journal reported that a source familiar with the deal said investors are valuing Twitter in the same fashion as Facebook, when it raised $240 million from Microsoft at a then-shocking valuation of $15 billion. Twitter did not immediately return a request for comment.

Twitter has exploded in popularity in the last year as users have flocked to the service, which allows people to post rapid-fire thoughts of 140 characters or less onto the internet. Industry analysts expect Twitter to have amassed nearly 50 million users by the end of 2009. Facebook, in contrast, has some 300 million users.

The $1 billion Twitter valuation represents a steep rise in the company's perceived worth, up from $250 million earlier in the year, after Twitter closed its previous funding round. In other words, as Brad Stone points out, Twitter has quadrupled in value in less than a year. Twitter's $100 million raise -- the startup's third and biggest financing round -- is expected to close Thursday.

The $1 billion valuation was first reported last week by TechCrunch. On Thursday, The Wall Street Journal's website added additional details about some of the new investors and the latest round's timing.

Twitter has already raised $55 million but says it has spent only $25 million of that money. Company executives have hinted at plans to generate revenue, which include advertising as well as premium and corporate accounts. Earlier this week, Twitter said it has no plans to begin running ads this year. Twitter prompted chatter that it might soon start selling ads after it modified its terms of service to state that "services may include advertisements, which may be targeted to the content or information on the services, queries made through the services, or other information."

But Twitter's founders have been wary of introducing ads for fear of alienating its hard-core users -- who have grown accustomed to an ad-free Twitter -- and are more focused on premium and corporate accounts.

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