I'm not saying they are worth 3.5B but it looks like Twitter is setting themselves up for a really long runway before they would crash
[1] http://www.businessweek.com/technology/content/dec2009/tc200...
Employees: 350 (Source: Forbes, Dec 15th, 2010) Avg salary, lets assume 80K. (probably too low) TCO per employee $110K
$110K * 350 = $38.5 Million per year on employees.
They've been paying NTT for managed hosting thus far - so much that NTT has cited it as a reason they're expanding their hosting network. They're about to open their own data center in Sacramento - probably because they're realizing how expensive NTT is. My guess is they could be spending as much as $30 million per year on hosting and infrastructure.
Add another $10 for office, admin and legal and you've got a burn rate of just under $80 million per year or $400 million over 5 years.
I think there's also an element of betting going on - this is a venture backed startup after all - if Twitter really starts to unlock massive growth over the next year or so then having so many employees will seem a prescient move.