Twitter lands $800 million venture capital deal, breaking record
mercurynews.com
mercurynews.com
Wikipedia provides a reasonable starting place: "A startup company or startup is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets."
But still... Facebook has taken in over $2 billion in VC funding but has a valuation approaching $100 billion. Twitter has taken in $1.16 billion for an $8 billion valuation.
I personally think Twitter is at serious risk of losing relevancy (this decade's Myspace) and they've reached a point where they need to figure out a business model (although technically they've just bought themselves another 2-3 years).
I've got Twitter's most successful shot at a business model physically next to me. Unfortunately, because the realities of a team moving quickly enough, in the right steps, and with enough disruption to become viable is a near impossibility, they'll probably wither (I don't see IPO and save for MS or another hungry to innovate by acquisition, I don't see another round coming).
What we'll do is build up our bootstrapped MVP, get traction and users the old fashioned way and likely eat some scraps mistakenly left on the veritable opportunity table.
Be careful equating a implied valuation based on a late stage private financing to actual valuation. It works when when companies are worth $1 million and there are one or two classes of stock. Not so much in these cases. The public markets will have the final say, and that could be a very, very different story for both Twitter and Facebook.
In other words, I think the claim that they are spending the money to "aggressively innovate" is PR bullshit. They need the money to pay their immense infrastructure bills because their revenue stream so far has been too feeble.
Most likely they are trying to get some cash to buy a company they need.
This leads to big valuations and relatively low revenues. As wealth continues to concentrate at the top of society the trend will continue. This would not have happened 100 years ago when the top tax bracket was ~90%.
Money is worth less to those with wheelbarrows of it. Ownership matters more. Call it inflation if you want.
Not to be too pedantic, but 100 years ago was a great time to be a millionaire, the highest tax brackets were inconsequential, the tax for the top bracket of $500,000 was 7%. Rockefeller didn't have too much tax planning to worry about.
The high brackets came with the depression and later WWII.
From the NVCA's own data that deal alone is nearly equivalent to Q2's top TEN deals:
http://www.nvca.org/index.php?option=com_docman&task=doc...
You want to talk about "disruptive": DST and their limitless oligarch cash coming in and liquidating employees before a traditional liquidity event (public stock).
Wow.
There are people who traffic the ads, people who manage accounts, sales staff that get the accounts, marketers, biz dev, product managers, financial analysts, accountants, and engineering + QA who just do ads, optimization, billing, reporting, and trafficking UI. On top of that you have middle management, then senior management on top of that. Add to that support like HR, legal, facilities...it all adds up.
Not saying that it needs to be that way, just that I've seen it be that way.
http://blogs.wsj.com/venturecapital/2011/01/10/has-a-company...
Looks like Twitter did definitely not break the record here. Remember Groupon?
Out of the $800M Twitter investment, only half of it was an actual VC investment, so we are looking at $400M.
Let's see the others:
- Groupon got $950M, but I think 3 quarters of that went to buying out existing shareholders
- Clearwire got $900M from Intel and Motorola. Even though Intel Capital is an actual VC fund, I am not sure about Motorola having a VC fund, and in any case this sure sounds like a strategic investment, rather than a VC one
- Western Intergrated Networks got $889M, but if you like at the investors, they are private equity rather than VC: Blackstone Group, Madison Dearborn Partners, Oak Investment Partners and Providence Equity Partners
So, I think they are right if they are referring to traditional VC investments. The only problem is that I am not exactly sure what a traditional VC investment means.
On a lighter note, that's 5.7m per character!
The strength of twitter is it's protocol like structure which could potentially be invaluable just like TCP/IP is (I know they are not by any metrics the same)
But whether they can turn it into a business in the long run that is hard to say. I would worry about conflict of interest just as we are seeing with google now betting against it's own customers.
Twitter is not exactly mainstream and early adopters have already jumped on Plus in a big way. So they will really need to ramp up on innovation if they are to stay active in light of Plus. The $8B valuation (if accurate) makes me wonder if the risk from Plus was considered. The deal was surely set in motion before Plus's momentum was apparent, and I still don't see people acknowledging what Plus means for Twitter (or for Posterous, Tumblr, etc...but ignoring that for now too).
Twitter is historically lacking in the following areas, which Plus has covered:
- You can't easily follow conversations (versus Plus's comments against a status)
- You still can't search for old tweets. You can't even find your own old tweets. (Plus doesn't have integrated search, but it's already possible via a site: search on google and it's surely coming to Plus.)
- While Twitter has lists, they've never really embraced them the way Plus embraces circles. (e.g. Sticking someone in a circle is always just a click away.)
- While Twitter has favorites, they've also never embraced them the way Google/Plus embraces +1. Given the success of the ubiquitous Facebook Like button, it's astonishing this aspect has never been taken up.
- Better integration of media and links - images, URLs, etc are held as metadata, not shoehorned in with a URL shortener.
- ... speaking of which, the arbitrary 140-character limit is gone, so no more SMS speak and URL shorteners. Twitter did a great job teaching us it's good to be concise, but we can shed the 140 bondage already.
- Integrated into Google's various properties, which is itself a competitive advantage.
- Scaleability has always been a major concern for Twitter (and likely the reason why there hasn't been as much innovation in other areas), whereas we can be fairly certain Google has that covered.
- And of course the business model, which Twitter is still massively tweaking. We can be fairly certain Plus will more than pay for itself in the case of Google.
It's a bit like when the web took over from Gopher [1]. It did so quickly because it subsumed gopher, and it feels that way with Plus. Anything you can tweet, you can plus. But you can do much more with it. For a startup, it would be a lot of hard work getting the user base to make it worthwhile, but with Google they've already been able to build up the network.
I've been wondering lately that Twitter is on the way to becoming a niche network for anonymous users, given the recent real name controversy, unless it gets moving. For now at least, I am getting more feedback from Plus posts than tweets, despite having ~20% as many followers on Plus.
I say all this as a major fan and developer of Twitter who wants the platform to stay relevant. (But also a former Googler, who also wants Plus to thrive...so take it how you will!)
You're joking, right?
If that's not mainstream, I have no clue what is.
Politicians everywhere have learned to adopt technology early, it's critical for public relations and community-building. Just like Obama visits Facebook or Google for a Q&A. So that alone, and even the niche who follow every tweet (as opposed to the vast majority who pick it up second or third hand via journalists) is not mainstream.
Mainstream is hundreds of millions of ordinary people sharing photos with each other. That's the game Google and Facebook are playing.
Twitter is mainstream. Besides celebrities and other public figures, it's a way for people within industries to follow one another.
That's 40 times the $200 million in yearly revenues that equity research firm Hudson Square recently estimated Twitter takes in.
Yes, because this time is different.
http://moneywatch.bnet.com/investing/blog/wise-investing/thi...
Yeah, sorry for that, I know it sounded too reddit-like, but in addition to what arethuza was saying bellow I can tell you how I can still remember reading a The Economist 30+ pages special report on the CDS market around 2007. They were saying how that one time all was different,about how the risks were spread among multiple players, how the market fundamentals had changed etc. And then 2008 happened (and yes, I know that technically the CDS market wasn't the one that blew up, but I think everybody now can see how stupid those assumptions were).
To sum it up, reading this article on Twitter reminded me of that period, and many like it. You cannot just foul the fundamentals.
I didn't say it's inherently under- or over-valued, just that the ratio is meaningless.
Can someone explain why such a large portion of the money in both this deal and the Groupon deal went to insiders instead of being used for infrastructure/personnel/normal business-growing costs?
Also, is this a more recent trend or have things commonly worked this way?
I can't speak to how it has been done in the past, but it doesn't make much sense to me to force all involved parties to wait for IPO + 18 months to divest from a company, especially if they're going to actively hinder the companies growth.
Also, the terms you get from shifting pre-existing shares (e.g., employees) around are probably better than creating new ones. The later investors get a greater chunk of the pie for less money because the company doesn't have to create new shares, and the early investors would prefer to get cash today than more highly valued shares tomorrow.