Friday, September 25, 2009
Nothing from nothing leaves $100 million
Rich people still are different from the rest of us. Perhaps that's the best explanation yet for why venture capitalists ponied up an additional $100 million on Thursday for a bit of Twitter, the wildly popular Internet microblogging service. Twitter, a Web startup that lets people express themselves in 140 words or less, has attracted millions of users in its three and a half-year existence but no known revenue. The new cash infusion is expected to raise the value of the company to $1 billion, even though it only has 60 employees and does not plan to begin accepting advertising revenue until next year, according to the New York Times. Twitter's valuation is apparently based in large part on the numerous takeover offers it has received, notably from its chief rival, Facebook, and as well from Google and Microsoft. “Twitter is so likely to be successful at this point, it is almost impossible to envision a way in which Facebook can truly monopolize online content-sharing,” Keith Rabois, the vice president of strategy at Web social entertainment firm Slide, told the Times. Facebook has more than 300 million users but its continued domination of Web social networking appears to face a serious challenge from Twitter. “There have probably been less than five examples of companies that have grown like Twitter has,” John Borthwick of Betaworks told the Times. Betaworks created the link-shortening service Bit.ly. Twitter is "a new layer of innovation on the Internet," Borthwick said. “This investment is happening because it represents a shift.” And just who are the new investors? They include Insight Venture Partners, a New York company, mutual fund giant T. Rowe Price and current backers Spark Capital and Institutional Venture Partners, the Times said.