Dotcom darling Twitter is close to securing a cash injection of $100m, with executives due to complete a surprise funding round that would see the total value of the much-hyped Californian company quadruple to an estimated $1-billion.
More than half a dozen investors — including some existing backers — are understood to have lined up to pump even more cash into the three-year-old San Francisco-based start-up, despite the fact that it has yet to make any money.
Twitter refused to comment on the deal, but it is believed to have secured cash from new investors Insight, a New York venture capital firm, and the mutual fund T Rowe Price. Existing investors Spark Capital and Institutional Venture Partners have also put in more funding, through it was unclear whether the site’s other existing backers, Benchmark Capital, Charles River Ventures or Union Square Ventures, had also done so.
The move comes just seven months after Twitter, which allows people to post 140-character messages to each other through the web or cellphones, raised $35-million in a deal that valued the business at $255-million, and is another indication of the phenomenal growth of the micro-blogging company. It catapults Twitter into the big league of recent Silicon Valley fundraising, although it still lags some way behind its rival Facebook.
In May, the Russian internet company Digital Sky Technologies snapped up a small stake in Facebook for $200-million, in a deal that valued the social networking site at $10-billion, even though it too has yet to make a profit.
Facebook has about 300-million users and Twitter a tenth of that number, but the latter has been winning the headline battle in recent months, generating acres of coverage for the way it allows people to connect with each other.
Twitter’s rapidly increasing valuation makes an imminent takeover less likely, particularly since the company has turned down substantial offers from Facebook and Yahoo! in the past.
The option to float on the stockmarket, meanwhile, is still a pipe dream as long as the company has no obvious way to make money from its services.
The latest round of funding does, however, give Twitter a war chest with which it could attempt to acquire and find a way to create revenue. In doing so, it would follow the model set by Google, which had no way of generating profit from its popular search engine until it bought another start-up, Applied Semantics, in 2003.
That acquisition gave Google access to technology that formed the backbone of its advertising system, which became a huge success and helped to turn its founders into overnight billionaires when the company went public in 2004.
Earlier this year, Twitter’s co-founder, Biz Stone, told the Guardian that the decision to buy the search outfit Summize had already proved a significant turning point for the messaging start-up, but that he did not necessarily think the company needed to mimic the size of Google, Yahoo! or even Facebook in order to be successful. “Do we need to be a company of thousands? Maybe not,” Stone said. “Maybe we can be a company of hundreds and still bring Twitter to a huge number of people around the world.” – guardian.co.uk