Breaking News: Twitter to Raise $100 Million From Insight, T. Rowe Price, Other Investors
The WSJ's Michael Corkery and Jessica E. Vascellaro report: — Twitter, the messaging web site that has become an Internet sensation, is nearing a deal to close as much as $100 million of new funding …
Context & Ripple Effects
Twitter has been circling this raise for a while: back in April 2008 the company took another round of funding while Silicon Alley Insider openly asked how much the service was even worth. Eighteen months later the WSJ reports the answer taking shape — as much as $100 million from Insight, T. Rowe Price and other investors, with Bits framing it as tech's newest $1 billion company.
The timing matters because the money arrives before any revenue model does: Biz Stone publicly denied on September 22, 2009 any plans to introduce advertising in 2009, even as commentary pressed the two-year-old service to start making money off its surge in users and media attention earlier this year. The syndication spread — Deal Journal, Between the Lines, Bits all on the same story — shows how closely the market is watching whether institutional buyers will underwrite a pre-revenue consumer platform at ten figures.
First-order effects
- Twitter gains a war chest reportedly approaching $100 million, letting it fund infrastructure and operations through 2010 without an advertising product, per Stone's denial of ads for 2009.
- Insight and T. Rowe Price take positions in a company whose valuation — reportedly around $1 billion per the syndicated coverage — rests entirely on growth rather than revenue.
Second-order effects
- A traditional mutual-fund manager buying into a pre-revenue startup pressures other late-stage consumer web companies to court the same institutional capital, widening who can fund scale-ups beyond venture firms.
- The absence of an ad business despite confirmed outside pressure to monetize pushes competitors and would-be partners to build businesses around Twitter's data and ecosystem — the retweet feature adoption alone signals the platform reshaping user behavior rather than selling inventory.
Third-order effects
- If pre-revenue consumer platforms can clear nine-figure raises at billion-dollar marks, private-market valuations decouple further from revenue multiples — a structural shift toward growth-at-any-cost financing that regulators and later public-market investors will eventually have to price.
- Institutional money flowing into late-stage private rounds blurs the line between venture investing and public-market asset allocation, changing what kind of company can stay private and how long.
The trend: Late-2009 capital markets are normalizing billion-dollar private valuations for high-growth, pre-revenue consumer web companies as mutual funds join VCs in late-stage rounds.