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December 16, 2010 12:39 am
Twitter’s latest fundraising has valued the company at $3.7bn, up sharply from the $1bn that the microblogging service was worth a year ago and the latest sign of the sky-high prices private investors are prepared to pay for fast-growing internet companies.
The deal also adds one of Silicon Valley’s most powerful financiers to Twitter’s growing army of backers, with John Doerr, the Kleiner Perkins partner who was also an early promoter of Amazon and Google, leading the capital-raising round.
The company would not comment on the details of the financing on Wednesday, but one person familiar with the situation said Twitter had raised $200m at a valuation, before the addition of the extra capital, of $3.7bn.
The jump in value compared with a year ago points both to the headway Twitter claims to have made in building on its early buzz among users to turn itself into a commercial service, as well as the rising values of private internet companies.
After raising $100m in capital late last year, Twitter said it would focus much of its effort in 2010 on trying to turn its service into a money-maker. With the rapid growth of its simple service for broadcasting short messages, it was a byword in Silicon Valley as a “hot” company without any commercial underpinning.
In recent months it has experimented with a number of ways to make money, including allowing “sponsored tweets” through which advertisers can pay to send out messages, though it has yet to turn a profit. The early results have been encouraging, with 5-8 per cent of sponsored messages being retweeted or taken up in some form by users, a higher level of engagement than seen on many rival services, Twitter said.
The financing comes little more than a week after Google came close to paying $6bn for Groupon, a two-year-old online marketing service for local merchants. That price tag has drawn attention to a broader rise in the private valuations of fast-growing internet companies, as venture capitalists and strategic buyers such as Google try to tap into the next hot companies at an earlier stage.
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