Twitter raises money, birds fly

by Mathew on April 27, 2008 · 8 comments

Sarah Lacy of Yahoo’s TechTicker show — yes, the same one who did that interview with Mark Zuckerberg at SXSW that was either a train wreck or merely underwhelming, or somewhere in between — has a post up at her blog that spends several hundred words telling us how uninteresting it is that Twitter is raising money. Why is is uninteresting? Because it’s so obvious, Sarah says. Of course Twitter is raising money; anyone with any sense, including Ning and Slide and Glam, has done the same. Why? Primarily because they can, that’s why.

To be fair, Sarah doesn’t say that it’s uninteresting; she says that it isn’t newsworthy, because it’s not surprising. And she has a point. Twitter needs to raise money because it doesn’t have a business model, and so it needs some cash to live off — and to use for upgrading its servers, etc. — until it manages to come up with one, or until it gets acquired. And it can raise that money in part because (as Sarah also notes) VCs are desperate to find the next Facebook. If that takes $10-million paid out to Ev Williams and the gang, then so be it.

The question every one wants the answer to, of course, is whether Twitter (or Slide, or Glam for that matter) are actually worth that kind of money. And the uncomfortable answer is that no one really knows — not the VCs who are providing it, not the partners who are raising it, and certainly not Ev or Biz or the people running companies like Twitter. Did Mark Zuckerberg think Facebook was worth $15-billion a year or two ago? If he did, he probably knew enough to keep it to himself, because if he had said so, he would have sounded insane.

To some, the idea that Facebook is worth $15-billion is still insane. But there’s no question that it’s worth something — and given the kind of activity and devotion it has generated, Twitter likely is as well. In the end, a VC has to make a calculated guess that it will eventually be monetizable. And all they can hope is that the times when they’re right eventually make up for the times when they’re wrong.

  • http://mrinal.vox.com Mrinal

    Mathew – not sure if it is all about “…calculated guess that it will eventually be monetizable”. Maybe you meant this but “Exit-able” is probably the word (which can include monetizable) since cos. like Google have proven the 'free' business model in the URL (Ubiquity first, revenue later) world :)

  • http://www.mathewingram.com/work mathewi

    Ubiquity first, revenue later — I like that. And yes, that's more or
    less what I meant.

  • Thusenth

    “VCs are desperate to find the next Facebook.” Last time I checked VCs were looking for highly profitable businesses to invest in – but maybe they know something we don't. Then again, Facebook could have been profitable – but they've decided to build the company up. Attracting ex-Googlers can't be cheap.

    Although I was only 14 when the 'dot bomb' took place, very little seems to have changed in terms of valuations. They still seem to be based on page views, but the major difference seems to be that private money is at stake now as opposed to the public's.

  • http://www.mathewingram.com/work mathewi

    I think that's an important point, Thusenth — that more private money
    is at stake this time around, and last time it was mostly public
    money.

  • http://www.mathewingram.com/work mathewi

    Ubiquity first, revenue later — I like that. And yes, that's more or
    less what I meant.

  • Thusenth

    “VCs are desperate to find the next Facebook.” Last time I checked VCs were looking for highly profitable businesses to invest in – but maybe they know something we don't. Then again, Facebook could have been profitable – but they've decided to build the company up. Attracting ex-Googlers can't be cheap.

    Although I was only 14 when the 'dot bomb' took place, very little seems to have changed in terms of valuations. They still seem to be based on page views, but the major difference seems to be that private money is at stake now as opposed to the public's.

  • http://www.mathewingram.com/work mathewi

    I think that's an important point, Thusenth — that more private money
    is at stake this time around, and last time it was mostly public
    money.

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