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In a round four times larger than the last, Twitter raises $200M from Kleiner Perkins at $3.7B value
Affirming reports from a couple weeks ago, Kleiner Perkins Caufield & Byers has led a new $200 million round for Twitter that values the microblogging startup at $3.7 billion. The round is exactly four times larger than the last round raised by Twitter, back in September 2009.
Even more amazingly, the round bests other megalithic rounds from earlier this year, including the $147 million Zynga raised from Softbank in June and the $135 million Groupon raised from DST in April. Let’s not forget, however, that Zynga in 2009 raised $180 million from DST at an estimated $3 billion valuation.
Just for perspective, while Twitter, Zynga and Groupon are three of the most hyped up Web companies, widely expected to meet and sustain wild success, all three have valuations under $5 billion, a fraction of social titan Facebook’s $50 billion valuation. I bring up these numbers, not to minimize Twitter’s accomplishment, but to point out that if Facebook can be valued that highly without a clear plan for monetization, why criticize Twitter for not having revenue yet?
As part of the deal, Mike McCue and David Rosenblatt will be joining Twitter’s board of directors. Interestingly, key Kleiner partner John Doerr was barred from receiving a board seat because his directorial position at Google was seen as a potential conflict of interest, according to a source close to All Things Digital.
On the same day that Twitter revealed the new epic round of institutional funding, the company also made a couple other major announcements. First, the Twitter for Business site has been revamped, signaling the startup’s desire to show its business side a little more.
Twitter also posted some interesting statistics: in the past year, users have posted 25 billion tweets and over 100 million new accounts have been created. The company itself has more than doubled in size, from 130 people to over 350, which is actually 50 more than we reported less than two months ago. Because Twitter still lists nearly 40 open positions on its “Working at Twitter” page, the subtext seems to be that this startup is still in the process of ballooning to the size it needs to be to hone what could be a thriving business.
If you’re surprised that Twitter has already burned through the $50 million it raised a little over a year ago, don’t be too hasty. A month before this most recent round closed, Evan Williams, former Twitter CEO and current head of product, told the audience at Web 2.0 Summit that, though he couldn’t comment on the state of the rumored new round, Twitter had “a lot of money in the bank.” Of course, he might have just needed to say that so potential investors, like DST’s Yuri Milner and Kleiner’s John Doerr, wouldn’t feel like Twitter desperately needed their support.
In either case, the company is doing what every startup should do at any stage, according to all three Vator Splash speakers from last night: that is, raise funding whenever you can, not just when you need it. Now that it has even more cash in the bank, Twitter doesn’t have to be hesitant in the slightest about paying all those first-year salaries.
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What is Twitter?
Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests.
Where did the idea for Twitter come from?
Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.
How is Twitter built?
Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes.
We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.
How do you make money from Twitter?
There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.
In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet.
At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.
Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.
What's next for Twitter?
We continue to focus on building a product that provides value for users.
We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.
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Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users. Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist. The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel. Zynga is headquartered at the Chip Factory in San Francisco. For more information, please visit www.zynga.com.