Union Square secures $135 million of new fund

Ronny Kerr · December 29, 2010 · Short URL: https://vator.tv/n/155c

Fred Wilson's top-tier New York City venture capital firm looking to raise $200 million fund

Union SquareUnion Square Ventures has secured $135 million of a new $200 million fund titled Union Square Ventures Opportunity Fund LP, according to an SEC filing.

Listed as a new partner in the filing is John Buttrick.

Principal investor Fred Wilson of Union Square is one of the most visible Silicon Valley venture capitalists you can find, as he operates a blog updated nearly every day called A VC: musings of a VC in NYC and is a regular contributor to VatorNews, commenting on financial news and trends. His most recent post, entitled Invest in the mess, follows up on his own piece highlighting the crowded startup environment and suggests that the best firms will know how to invest intelligently anyway:

Not everyone knows how to invest in the mess. But experienced VCs should know how to invest in the mess because they have all had to help their companies get through this stage. They understand the issues, they understand what it takes to cure them, and they should have the courage to know that investments made at this stage will be handsomely rewarded when the companies emerge into a successful adulthood.

We have plenty of portfolio companies in the ugly adolescent stage. And most of them are not finding it easy to raise money. We are doing many of these rounds as inside rounds, meaning the existing investors are funding the company without a new lead investor. I see this as a big opportunity for our firm and I am excited about it and entusiastic about making these investments. I know that not all of them will be great investments. But I know that many of them will be. And we are getting to make these investments at attractive valuations that don't have the least bit of irrational exuberance written on them.

Union Square has invested in several notable tech startups, including Twitter, Zynga, Tumblr. Most recently, the firm has contributed to rounds raised by open-source database developer 10gen, browser add-on Zemanta and cloud telephony platform Twilio. The former three could be considered the “ugly adolescents” that Wilson is referring to, but Twitter didn’t seem to have very much trouble raising a $200 million round recently from Kleiner Perkins Caufield & Byers. Tumblr also just recently raised a fourth round of funding and Zynga raised a massive round over the summer.

It’s hard to tell which are the startups having trouble raising funds because executives typically remain tight-lipped during the fundraising process. To get an idea of the kinds of startups Union Square funds, check out their full portfolio. Also, I've embedded a video below of John Doerr (Kleiner Perkins) and Wilson discussing the current state of entrepreneurship and finaces at Web 2.0 Summit in November.

(By the way, if you’re a VC firm or startup trying to keep new financing quiet, Wilson has some advice for you: “do as I say, not as I do.”)

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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.



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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.


Fred Wilson

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