No Revenue? No Problem. More Money for Twitter on the Way.

Published on January 25, 2009
by Peter Kafka

Remember the good old days of Bubble 2.0? When a webby company with no real business plan could raise piles of money at an eye-popping valuation?

That would have been par for the course as recently as a year ago, but now only one company seems able to pull this off at any scale: That would be Twitter, of course.

A person familiar with the situation tells me that the thrust of TechCrunch’s report from last night is indeed correct: Twitter is raising a third round of financing that should double both its valuation and the total amount of cash it has raised–it’s looking to raise something like $20 million at $200 million to $250 million valuation.

TechCrunch says that IVP has signed a term sheet; I’m told there was interest from multiple investors at that price range, so we may see more folks signed on before the deal is finalized.

Twitter, famously, generates almost no revenue, and has yet to explain how it will do so. But I’m told emphatically that the company has still kept its burn rate very low. So it doesn’t need the cash it’s collecting now–it’s doing so because it can.

The deal is yet another indicator that the Twitter team thinks they have a huge hit on their hands: Last fall, they walked away from a deal worth $500 million in cash and stock from Facebook. The new deal means they’ll eventually have to look for an exit at a much higher price than that since their new investors will want a significant return on their investment.

But it also gives them that much longer to figure out exactly how they’re going to make money. And in these post-boom times, that’s a great luxury.

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