Prominent Internet companies like HomeAway Inc., Kayak Software Corp., Twitter Inc. and Zynga Gaming Network Inc. have held similar nine-digit funding events that gave founders some pocket money until the big exit. And one investor has popped up in all of those big raises: Institutional Venture Partners.

IVP General Partner Todd Chaffee, who led the firm’s deals in HomeAway, Kayak and Twitter, spoke with Venture Capital Dispatch about why he thinks venture and private equity investors will continue to be a source of liquidity. “These companies are a different animal than we’ve seen before,” Chaffee said. “They’re scaling quickly, but they’re profitable. I think the key message is it doesn’t drive companies towards premature liquidity. It helps them hit for the fences.”

Read the rest of this post on the original site

Although it’s a senior citizen in VC with 13 funds to its name, the late-stage investor is behind two of the Web’s hottest companies, Twitter Inc. and Zynga Game Network Inc.

And while many firms struggle to hit fund-raising goals, IVP recently closed a new fund at $750 million, its largest ever, blowing by a $600 million target.

Its partners think that’s because this is exactly the right time for its strategy as the road to exiting has grown longer and early investors and founders look for liquidity.

Although the firm is not lacking competition, “the supply-demand relationship in the late stage is quite attractive,” said General Partner J. Sanford “Sandy” Miller. Fund-raising data support this view: Early-stage and multi-stage venture firms raised $3 billion and $3.98 billion, respectively, in the first half of this year, according to Dow Jones LP Source; late-stage specialists raised a mere $500 million (this amount does not include IVP’s latest fund, which closed in the second half of this year).

Read the rest of this post on the original site

Since BoomTown constantly called the $15 billion valuation of Facebook “insane” when Microsoft (MSFT) forked over $240 million in 2007 and gave Slide’s Max Levchin a very hard time when his widget company got a $550 million valuation a year ago, it’s only fair that I say something equally appropriate about Twitter.

The hot microblogging service just got its very own $250 million valuation, all without a dime of revenue in sight. (I know, Bijan, it’s coming, it’s coming!)

After all, Facebook and Slide got their funding in boom times and here we are hurtling toward a possible Depression: The Sequel, even as Twitter hauls in $35 million more in investments.

But I am torn.

Should it be “WTF?” given that the current economic meltdown really seems to have little impact on Silicon Valley venture capitalists?

I guess they have to put their money somewhere and that’s probably the best choice out there, due to Twitter’s strong growth and, perhaps more importantly, overhyped media mindshare.

Or maybe: “Don’t Stop Believin’!!? I mean, you almost have to admire the appalling suspension of disbelief for Benchmark Capital and IVP to hand over such a sum.

In fact, they are probably right now down at at Il Fornaio in Palo Alto, telling everyone who will listen that Google (GOOG) was founded in the last tech downturn.

Actually, I think the only thing to say is to reference the search giant: “Let’s hope Google has another YouTube moment and decides it must own the start-up pioneering real-time search and status updates no matter the price.”

That’s kind of long, so I will distill it to this Calgon-inspired thought: “Larry and Sergey, take me away!”

Because while I appreciate that Twitter co-founder Biz–I can’t help it, but I laugh every time time I write his name in relation to a company that makes bupkis–Stone underscored that the company was ready to make some money using the new funding, an acquisition by a big, nervous Internet giant is the only way this is going to end well.

In his post, ironically titled “Opportunity Knocks,” Stone noted, “We are now positioned extremely well to support the accelerating growth of our service, further enable the robust ecosystem sprouting up around Twitter, and yes, to begin building revenue-generating products.”

That would be nice, because right now, there’s no Biz like no biz.

And not to sound like a skunk at this Silicon Valley garden party, but Twitter might want to start doing that sooner than later.

I know, I know, I am such a bummer with all this talk of things not just growing to the sky in a world without end.

But as Facebook–valuation now officially $3.7 billion, although probably more if it were to be sold–has found out, the delta between dreamy funding and revenue reality can be quite huge.

And, by that, I am not saying it can’t be done, I am simply saying: Do it.

Until then, here is a lovely Calgon commercial and also a video of that amazing last scene in the finale of “The Sopranos” with the Journey song playing until it is abruptly cut off (I say Tony was shot in the head by the guy in the bathroom, but please weigh in):

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.