Twitter is rumored to be raising $20 million (or more) in venture capital funding at a valuation that would peg the company to be worth $200 million or higher. IVP, a late stage VC investor is rumored to have signed on, reports TechCrunch. Peter Kafka has been able to confirm from his sources that the funding for San Francisco-based microblogging company is indeed in the works.
Several other investors are said to be interested in the company. Even though Identi.ca, an open source Twitter competitor, recently raised some early stage capital, I am surprised that Twitter hasn’t attracted more competition. Its growth and rumored valuation is going to change the landscape.
The company has so far raised $20 million, with $15 million coming in June 2008. New investors Spark Capital and Bezos Expedition joined previous investors Union Square Ventures and Digital Garage in that round. At the time, the company had about 2 million users and the company was valued at $80-$100 million. Since then, the number of Twitter users has increased to 6 million. A majority of Twitter’s usage is through its API, and the unique visitors to its web site are only fraction of company’s growth story.
It is not a surprise that the rumored funding and stupendous valuation has folks asking about Twitter and its apparent lack of business model. In my view, its business model is a work in progress and we should be looking at the company’s Summize deal for answers. The number of searches on Twitter is on an upswing and it could become the underpinning of Twitter’s future.
As a company, Twitter is still trying to come to grips with its identity — whether it wants to be a service, a platform, or both. If it is just a service, then a $250 million valuation might be too rich. On the other hand if it ends up becoming a platform that is supporting add-on services such as Twitpic or Stocktwits, then it can be accorded a different valuation.
Nevertheless, once it gets a grip on the direction it wants to take, Twitter can set about putting a business model in place.
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