What Do Venture Capitalists Want With Twitter?

In its latest round of funding, Twitter received $35 million in venture capital. According to one of the company’s founders, Biz Stone, they weren’t even looking for it!

Funny, I don’t look for Twitter but I find it everywhere. It is online and it is on television (seems like every other word Rick Sanchez says is “twitter” or “facebook”).

According to MarketWatch, Twitter’s active user base has skyrocketed 900% in the past year. Siliconalleyinsider.com reported that Twitter is now worth $230 – $250 million.

Twitter is popular, but I must wonder what venture capitalist would want with it. Of course they want to make a profitable investment, but how?

Venture capitalists (VCs) typically provide funding to startups and small companies. In exchange for funding, VCs will own a portion of the firm and may exercise control over some company business.

Generally speaking, VCs ultimately wish to help the company go public or get acquired by a larger firm. In both scenarios, the goal is of course to sell off their stake in the company at a substantial gain.

What do they want with Twitter? Twitter is not profitable and probably won’t be anytime soon. Perhaps a Twitter IPO would have generated a frenzied price run-up back in 1999 but for now I think the VCs are making Twitter a more attractive acquisition target.

(Image source: Picapp)