Twitter Valuation To Be Worth $250 Million Soon?

Posted Jan 25, 2009

It seems like whenever a major event happens that shakes the blogosphere, the Twitter community is the first to respond.  This is true for the Obama’s inauguration, the recent terrorist attack in Mumbai, the Hudson River airplane accident, etc.  Twitter is also becoming a marketing tool for celebrities.  Now that Twitter is garnering so much more attention, it is only natural for the company to raise more funding to keep the traction going.

A source at TechCrunch has it that Twitter has signed a term sheet with at least one venture capital company, including Institutional Venture Partners, to raise a new round of funding that will put the company at a $250 million valuation.  It is pretty likely that the company will raise over $20 million in VC money.  Last May the company raised $15 million and the year before that they raised $5 million.

The big question here is whether major corporations believe Twitter is worth at least $250 million.  Apparently Facebook did as they offered the microblogging service $500 million in cash and stock options that Twitter reportedly turned down.  Facebook’s actual value has been questioned multiple times by multiple companies so it was pretty logical for Twitter to hold off for now.

Another problem Twitter has is the lack of a revenue model.  Twitter’s servers are being hammered by the five million plus users that they have.  Of these millions of users, none of them have to pay to use the service.  This is a niche that Yammer, an enterprise Twitter-like service,  filled in.  If Twitter begins to charge for premium services, then it is pretty likely that people will start paying because many of the users have already established a reputation.

One thing that is for certain is that this new round of funding will keep Twitter running through the weak economy and may see itself being acquired when the acquisition market begins to heat up once again.