More Twitter Funding Notes

Twitter last Friday announced that it had raised $35 million in Series D funding, from Benchmark Capital ($21m) and Institutional Venture Partners ($14m). The micro-blogging service also raised an undisclosed amount of capital from past backers Spark Capital and Union Square Ventures, and could add even more once existing angel shareholders decide whether or not to exercise their pro rata rights at the $230 million-ish valuation. All together, Twitter is expected to have over $50 million in cash on hand (including some old VC money that has not yet been spent).

A few brief notes on this deal, based largely on a conversation with Todd Chaffee of IVP:

* IVP initiated this transaction, by Chaffee calling Fred Wilson of IVP (the two had once invested in Comscore together). Wilson said the company didn’t need new capital, but would be interested in having a West Coast investor. Twitter’s co-founders met with IVP on January 12, and signed a term sheet just four days later.

* IVP is usually a later-stage investor, and Twitter is a two-year-old company without any revenue. During the negotiations, both sides believed it would be best to bring on an additional West Coast partner with more early-stage experience. The call went out to Benchmark, largely because Benchmark has a pair of partners who helped grow Facebook (Peter Fenton as an investor, Matt Cohler as VP of product management).

* Chaffee believes there is far too much attention paid to Twitter’s current lack of revenue, given its age. He firmly believes that this is a Facebook or YouTube-type opportunity. When asked if Twitter would have revenue in one year from today, he said it would likely have “test revenue.”

* One big difference from Facebook, however, is that Twitter’s co-founders do not have the same type of control over Twitter that Mark Zuckerberg has over Facebook (where he, and he alone, can approve or veto an acquisition).

* Twitter raised seed funding from Charles River Ventures, but the firm has not participated in a subsequent round. It still has some shares, but isn’t really involved in the company beyond that.