Growth5 Blog

Friday, December 17, 2010

Kleiner Perkins Stays in "Green" Space by Giving Twitter a Pile of Money

John Doerr / Kleiner Perkins just led a $200mm round of financing for Twitter that now values the company at $3.7 billion. Four thoughts on this move:

1. Kleiner Perkins is coming back to the web. This investment in Twitter and their recent $250mm fund for entrepreneurs who are developing social apps and services sends a clear signal that John Doerr's recent focus in the green space may be taking a back seat to the digital world again.

2. This move represents a vote of confidence for online firms. As recently as 2008, KPCB introduced the $500mm Green Growth Fund and other vc firms looked like they were sprinting towards alternative energy. KPCB's $200mm investment in Twitter, the $250mm "social" fund and their recent investments in game developer Zynga, online book renter Chegg and mobile-gaming company Ngmoco indicate the digital space is taking the lead at KPCB in actual $ invested and focus again as well. Great news for entrepreneurs who are developing in this space.

3. Twitter needs to monetize their business. They need to hire people that can execute around their "publishing / in-stream ad" strategy vs. their search strategy. They've dabbled with a few ideas, including the recently launched "Promoted Tweets" to allow for advertising. More ideas are forthcoming.

If they can't work out the business side, they can always look in Google's direction. Sources say Google already made an offer earlier this year at $4 billion. Will be interesting to see how that plays out considering Doerr is on the Google board.

4. With 200 million Twitter users expected by year's end, the current $3.7 billion valuation yields a per user value of $18.50. With Facebook's 500 million users and a secondary market valuation of $52 billion, each Facebook user is currently worth $104.00 to the company. The difference per user? Twitter's 2010 estimated revenue per user: $0.40. Facebook's estimated revenue per user: $4.00. As usual, cash is king.

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