Twitter Valued at $250 Million

I was reading an article this morning that made me realize that we are indeed living in strange times.  Twitter, a social networking / microblogging service that has struggled throughout to scale their application to meet it’s growing popularity, and who has no clear cut plan as to how they are going to even make money from it, is being valued at approximately $250 million.

How in the world could a company that has operated primarily from the capital of angel investors and no plan to bring in revenue and become self sufficient be of value to anyone?  Don’t get me wrong, as a twitter user I am in love with the product too, my partners and I see a lot of potential for our clients with Twitter, and I firmly believe that we haven’t realized it’s full potential yet, but $250 million? No business model??  Amazing times! 

Twitter may have signed a term sheet with Institutional Venture Partners according to a recent report on TechCrunch; a deal that will place the valuation of the rapidly growing microblogging service at $250 million.

At first glance the deal seems to contradict co-founder and CEO Evan Williams assertion last month that he doesn’t want to raise money in 2009, but look a little deeper and it may just make sense.

Although Williams may not want to raise money, the only way VCs would fund Twitter in our current economic climate would be if they could see a clear and detailed business plan that solidifies its revenue model.

"We’re looking at Q1 for revenues," Williams told the Churchill Club last month. "This is a change from the original, pre-economic meltdown plan," he said. "The original plan was to focus on revenues in 2010."

Clearly, the Twitter crew has been heavily invested in coming up with potential revenue models, and while they may not be able to implement them in the time Williams anticipates, a plan may just be enough to entice the VCs into giving them some breathing space.

While other startups are experiencing financial difficulties, for instance the recent cut backs at Digg and the shutting down of Pownce, Twitter appears to be making great strides. By getting on with the job, investing in Summize, working on scalability, rejecting Facebook’s offer, hiring new staff and generally focusing on its product, the company is clearly experiencing phenomenal growth.

Twitter has so far raised over $20 million in funding and it appears that this time around it’s likely to raise the same amount, if not more. Although the TechCrunch report did not get into details, it did cite "a source with knowledge of the deal."

Twitter: Possibly Valued at $250 Million – ReadWriteWeb