Twitter Valuation Reaches $250 Million

A report from TechCrunch says micro-blogging and social networking Web site Twitter has entered into an agreement with one or more venture capital firms that place the company's value at $250 million. The report does not mention a specific source other than "a source with knowledge of the deal."

In November, several news outlets reported social networking behemoth Facebook was interested in buying Twitter for $500 million, although the majority of the acquisition funds would have been tied to Facebook stock. The deal subsequently fell through, though Twitter is backed by a variety of venture capital firms, including Union Square Ventures, Digital Garage, Spark Capital and Bezos Expeditions, led by Jeff Bezos of Amazon.

Twitter founder Evan Williams has raised $22 million in funding for the company, and Internet research firm ComScore reported Twitter's traffic flow rose almost fivefold to 5.57 million in September from a year earlier.

"Rumor is Twitter hit up more than a few venture firms to pitch the $250 million valuation, and got more than one -no.'" TechCruch reported. "But someone's bit, perhaps encouraged by Twitter's breakneck growth and the interest from Facebook." The site also reports that two sources have revealed Institutional Venture Partners (IVP) has signed the term sheet.

Twitter's last round of funding took place in June, when new investors Spark Capital and Bezos Expeditions invested. It was at that time that Spark partner Bijan Sabet also joined the Twitter board of directors.

In an economic climate where cash is short and many companies are tightening their belts, Twitter's rising popularity and continued increase in traffic will be essential to convincing investors of Twitter's long-term viability. "Everybody's worth less,'' Williams told Bloomberg News in November. "The VCs have the money, but they'll just negotiate harder. I want to manage things so I don't have to raise money in 2009.''