Sunday, September 15, 2013

Can An Angel turn $25K into $10 Million at the Twitter IPO?

Once a company has raised hundreds of millions of dollars at record prices the role of the early stage investors is often overlooked. So would it be with Twitter, except for the fine work of journalists such as Peter Delevett of the San Jose Mercury News and Nick Bilton of the NY Times, who combine their memories with excellent research and fine reporting skills.

In June 2007, Evan Williams was looking for investors for a quirky Internet communications service called Twitter that he had co-founded and funded.

He had already signed up a number of well-known Silicon Valley financiers, but he also dashed off a note to his friend Dick Costolo, who had just sold his company to Google, asking if he would like to put in $25,000 or $100,000. 

“I’m on the $25k bus,” Mr. Costolo replied three minutes after receiving the e-mail. “Thanks Ev, this will be a lot of fun.”

Mr. Costolo, who is now the chief executive of Twitter, is one of a handful of individual investors who stand to reap the rewards of a potential initial public offering of stock in the social network. Although many details are still unclear — most of all the offering price of Twitter’s stock. Mr. Costolo’s initial investment is probably worth more than $10 million, with additional shares he has received as an executive worth many millions more, according to people knowledgeable about the company’s finances.

In  July 2007  Twitter, then 16 months old, raised $5 million from Charles River Ventures, Union Square Ventures and angels including Ron Conway, Chris Sacca, Marc Andreessen and Dick Costolo.

In  May 2008  Twitter ups the ante with $15 million. Union Square ponies up again, as do Amazon CEO Jeff Bezos and Digg Founder Kevin Rose, among others.

Later rounds were primarily institutional. In December 2011, the Saudi prince Alwaleed bin Talal invested $300 million in Twitter. The company was valued at $8.4 billion at the time. 

Additional Angels may own Twitter stock as a result of Twitter’s purchase of TweetDeck for $40 million in May, 2011.

TweetDeck was originally developed by Iain Dodsworth, and launched on July 4, 2008.  Dodsworth received his initial $300,000 seed funding a year later from The Accelerator Group, Howard Lindzon, Taavet Hinrikus, Gerry Campbell, Roger Ehrenberg, betaworks, Brian Pokorny, and Bill Tai. The company raised a Series A round of funding with many of these same investors, and Ron Conway, Danny Rimer, and the SV Angel group.

Some investors  have cashed out early. In hindsight, some have expressed regrets. But “in our case, we are early-stage people, and we had had a remarkable run,” said one early investor who sold millions of dollars of stock in 2011, when a Russian investment firm was buying.

But some investors held on. “For me personally, this is a once-in-a-decade or once-in-a-career kind of investment,” said Bijan Sabet, a partner at Boston's Spark Capital, one of the earliest investors in Twitter. 

The New York Times reports: “Mr. Williams, who provided crucial early financing for Twitter and remains its largest shareholder, will almost certainly become a billionaire. The venture investor Chris Sacca and at least two venture capital firms, Union Square Ventures and Spark Capital, will also most likely end up with stakes exceeding $1 billion each, according to an analysis of financial documents and interviews with people who know about Twitter’s finances. Others could make tens of millions or even hundreds of millions of dollars.” 

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