The new round of fundraising – $200m of cash, valuing the whole company at a
putative $3.7bn – bolstered Twitter’s status as internet darling.

The site has spent the past year trying to figure out how to convert trying to
turn the large and rapidly growing userbase of its free microblogging
service (tweeting in 140 character snippets) into a substantial
revenue-generating business.

It will now have venture capitalist John Doerr – who backed both Google and
Amazon early on – on the investor roster.

Yet Twitter is still not profitable. One way to justify such a valuation might
be the chance of a takeover battle. But Mr Doerr’s involvement surely
reduces the likelihood of an approach in the near term from Google, one of
the companies most often linked with Twitter. As a Google director, he will
have been privy to any board-level discussions on potential takeover targets.

Google is guilty though of pushing up valuations for other start-ups, most
recently in its rebuffed $6bn approach to Groupon, which would have been the
largest sale of a venture capital-backed business since 1999 (when Cisco
paid $6.9bn for Cerent).

While the company’s approach to local advertising online would sit wellwithin
Google, Groupon’s business model is easily replicated.

Groupon’s attraction is largely as a challenger to Facebook, king of the
opaque valuations. A secondary market sale of shares on Wednesday seemed
likely to top the previous $39bn valuation, but neither buyers nor sellers
have access to the financials. The blind lead the blind onwards and upwards.

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