Who knew 140 characters could be worth so much?
Twitter Inc., the social networking sensation, raised $200 million from investors Wednesday. That placed the value of the San Francisco Internet company at $3.7 billion, nearly four times its valuation a year ago.
Gartner Inc. analyst Ray Valdes said the valuation reflects rising investor interest in hot Internet companies.
"The valuation is not outlandish," Valdes said. "It reflects their growth and the time we are in."
Twitter, one of the Web's most popular social networks and increasingly a pop culture phenomenon, lets users send 140-character messages, or tweets, to followers. It is the latest Internet company to attract a multibillion-dollar valuation and high-wattage interest. Google, the Internet search engine, recently offered to buy 2-year-old daily deal site Groupon for $6 billion but was turned down. Facebook Inc., which is privately owned, is valued at more than $40 billion by some estimates.
Twitter's latest round of funding came from Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers and other investors. It marked the second-largest venture capital deal this year. Twitter has now raised about $360 million.
The privately held company for months has been on the lips of nearly every technology investor as several, including Russian investment firm Digital Sky Technologies, tried to get a piece of the company. Investors track Twitter closely, buying shares on private marketplaces such as SecondMarket where they are trading for $18 and anticipating one day buying public shares of the company.
In a post on the company's blog, Twitter Chief Executive Dick Costolo said two Silicon Valley veterans would join Twitter's board: Mike McCue, chief executive of start-up Flipboard who sold a voice-recognition company to Microsoft Corp. for $800 million in 2007; and David Rosenblatt, who ran DoubleClick, an online advertising service that Google Inc. bought for $3.2 billion in 2008.
Twitter recently added former Netscape Communications executive Peter Currie, who heads an investment firm in San Francisco, to its board. Twitter now has eight directors to help guide the 350-person company, which is in a growth spurt, having added 220 staffers in the last year and building data centers to cope with its crushing traffic.
The moves come two months after the 4-year-old company handed the CEO job to Costolo, a seasoned executive who has focused on expanding advertising initiatives to help Twitter profit from its popularity and more than 175 million users. He replaced company co-founder Evan Williams, who is now focusing on product strategy.
In an interview this fall, Costolo said Twitter was taking a cautious and calculated approach to its business. "We've got a winner," he said. "We just have to make sure we scale this the right way."