I'm reading the Techcrunch post re: Twitter and it's Series C round of $35M. Congrats to them. In reading the comments, I noticed there was a fair amount of hate re: why anyone would continue to fund a company that doesn't have a revenue generating strategy in place. That's a legit stance. Still, I don't have as much pessimism about Twitter than I do about say, Facebook. For one, Twitter hasn't unveiled its revenue generating products yet. For all we know, it could hit a monster homerun. Facebook on the other hand has made several attempts at generating revenue with some success (and some failures - Beacon anyone?). Still, I'll reserve judgement until after they roll out those proposed revenue generating products.
One comment in particular was from a guy named Nathan:
Useless is a bit much. The service is useful to millions of people who use it multiple times every day. The issue isn't the usefulness of the service, it's the fact that it doesn't generate revenue. A big difference. Also, it seems that Nathan is a little bitter that his revenue generating start-up can't get funding. On that point, I feel for him. Fundraising is not easy. You'd be lucky to get one second meeting out of ten first meetings with investors. We've been fundraising for about a month and had to hear a lot of no's before we got to the handful of promising second/third meetings we are entering into now. Our business, like Nathan's, is not that sexy though we do generate revenue and have very strong growth projections.
The analogy I like to use is this. Someone comes up to you and asks for a million dollars to open a couple of Denny's franchises. The person provides solid sales numbers, tons of historical data, etc. and tells you that you'll most likely make back your money in 3-5 years and then receive a nice 10% dividend each year. Then another person comes and tells you they need a million dollars to open a new concept high-end restaurant with a new chef who has worked under the best chefs in the country. Who would you fund? My answer would be the Denny's franchise, but that's because I'm not rich and like the stability of a safe investment. For investors who already have money, the idea of a nice solid investment throwing off 10% just doesn't excite them. They need the next billion dollar payout - the next YouTube, Yahoo, or Google. Otherwise, they'd just go buy bonds and commodities.