The stakes just got raised in the venture business and the ‘real time’ web world. TechCrunch is reporting that Twitter ($twit ) has raised $50 million on a $1 billion valuation .
Twitter’s great timing is great for Twitter and a few smart/lucky/hard working people focused on the real time web, but the pressure only goes up with each big raise and bump in valuation.
Twitter is actually in great shape. They now have oodles of cash and can handpick the talent needed to grow into their market cap. Most of the investor’s have been in for a long time so even if they upped the ante at the ‘rumored’ $1 billion, their average cost is MUCH lower.
The raise could be for many reasons like posturing to force an acquisition or to let Facebook and Google know they are in it for the long haul.
BUT, the raise makes it harder to value related businesses and much like Google completely mucking up the video landscape with their YouTube acquisition, the tables are being set for impossible expectations to be met.
Much like you should not be chasing stocks 66 percent above their march ‘Generational Lows’, you should not be chasing dreams in the ‘real time’ web because of Twitter and Facebook valuations. The pressure and urge to be in the Twitter jet stream just went to all-time highs and beyond….
If Twitter were a public company, this would be more fun for us all. In a liquid market, ‘real time’ web stocks would be racing around on the news. As someone who loves to overpay for highly liquid securities and be cheap as hell for illiquid securities , I can tell you from experience that this one deal benefiting the few will lead to major pain for the many.
There are huge air pockets between the top few and the best of the rest so be careful.
Disclosure – I am an investor in Twitter through my hedge fund’s investment in Betaworks