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Union Square’s Early Twitter Bet Pays Off as IPO Nears

Twitter Logo
Twitter Inc. said yesterday that it’s seeking to raise $1 billion in an IPO, in what would be the biggest offering for a U.S. technology company since Facebook Inc. last year. Photographer: Scott Eells/Bloomberg

Fred Wilson’s 2007 investment in Twitter Inc. drew a tough inquiry from the technology crowd at the time: How could a service that let anyone say anything in 140 characters be worth $20 million? Wilson was a believer.

“If you tried Twitter early on and found it useless, I suggest you give it a second try,” Wilson wrote in a blog post on Aug. 26, 2007, after making the investment in the previous month. “My bet (literally) is that you’ll find following your friends on Twitter to be habit forming. I certainly have.”

Nobody is questioning Wilson any longer. The venture capitalist and partner at Union Square Ventures built a stake in the microblogging site worth over half a billion dollars for his firm by providing a few million dollars in the first funding round. Union Square, based in New York, is one of five firms with at least 5 percent ownership, according to Twitter’s initial public offering prospectus that was made public yesterday.

The biggest investor is Evan Williams, who co-founded the company in 2006 and self-financed its early days. Williams owns 12 percent of Twitter, for a stake worth $1.17 billion, based on the company’s fair value of $20.62 a share in the prospectus. That’s more than twice the amount controlled by co-founder Jack Dorsey, whose 4.9 percent stake is worth $482.7 million. Chief Executive Officer Dick Costolo owns 1.6 percent for a $156.5 million stake.

Peter Fenton, a partner at Benchmark and Twitter board member, is listed as a 6.7 percent owner, which represents Benchmark’s stake. Those holdings are worth $650.9 million. Fenton led Benchmark’s 2009 investment when Twitter had about 30 employees.

Top Owners

The other 5 percent owners are Rizvi Traverse, an entity affiliated with early Twitter backer Chris Sacca, Spark Capital out of Boston and DST Global, founded by Russian billionaire Yuri Milner.

In total, Twitter raised more than $700 million in direct investment and attracted hundreds of investors as early backers and employees sold pieces of their holdings. The San Francisco-based company said yesterday that it’s seeking to raise $1 billion in an IPO, in what would be the biggest offering for a U.S. technology company since Facebook Inc. last year.

Those kinds of numbers were unthinkable when Wilson took the gamble. More than an investor, the venture capitalist was an evangelist of Twitter well before celebrities were flocking to the service or it had gained prominence as a place for breaking news.

In an Aug. 5, 2007 blog post titled “Back to the Future,” Wilson wrote about the democratization of the news and Twitter’s potential role.

“With the advent of mobile broadcast messaging systems like Twitter, we’ll be getting more, not less, of our news from ‘citizen journalists,’” he wrote.

Five years later, on the eve of its IPO, Twitter has more than 215 million monthly active users.

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