Twitter Raises $35 Million

By Claire Cain Miller

Updated 3:45 p.m.: Added comment from Todd Chaffee of Institutional Venture Partners.

Twitter has raised $35 million in venture capital, bringing the microblogging start-up’s total funding to $55 million.

The new money came from Institutional Venture Partners and Benchmark Capital. Peter Fenton, a partner at Benchmark who has also invested in Web 2.0 darlings Yelp and FriendFeed, will join the Twitter board.

The fundraising round brings in two top West Coast venture firms. The San Francisco start-up had previously raised $20 million from investors including Union Square Ventures, based in New York, and Spark Capital, based in Boston. Those firms will also participate in the latest round, as could previous angel investors including Ron Conway and Marc Andreessen, which could bring the total to $40 million, said Todd Chaffee of Institutional Venture Partners. They are still working out the final details.

The company was not looking for new investors and still has money in the bank, said Biz Stone, a co-founder, in an interview. In December, Twitter C.E.O. and co-founder Evan Williams said that though he had originally planned to raise more money in 2009, when the economy turned, he decided not to. But the two new investors approached Twitter, Mr. Stone said, and “we went for it.” Institutional Venture Partners closed its part of the deal on Jan. 16 and Benchmark closed its funding Thursday night.

The announcement from Mr. Williams appeared, of course, in fewer than 140 characters on Twitter: “We raised more money: http://bit.ly/mbEO9 I feel very fortunate we were able to do this and very excited about what we will build. Go team.”

“We’re fired up,” Mr. Chaffee said. “They’ve had unbelievably explosive organic growth like I’ve never seen before, and an amazing level of interest from developers, the digerati and the media. We really need all hands on deck to figure how to shepherd that growth.”

Twitter will use the money first and foremost to hire new people. “We really need to grow the company,” Mr. Stone said. “We have 29 employees, which is shockingly low considering the work we have to do.”

Despite its growing popularity — active users have increased 900 percent in the last year, Mr. Stone said — Twitter has not earned a single dollar. It does not sell advertising on its site and is free for users. The company plans to slowly roll out a revenue plan over the next few months. That will likely include charging businesses for certain features they can use to talk to customers on Twitter.

Though Twitter has said that revenue is a priority in the first quarter of this year, the new money could buy the company some time. “I would much rather have this thing grow to natural scale than build in a revenue model artificially, too quickly,” Mr. Chaffee said.

Mr. Fenton said he had been watching the company, which turned down a reported $500 million acquisition offer from Facebook last year, for two years.

“They decided to partner with an active West Coast syndicate to vigorously pursue the path of independence,” he said. “As a business opportunity, it jumped out to us as having many potential revenue streams that support, and don’t undermine, its success.” h