Any day now, it’s expected that Twitter will make its IPO filing public, revealing exactly who owns what.
No one yet knows Institutional Venture Partners’s stake in Twitter, but based on the $35 million Series C round for the company that IVP led in January 2009, it’s clear the Sand Hill Road firm will generate a world-class return on its investment.
Yesterday, as part of a longer conversation, Chaffee shared the story of how that Twitter funding came together. It’s a good reminder of the importance of relationships in this business:
“One of the things we’re always doing is surveying the landscape for breakout companies, where they’re starting to gain traction…and their users and other metrics are starting to track up. Twitter was classic case of company just starting to break out.
One variable for us is: What could this be in terms of potential? An early-stage company can be interesting and getting some traction, but when you run the profile, [you realize it has the potential] of making 3x to 5x your return, [which isn’t a compelling enough exception for IVP, which specializes in later-stage companies that already have meaningful revenue].
Twitter fit our criteria [of being able to deliver a much bigger return]. And we had a view into that, so we called [early Twitter investor] Fred [Wilson] and asked if the Twitter guys would see us.
‘We’re not raising money right now,’ Fred told us. ‘Go away.’ But we’re co-investors [with Union Square Ventures] in Comscore [which tracks Web and mobile usage]. And so [after another plea or two] Fred asked if the Twitter guys would see us, telling them, ‘Just meet with them, and when you’re ready to raise, [IVP] will be there.’
So we had them come in [to our office] on a Monday in early January 2009, and when we heard them describe the company as the ‘pulse of the planet’ — those were their words — we could see this was much more than a microblogging service. Ev Williams and Biz Stone are sharp guys. Some entrepreneurs have a vision that’s clearly infectious and much bigger than everyone realizes, and [that was the case here], so it was pretty straightforward. In fact, you could see everyone around the table, thinking, This one could really go. Meanwhile, they [thought] IVP was asking all the right questions, [that we could] see opportunities and threats more clearly than anyone else, and they told Fred that they could see IVP as a partner.
It was a hot deal for us, so we scrambled the jets and the next day I went up there [to San Francisco from Menlo Park] with [IVP colleagues] Dennis [Phelps] and Jules [Maltz] for a day of due diligence. This was a Tuesday. Wednesday night, I had dinner with Ev Williams. On Thursday, he was calling our CEOs to see what it’s like to work with IVP. And by Friday, we had a term sheet.
Eventually, that news broke, and it brought everyone out of the weeds to outbid us. We asked [Williams and Stone], ‘Who do you like best of these groups?’ and they said Benchmark [Capital], so we dialed Benchmark into the deal.
Fred was absolutely instrumental. Because Ev and Biz hadn’t done this many times, I [feel] like Fred was the one who really opened the door for us and said [to them], ‘Let’s do the IVP deal.’”
(Look for the inside story behind IVP’s rise to the top — and how the firm plans to stay on top — on Friday. And if you haven’t signed up yet for StrictlyVC, you can that that right here.)
