Why VC

Kevin Burton is surprised by a VentureBeat interview in which I mentioned we were raising money for Twitter. Says Kevin, "It just seems a shame that they're going down this path as Obvious seemed like the anti-VC startup based on past statements."

Which gives me a good opportunity to say that I feel I've been a little misunderstood in this area. Just because I returned our VC's money and said we raised too much money too soon for Odeo, doesn't mean I think it's never a good idea. I still have a great relationship with George Zachary and CRV (the lead investors in Odeo). They were extremely reasonable and agreed what we did was the best outcome for the investors and the team, given the situation.

Twitter is in a much different place than Odeo was. For one (major) thing, Twitter has momentum. We're more in execution mode than invention mode (though we still have a ton to figure out). At this point, we have a few options:

1) Figure out how to get profitable
2) Keep funding Twitter myself
3) Get an alternative source of funding
4) Get bought
5) Raise VC

Option #1 is not out of the realm of possibility. However, it would certainly impact growth and how interesting of a service we can build. We think Twitter will definitely be profitable but that the smart thing to do at this point is to focus on growth. Which means more investment in people, infrastructure, sms, etc. to make the Twitter network as valuable as possible.

There's a limit to how long we can go on option #2. And even if there wasn't, it's not necessarily the smartest thing in the world. Outside money can bring perspective, discipline and other valuable things to a young company.

Option #3 is certainly viable. Alternative sources include, potentially, angel or corporate investors or even friends and family. There would be a lot of overhead to raising the amount we need through these sources (i.e., it would take lots of investors, meetings, paperwork, etc. to get a bunch of people who have very minor stakes and, therefore, little motivation to help out). Not that we'd rule out one or two if we think they add a lot, but there's little advantage to constructing a sizable round this way for the stage we're in.

As for option #4: There is strong evidence we could sell the company already and have a nice pay day. Doing that before getting outside investors means less dilution and less risk. But that's not really the game we're interested in playing.

Which leaves option #5. VCs, if chosen well and a good fit—and a fair deal is constructed—can be a useful source of funds + smart people around the table helping you make better decisions.

So, we're talking to some VCs. We'll see what happens.