Twitter dives into the VC world in style as Twitter Ventures (TV) appeared among a list of investors for Cyanogen, a mobile operating system startup, who’s raised $80 million in Series C. Speaking relatively, among other tech giants like Google, Intel and Qualcomm, Twitter doesn’t seem to have the monetary depth in cash and securities to compete. Although what Twitter gives up in size and cash flow, they seem to account for in the intangibles. Twitter Ventures represents the “smaller” tech players that have more to offer in their brand rather than their bank. Do they have what it takes to change the landscape of investing for tech VC’s?
In 2014, Twitter had $3.6 billion in cash and securities compared with $64 billion for Google, $14 billion for Intel and $18 billion for Qualcomm. But the SF-based tech company may feel more accessible to young startups who are more willing to align themselves with smaller, more “hip” companies and that is exactly where their advantage may live.
Why Twitter Ventures Can Offer More than Just Capital
Major tech giants that have ventured over into the VC world, like Google, use investments for acquisition purposes (as in its acquisition of Nest). Twitter, on the other hand, can get its hands on new tech without having to manage or acquire the startups. Twitter Ventures presents the opportunity for first looks into promising startups like Cyanogen – that anticipates competing head-to-head against Android and iOS with their own open operating system. I speak about the deal between Twitter and Cyanogen more in depth in a previous article “Twitter Ventures into VC Territory“.
Mike Gupta, the head of Twitter Ventures and Twitter’s former finance chief, has been quiet on the direction for Twitter Ventures but their recent debut investment introduces a new lane for tech VC’s.
Twitter Ventures’ investment doesn’t seem to be of the acquisition direction and this may speak for all of the smaller tech power players who intend to follow said path. Their leverage, outside of the actual investment, thrives in the intangibles. Twitter and other companies alike not only have access to upcoming pioneer startups but they also have the complimentary platform to help the brand’s growth. Unlike Facebook who’s used their talent acquisitions in Instagram and WhatsApp to further their mobile reach on a global level, Twitter has the opportunity to implement different plans with its VC arm. In Q4 of 2014 alone, Twitter reached an advertising revenue of $432 million. Their digital advertising market as well as an arsenal of other in-house Twitter products is a huge perk for their backed companies. This social network is also progressively innovative in their development so we can imagine that invested companies under TV will have access to the platform’s products well before the public.
A great deal of VC firms essentially operate as the funding and networking power behind early-stage startups. But Twitter has the audience reach and advertising platform that would allow for native advertising & marketing options for their ventures solely. Which incites the question – are the services of these VC arms just as valuable as the investment itself? Twitter’s reputation would also push a brand’s value forward just from an association level. We’re all aware of Cyanogen moreso because of Twitter’s involvement and we don’t even know how much of the $80 million investment they can account for. In addition, not many VC firms have accumulated an audience that fits into the demo of their subsidiaries, Twitter has.
Reasons for creating VC arms largely depend on the company — size doesn’t seem to be a factor as huge companies like Apple, Amazon and Facebook do not have venture funds. So it’s hard to say which investments Twitter Ventures has planned next but they undoubtedly have the opportunity to create a niche market in the VC realm that doesn’t focus on acquisitions but rather the intangible benefits Twitter has to offer. Considering they remained silent in regards to their venture capital activities, it’s expected they will do the same with their upcoming strategies and capitalize on their brand’s success with the rollout of Twitter Ventures.