Pure-Play Twitter Startups Attract 50% Less Venture Capital and Angel Investment Than Last Year

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As Twitter’s popularity has grown with users, we wondered if this popularity translated into more investment by venture capitalists and angel investors into pure play Twitter startups?  CB Insights’ venture capital and angel investor data suggests that venture capitalists and angels may be a bit less sanguine about the Twitter ecosystem than they were last year.  This is the opposite of what we saw in an earlier analysis for another hot ecosystem – Apple’s iPad and iPhone ecosystem – which saw a 220% increase in funding vs. last year.

First, the bad news…Last year (from June 2008 to May 2009), we’d seen $21.6M fly from venture capitalists and angel investors to pure-play Twitter startups.  In the June 2009 to May 2010 timeframe, the investment funding dropped over 50% to $10.4M.

Now, the good news…The number of investment rounds held nearly flat with 11 rounds in our analysis of last year vs. 10 rounds in the more recent timeframe.  This does, however, show that average amounts invested by investors has dipped fairly dramatically going from nearly a $2M average round last year to just over $1 million more recently.  We also saw a high degree of collaboration between angel investors and venture capital firms on these deals and that these pure-play funded Twitter startups were going to a diverse array of industries.

There are lots of theories on why the amount invested has dipped with the most popular explanation being a feeling of uncertainty by application developers and investors alike about the direction Twitter will go.  More recently, compounding the uncertainty are acquisitions by Twitter of the likes of Tweetie and Summize (filling holes on its platform)?  Time will tell if these moves will drive investors to be even more cautious about the platform?

The graph below shows the funding activity over the last 24 months of the analysis.  The green line separates data from last year’s study vs. this year’s.

pureplay twitter startup funding received from venture capitalist and angel investors

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The graph below shows the deal activity over the last 24 months of the analysis.

pureplay twitter startup number of investments received from venture capitalist and angel investors

Also, a definitional note – our data looks at only pure-play Twitter startups which we define as those companies whose product or platform is predicated wholly on the Twitter platform.  In addition, they must have received investment by venture capital or angel investors during the periods in question.

As always, we we welcome your ideas and prognostications on where you see the funding trend into the Twitter application and startup ecosystem going in the next year.


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