Startups Seek Ways Around Venture Capital

Twitter, others explore other revenue streams to avoid investors' raised demands
By Ambreen Ali,  Newser User
Posted Nov 12, 2008 4:25 PM CST
Twitter, a short-message social networking site shown here, has been used by Barack Obama and Britney Spears.   (AP Photo)

(Newser) – While Wall Street investors have taken advantage of the tanking economy to nab low-priced stocks, Silicon Valley’s venture capitalists have likewise enjoyed a buyer’s market, demanding larger ownership stakes in startup outfits in exchange for their coveted funds. Companies like Twitter—initially funded with $22 million in venture capital—are now looking for alternative revenue to avoid being devalued, Bloomberg reports.

Twitter plans to charge companies who want to reach its estimated 5.6 million users. The ad revenue could stave off the need to approach investors again, who will “just negotiate harder” in tough times, Twitter's founder says. Venture capitalists are under their own pressure: With fewer startups being bought out, there’s less return on their investment—and their own funds are drying up.