San Francisco-based Twitter Inc. has raised $35 million in third round funding to help expand its popular free  micro-blogging service, in an agreement with Institutional Venture Partners and Benchmark Capital that closed Thursday, according to Twitter co-founder Biz Stone. The agreement gave Menlo Park, California-based Benchmark Capital general partner Peter Fenton a seat on the Twitter board of directors. Peter Fenton Of Benchmark Capital Joins Twitter Board Twitter has rapidly grown to become the third-largest online social networking service, trailing only Facebook and MySpace, according to figures released by Web traffic analysis company Compete, and has increasingly gained a more mainstream user base taking it well beyond its über-geek origins. By some measures Twitter has seen traffic increases of nearly 1000 percent over the past year, with most users first signing up to use the service in 2008 according to a recent survey from research firm HubSpot. "Active users have increased 900 percent in a year and even though our Web traffic is amazing, we see twice that traffic to the APIs," Stone wrote in a message announcing the funding deal posted Friday on the company's blog, referring to the numerous computer programs with names such as Twhirl and TweetDeck that constantly interact with Twitter through its Application Programming Interface. Stone and Twitter's other co-founder, Evan Williams, were convinced to accept the new funding after a recent visit with Institutional Venture Partners, Stone noted in the Friday message. "Last night, we closed on funding with our friends Peter Fenton from Benchmark and Todd Chaffee from Institutional Venture Partners," Stone noted. Although Stone said that he and Williams "were very impressed" with IVP, he said that Twitter had not been actively seeking additional funding, and noted that the company still held capital from a previous funding round completed in 2008. Revised Twitter Valuation Information Forthcoming "We weren't actively seeking more funding because significant capital from last year's partnership with Bijan and his team at Spark is still in the bank," Stone said. Bijan Sabet is a general partner at Boston-based investment firm Spark Capital, one of several companies Twitter received $20.4 million from in rounds of $5.4 million and $20 million. Stone said that Twitter's rapid growth, fueled in part by cellphone users who interact with the company's service  using SMS text messaging, has made Twitter a target for funding. "Our strong growth attracted interest and we decided to accept [...] a very attractive offer," Stone wrote in the Friday funding announcement. Stone wrote that the addition of Fenton to Twitter's board would be beneficial to the company. "Peter will be joining our board of directors which means we gain his experience and savvy in addition to that of all his partners," Stone noted. "We are now positioned extremely well to support the accelerating growth of our service," Stone said, and added that Twitter was also well positioned to "begin building revenue-generating products." Earlier this week Stone suggested that Twitter was considering a variety of methods to generate revenue. "We are noticing more companies using Twitter and individuals following them," Stone told United Kingdom-based trade publication Marketing Magazine's Fiona Ramsay in a Tuesday report. "We can identify ways to make this experience even more valuable and charge for commercial accounts," Stone added. Twitter Takes $35 Million Third Round Funding Stone revised that message later, writing in the Twitter blog that the company "will remain free to use by everyone—individuals, companies, celebrities, etc.," while also noting that Twitter hoped to "begin iterating on revenue products this year." Friday's third-round funding announcement placed Twitter in a strong position for an eventual implementation of a revenue model, Stone said. "We are now positioned extremely well to support the accelerating growth of our service," Stone noted. Twitter or other partners in the Thursday deal, which reportedly included Spark Capital and Union Square Ventures -- both involved in Twitter's earlier funding rounds -- did not release valuation information. A growing number of companies have been using Twitter to connect to customers and to provide quick customer support, including Starbucks, Comcast and Amazon. Reputation management has increasingly been the goal of some firms with Twitter accounts, such as Web hosting firm GoDaddy and shoe-seller Zappos. Related Links:
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