Fred Wilson had a blog post recently in which he talked about online business models, and how that operating costs are as important as revenue. He pointed to companies such as Craigslist that have few employees but huge sales, while a company such as Digg employs more than three times as many people – 70 – even though its content is user-generated.
As part of his argument, Fred cited some of Union Square’s portfolio companies such as Disqus and Tumblr, and how few employees they have. This included Twitter, which has 20 people on the payroll, which seems like a reasonable number.
Now, if you take 20 people and multiply it by $100,000/employees (pretty standard back of the napkin operating cost estimates), you’re talking about $2-million/year.
So, the question is how and where Twitter is spending all the venture capital it has raised.
How is Twitter spending so much money given its payroll is relatively modest? Is it server costs? Development costs? SMS expenses?
Given it appears to be burning through capital at a pretty good clip, you can understand why there’s so much interest in Twitter unveiling a business model later this year.
More: The San Francisco Chronicle has an article looking at how Twitter is going to unveil a revenue model soon. I’ll see it when I believe it.
Even More: Mark Drapeau has a guest post on Mashable looking at Twitter’s future and vision. A lot of food for thought.
How Does Twitter Spend its VC?
Fred Wilson had a blog post recently in which he talked about online business models, and how that operating costs are as important as revenue. He pointed to companies such as Craigslist that have few employees but huge sales, while a company such as Digg employs more than three times as many people – 70 – even though its content is user-generated.
As part of his argument, Fred cited some of Union Square’s portfolio companies such as Disqus and Tumblr, and how few employees they have. This included Twitter, which has 20 people on the payroll, which seems like a reasonable number.
Now, if you take 20 people and multiply it by $100,000/employees (pretty standard back of the napkin operating cost estimates), you’re talking about $2-million/year.
So, the question is how and where Twitter is spending all the venture capital it has raised.
This is a company that raised $15-million in May 2008, and it’s now apparently looking to raise another $20-million.
How is Twitter spending so much money given its payroll is relatively modest? Is it server costs? Development costs? SMS expenses?
Given it appears to be burning through capital at a pretty good clip, you can understand why there’s so much interest in Twitter unveiling a business model later this year.
More: The San Francisco Chronicle has an article looking at how Twitter is going to unveil a revenue model soon. I’ll see it when I believe it.
Even More: Mark Drapeau has a guest post on Mashable looking at Twitter’s future and vision. A lot of food for thought.
Technorati Tags: twitter, venture capital