As one of the investors said at the time, "He's either going to be remembered as an idiot or as a genius."
The thing is, I don't think even he knew which way it was going to go until after the Summize acquisition two years later.
Twitter always seemed like a worthwhile project, but those first two years were really hard for everyone and from the outside it looked like they might just completely fail to keep up with the growth.
That's a bit ridiculous. Buying Twitter for $44bn was entirely his fault (and I think, a very stupid decision) and he does seem to be running the company into the ground, but were the fundamentals of the business solid before he got there? Did it ever justify its share price? Is ad revenue a sustainable business model? Was it going to remain profitable for long enough for someone who bought in e.g. 2020 to make a good return?
If you go to market and buy a lame horse then flog it into the ground, that's entirely your fault, but it's not like the horse was ever going to race well.
But why would he bother? If the company was really in such bad shape, why not just let it fail and create a competing service (for a lot less than $44B)?
In any case, from my perspective Twitter didn't really make serious mistakes. They got $44B for the company despite its issues.
You do realize that all of those companies grew immensely after their Series A/B rounds of funding, right?
Regardless of what I think of the guy, there is a lot of hate on here, and it's easy to look back and say "well of course Twitter did well, he's so lucky he got to invest in it in '08" as if it was common knowledge that it would be this big.
So the 'world's most brilliant entrepreneur' paid 44 billion - about twice as much as its estimated worth at the time, though much less that that now - to own the Twitter brand, only to toss it out within a year. Arguably the one thing that, while damaged, still holds some value. Help me make it make sense.
Buying Twitter at the price he bought it at made no sense once the market turned. It would have made financial sense to structure the deal in a way that it was easy for him to get out of, but he didn’t. Twitter has also now been saddled with additional debt with interest that needs to be paid on a regular basis since it was a leveraged buyout. I’ve been thinking about the deal since it happened and it certainly doesn’t seem to make financial sense to me.
Twitter was pretty awfully run even before he bought it. Their business metrics were absolute crap for a business of their scale and in the pandemic environment.
The jury is still out if new Twitter has failed or not.
He isn't - but Twitter is a $50 bill mkt cap company and Square is $100 bill. The point is, when smart investors invest in something which appears stupid, there is a decent chance it isn't stupid at all, that it just requires a different viewpoint. Or something. Anyone around long enough for the start of twitter and airbnb can tell you how stupid they seemed to a lot of people (myself included). They weren't stupid, we were.
The irony is that if Evan Williams had not bought back the shares and had instead started Twitter out of the same corporate entity, the investors would've done a whole lot better. Instead of breaking even, they'd be sitting on a few billion.
Market cap of pre-acquisition twitter is why the company is drowning in so much debt. Had he timed his acquisition better perhaps it would have been more sustainable. Its market value collapsed a few months after he made his acquisition offer. Ergo less debt.
It made a profit 2 years before he bought it. And the only reason it made a loss the last complete fiscal year before he bought it was due to a massive > $1Bn FCC (or FTC?) fine.
Twitter’s underlying business was already profitable.
From the article, "industry insiders have growing doubts about Williams' business judgment and are starting to say the company is his vanity project"
This is the co-founder of Twitter which is still losing money despite being post-IPO and having a huge user base. As far as I'm concerned Twitter is still a vanity project.
This is a great example of how a company was undone by greedy VCs. A little history lesson. The founders of Twitter really believed in a vibrant ecosystem for Twitter. They gave the developer community a slew of APIs, gracious quotas, and support.
The ecosystem thrived and created dozens of major companies that made Twitter truly useful. The user numbers grew as well because those very same companies marketed their new and innovative solutions. Then Ev was fired. Dick was brought in and month of after month they lay waste to the ecosystem. Dozens of companies died and hundreds of millions of dollars in VC money was lost.
Why? Fred wanted to cash out with a lot of other VCs. They wanted to turn Twitter into a media company. Run up the revenue and go IPO to dump their shares. Sure, if Twitter went along with their founders vision it could have been much bigger over time but going that route didn't help Fred cash out his 100x return and report back to his LPs.
The reality is founders spend years even getting off the ground. The "board", represented by VCs, rarely add value to the operation and vision of the company. They invest because they believe in the vision. Make sure that reality is in writing so people like Fred don't stab you in the back so they can cash out early.
Ev was a seasoned entrepreneur at the point he sold that stake, definitely a smart move to take something off the table. $340 million is an immense amount of 'fuck you' money for something that had no business strategy at the time. Twitter could have very easily gone the way of Tumblr, resulting in a loss of 2/3 of Ev's value (and Tumblr is a wildly successful example).
I gather it was a leveraged buyout so he wont be losing much if it does go under. The only problem is most leveraged buyouts are for mature low or no growth companies that are profitable have strong cashflow and low capex requirements. Cant really say that about Twitter in any way. It feels like its going the way of Digg.
Why? The business was weeks away from shutting down in 2015 under original ownership, Twitter looked to be saved from 2018 - 2019, but not really, seeing as 2018-2019 were the only 2 profitable years for Twitter ever
Twitter was leaking money for 2020 and 2021, the trend looked to be continuing for 2022, they had an OK first quarter, and maybe they were going to continue to do well, but I sincerely doubt it seeing how every single tech stock has performed this year. Q2 alone blew away $344 million loss compared to Q1's $513 million gain. I also sincerely doubt Twitter was being led well by looking at their earnings reports and the money hole that punctured the company coffers in 2020Q2. The middling performance through 2021 continued when that should've been Twitter's best years, all other tech stocks even ad agencies were printing money, why was Twitter not doing the same?
I think Twitter board's best decision they ever made was offloading the company off to Elon, cut their losses for a clearly failing company with little to no headwind coming their way for the next few quarters at minimum.
But I do need to know why does Elon get the brunt of the blame for Twitter's presumed downfall? Seems like Twitter was already a falling knife by itself
The thing is, I don't think even he knew which way it was going to go until after the Summize acquisition two years later.
Twitter always seemed like a worthwhile project, but those first two years were really hard for everyone and from the outside it looked like they might just completely fail to keep up with the growth.
reply