Twitter's IPO is an indicator for future startups

By Marc Castro

Nov 04, 2013 05:22 AM EST

Twitter's IPO is not just about shares held by investors and employees. How the stock fares would influence how dealmakers of Silicon Valley would evaluate Web startups. 

A robust Twitter debut would ensure venture capitalists and entrepreneurs that consumer internet IPOs are good investments. This would in turn help these start ups set the tone and the pricing for their shares and later funding rounds. A drop in shares, like what occurred following the IPO of Facebook back in May 2012, would send the negative impression on these start ups and make venture capital investment dwindle and dry up before the action begins.

The drop in Facebook valuations in the first three months after it became public resulted in aftershocks through out the landscape. According to the National Venture Capital Association, investments in US internet based firms fell for three straight quarters before recovering in the second quarter of this year.

Twitter had gained enough investor demand to result in the sale of all the shares of its IPO, according to people with knowledge of the matter. The total offer price is estimated to reach USD1.4 billion. 

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