Term Sheet

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Twitter's huge payday for early investors

October 16, 2013: 4:57 PM ET

For early investors, Twitter is not a home run. It's a grand slam in the bottom of the ninth in Game 7 of the World Series.

FORTUNE -- Twitter yesterday updated its IPO registration, disclosing four top-line items:

  1. 1. Its shares will list on the NYSE
  2. 2. User growth decelerated a bit
  3. 3. Revenue growth was flat
  4. 4. Its percentage of ad revenue coming from mobile climbed from 65% to 70%

Much further down in the doc, however, was a revised cap table that showed how Twitter's earliest investors will fare. In short, ridiculously well.

Here's the breakdown:

  • Union Square Ventures (led Series A in 2007): 27.84m shares, 5.9%
  • Spark Capital (led Series B in 2008): 32.4m shares, 6.8%
  • Benchmark (led Series C in 2009): 31.57m shares, 6.6%

At last check, Twitter shares were being marketed at $31 per share on the private markets (working out to a $15.5 billion valuation). Let's use that as a baseline, even though we've already seen one bank analyst issue a $50 per share target. Here's what each firm's stake would be worth, compared to the size of the fund out of which it invested in Twitter:

  • Union Square Ventures (led Series A in 2007): $863m in Twitter stock vs. $125m fund size
  • Spark Capital (led Series B in 2008): $1 billion vs. $360 million
  • Benchmark (led Series C in 2009): $979 million vs. $500 million

In other words, two of the three firms will more than double their entire fund based on just one investment. Benchmark will get there if Twitter stock goes just $1 higher ($32 per share).

And this doesn't even account for the fact that both Spark and USV each did two secondary share sales. Twitter doesn't break these out in its IPO documents (which is unusual) but, for example, it's known that Spark owned 15% after its 2008 deal and invested inseveral subsequent rounds (again, its current stake is just 6.8%). Chances are that each firm may have already returned the fund on those sales, meaning that what comes in the IPO is just gravy...

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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