SAN FRANCISCO, USA: Twitter received $100 million in funding on Friday, valuing the company at $1 billion, according to a person familiar with the matter, as investors bet that the Web company's explosive growth will yield actual revenue or a lucrative deal.

Investors including mutual fund giant T. Rowe Price and private equity firm Insight Venture Partners took part in the latest round of funding which closed on Friday, according to Twitter. Twitter did not give the amount of the funding.

Analysts and industry executives say the involvement of T. Rowe Price and Insight set the stage for an eventual IPO or acquisition, and illustrated how private equity and investment fund houses were increasingly getting into tech startups.

But the three-year-old Internet microblogging company has yet to figure out how to make money from the free service.

Executives have cited premium features and advertising as key initiatives to make money, though co-founder Biz Stone told Reuters this week that Twitter would not take advertising this year, despite widespread speculation that it would.

While the heady valuation for a company without revenue may, for some, recall the unbridled exuberance that defined the dotcom bubble of the late 1990s, others argued that Twitter was a special case.

"I wouldn't take this as a sign that the entire market has become frothy now and that every entrepreneur can get funding," said Raj Kapoor, a managing director at the Mayfield Fund.

Most startups raising capital still need to prove that they have real revenue opportunities, Kapoor said.

"If Twitter gets a pass, it's because it has "pierced the mass market," he said. "It's become a verb."

Twitter, which lets people send, or tweet, 140-character text messages to groups of "followers," is one of the fastest-growing Internet social media companies. Worldwide visitors to its site hit 44.5 million in June, up 15-fold from a year earlier, according to comScore.

It's a verb

Twitter announced it had closed a "significant" round of funding on the company's official blog on Friday, with existing backers Institutional Venture Partners, Spark Capital and Benchmark Capital also participating.

A person familiar with the matter, speaking anonymously because the deal terms were not public, said the investors contributed $100 million in new funding, granting the company a $1 billion valuation. The amount of financing and the investors was reported by the Wall Street Journal on Thursday.

A February round of funding in Twitter, led by Institutional Venture Partners and Benchmark Capital, had valued Twitter at just about $250 million. The pair jointly invested $35 million in Twitter during that round.

Some analysts believe Twitter could eventually be acquired by one of the established Internet companies such as Google Inc, Yahoo Inc or Time Warner Inc's AOL. Google CEO Eric Schmidt called Twitter a "poor man's email."

The company however has said it intends to remain independent, and in Friday's blog post, Chief Executive Officer Evan Williams said the new investment partners "share our vision for building a company of enduring value."

The investment in Twitter by T. Rowe Price, a mutual fund known more for investments in public companies than in startups, stirred speculation that Twitter could be moving toward an eventual public offering.

Martin Green, Chief Operating Officer of online messaging service Meebo, said large funds are increasingly looking to invest in late-stage private companies.

Analysts say they are chasing higher returns with a still-acceptable level of risk, given the small amounts invested, usually for preferred shares.

"When we did our funding round 18 months ago we ended up talking to a bunch of those kinds of firms as well," Green said. The big funds offer insight into the public markets and can help lay the groundwork for an eventual IPO.

But "it speaks more of their (Twitter's) aspirations, than it speaks to proximity to an IPO," he said.