How Twitter’s largest outside investor tricked me
FORTUNE — When Twitter (TWTR) unveiled its IPO registration last month, a lot of folks were stunned to learn that the company’s two largest institutional owners weren’t any of the venture capital firms known to have invested in the company. Instead, they were Michigan-based private equity firm Rizvi Traverse (17.9% stake) and entities affiliated with J.P. Morgan (10.3%). Both firms were known to have some Twitter exposure, but significantly more than Benchmark or Spark Capital or Union Square Ventures or Yuri Milner’s DST Global? Stunning.
So how did these two firms accumulate such large positions in Twitter without anyone really noticing?
To learn that, you apparently must go back to a story I wrote three years ago. It was about Chris Sacca, the former Google exec and super-angel who had quietly been raising third-party capital to buy shares in Twitter from vested employees and early investors. We reported that he had secured $30 million for a pair of dedicated vehicles, and that he had recently sent out offering docs for a third fund called Lowercase 140 (which I realized was Twitter-related thanks to its name).
When I called Sacca about Lowercase 140, he sounded alarmed. Probably because he only had sent the documents to a tiny circle of prospects (who was leaking?), and also because my story was likely to piss off Twitter (which was notorious for trying to keep all of its secondary sales quiet).
So Sacca killed off the Lowercase 140 effort, and came up with a new strategy. He’d keep raising Twitter funds, but would make damn sure that they didn’t look like Twitter funds to folks like me. So when he raised money on behalf of Rizvi Traverse — and, indirectly, J.P. Morgan (JPM) — he called one of the vehicles Institutional Associates Fund LLC. Another one was called Compliance Matter Services LLC. And when those vehicles filed Form Ds with the SEC, his name wasn’t listed. Neither was an address that would jump out as affiliated either with Sacca (known to live in Truckee, CA) or Twitter (based in San Francisco).
All of this became depressingly obvious upon reading the S-1,and Sacca laughingly copped to it when I asked.
He said it was an old trick he had learned during his Google days, when scoping out locations for the company’s first large data centers. Find the most pedestrian-sounding names in the hopes that no one would take a second look.
Each day I skim the latest SEC Form D filings. And there’s a 99% chance that I saw both Institutional Associates Fund LLC and Compliance Matter Services LLC, without choosing to click on either one.
Particularly galling is that the new SEC reporting requirements forced Sacca to reveal all of this in IAPD filings, but I never thought to look at those either (despite the rumors of his Twitter-related fundraising prowess).
So I tip my cap to the man who tricked me. And vow to not let it happen again (although, for all I know, he’s doing it as I write this).
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