Little-known investor poised to score big with Twitter IPO

New Yorker Suhail Rizvi has quietly amassed a $1bn 15% stake in the microblogging phenomenon for himself and his backers
Twitter
By Reuters
Fri 04 Oct 2013 04:37 PM

When Twitter goes public in coming weeks, one of
the biggest winners will be a 47-year-old financier who guards his secrecy so
zealously that he employs a person to take down his Wikipedia entry and scrub
his picture from the Internet.

Over the past two years, Suhail Rizvi, founder of
New York private equity firm Rizvi Traverse Management, has quietly amassed a
stake of more than 15 percent in the microblogging phenomenon for himself and
his investors at a cost of more than $1 billion, according to three people with
knowledge of his investments.

While Rizvi was known to be an investor in Twitter,
the extent of his involvement had not previously been reported.

Twitter made its IPO registration documents public
late Thursday, setting the stage for the most closely watched initial public
offering since Facebook's in 2012. Rizvi Traverse is listed as one of the
institutional shareholders with at least a 5 percent ownership stake, but no
further details were disclosed.

The shares Rizvi purchased were distributed among
investors via multiple vehicles, sources said, and the size of his personal
stake is not known.

People with direct knowledge of his investment
activities say that Rizvi, backed by Chris Sacca, a former Google executive and
Twitter investor, was instrumental in attracting large private investors to the
microblogging site, serving as matchmaker between the company's founders and
global financiers from Wall Street to Riyadh.

Rizvi declined to comment for this article. Sacca,
a longtime friend, gave him an entree into tech investing in 2011 - when
Twitter was still struggling to make money. From there, Rizvi scored stakes in
some of the most sought-after Internet startups, from Facebook Inc before it
went public to Square and Flipboard.

Rizvi's string of tech deals came amid intense
competition among hedge funds and private equity investors to secure shares in
startups, highlighted by Russian billionaire Yuri Milner's 2009 investment in
Facebook.

With tech companies waiting later than ever to go
public, some investors believed they may miss out on the biggest gains if they
wait to buy shares in public markets, when a company's value may no longer rise
exponentially.

The son of an Iowa psychology professor, Rizvi has
networked with rich and powerful people including Queen Noor of Jordan and
Google Inc's Larry Page and Eric Schmidt, devising financing schemes that
leveraged his access to deep-pocketed investors, according to people who know
Rizvi.

Those who invest with Rizvi include British
billionaire Richard Branson and Jeffrey Skoll, the former eBay executive and
film producer, according to people with knowledge of the matter. It is not
clear whether they are among the investors he brought into Twitter.

Before turning his attention to the internet,
Rizvi's deal-making focused on Hollywood. He helped Hugh Hefner take Playboy
Enterprises private; bought and then sold the Hollywood film studio behind the
"Twilight" series; and led the buyout of a leading talent agency,
International Creative Management (ICM).

Rizvi is not alone among entertainment investors
who have turned their focus to Silicon Valley. Former News Corp executive Peter
Chernin's Chernin Group has invested in Tumblr, Pandora and Flipboard, while
Michael Ovitz, the talent agent and former Disney CEO, has invested in Ron
Conway's SV Angel funds, the tech incubator Y Combinator and venture capital
firm Andreessen Horowitz.

But few have operated on the scale of Rizvi.
Twitter has a policy of restricting outside investors to only a handful, but
Rizvi has had more freedom to bring in additional investors since he bought a
large slice of the company.

"He's not to be underestimated. His approach
to traditional media as well as technology has put him in a great
position," said Jeremy Zimmer, chief executive of United Talent Agency, a
competitor of ICM. "His ICM investment was viable and gave him a seat at
the table and a chance to make a sound investment in Twitter."

In late 2010, Sacca approached Rizvi with an offer:
Sacca's friend Evan Williams had stepped down as CEO of Twitter and was seeking
to sell 10 percent of the company. Rizvi soon snapped up the shares for $340
million, according to people familiar with the matter.

Following that first transaction, the two men
formed a highly efficient tag team, the sources said. Sacca would seek
shareholders who wanted to cash out, while Rizvi helped raise money to purchase
the stock.

The friends successfully pitched JPMorgan Chase
& Co on a deal to buy more than $400 million worth of Twitter shares in
2011. Months later, Rizvi recruited Kingdom Holding Co, Saudi Prince Alwaleed's
investment company, to buy an additional $300 million in stock in a separate
vehicle.

JPMorgan Chase and representatives for Alwaleed did
not respond to requests for comment on the deal.

By mid-2013, investment vehicles managed by Rizvi
and Sacca had collectively bought more than $1 billion in shares, a stake that
at one point amounted to nearly 20 percent of Twitter before it was diluted in
recent months, sources said.

Twitter declined to comment.

Rizvi's Twitter connections opened the doors to
other investing opportunities. Last year, Rizvi led a $200 million investment
in Square, the mobile-payment processing company founded by Twitter co-founder
Jack Dorsey, at a $3.25 billion valuation. On September 24, Rizvi led a $50
million financing round for the news reader app Flipboard, whose founder, Mike
McCue, once sat on Twitter's board.

But he has not always gotten his way in Silicon
Valley. Although Rizvi indirectly owns some shares of Pinterest, Rizvi failed
to purchase a significant stake when the online scrapboard site raised $100
million in 2012 and $200 million this year. It was unclear what stymied his
attempts.

"He fought tooth and nail for an
allocation" but failed, an angel investor in Pinterest recalled. "He
was willing to pay."

It also remains unclear whether Rizvi's Internet
investments other than Twitter will pan out. Some industry insiders note that
he missed out on the huge gains that were made with very early investments in
social media, and companies including Square and Flipboard remain unproven.
Rizvi was able to buy only $100 million in Facebook shortly before its IPO,
thus limiting his returns, according to people with knowledge of the matter.

Rizvi, who owns a sprawling three-home compound in
Greenwich, Connecticut, and a 1.65-acre Palm Beach, Florida, estate near Bill
Gates and Michael Bloomberg, was born in India but moved to Iowa Falls, a town
of 5,200 people, when he was five.

Along with his older brother Ashraf, a hedge fund
manager, Rizvi graduated from the University of Pennsylvania's Wharton business
school. Both now serve on the undergraduate school's executive board.

Rizvi worked as a real estate analyst while at
Wharton, then he started and sold a telecom company. With the proceeds, he
financed his first big buyout in 1995, when he bought the electronic
manufacturing business of a Puerto Rico phone company. Refocusing it on making
higher-cost equipment, he spent the next four years boosting the company's
annual revenue from $10 million to $450 million.

He did not break into the elite circles of media
investing until 2004, after he founded Rizvi Traverse with John Giampetroni, a
New York private equity investor.

In 2005 the ICM talent agency, which represented
stars like Mel Gibson and Robert Redford, was looking for financing as it
struggled with the defection of key agents and stars.

Rizvi took a controlling stake in ICM for $100
million, including $95 million in debt financing from Merrill Lynch & Co,
according to a person with knowledge of the deal. Rizvi Traverse put up just $5
million. Later, he refinanced the agency for $300 million against future
revenue from assets like "Friends," the popular show in which ICM
holds a stake.

That $300 million was enough to repay Merrill Lynch
and provide a hefty return for Rizvi and his partners.

Even as Rizvi's circles have broadened, he has
continued to keep a low profile, both in his personal style - sometimes flying
commercial, one Hollywood executive said - and in his hands-off approach to
tech investing. Despite bringing capital, he has not taken a board seat at
Twitter, Square or Flipboard.

Rizvi's trusted lieutenant, Ben Kohn, has instead
been the face of the firm on the West Coast, several entertainment industry
executives said. Known for an aggressive negotiating style that contrasts with
Rizvi's more reserved stance, Kohn manages a dozen employees out of a small
office in Los Angeles.

Rizvi's growing network includes the likes of Vivi
Nevo, the secretive Time Warner Inc shareholder who also famously prided
himself on being "UnGoogleable," mutual friends of the two men said.

But while Nevo is now easy to find online, Rizvi
maintains an elusive Web presence. The only readily found picture of Rizvi is a
snapshot of him sitting with Twitter CEO Dick Costolo and Alwaleed in a New
York hotel after the prince bought Twitter shares.

The photo, on a Saudi news outlet, had irked
Twitter executives and Rizvi, as they had preferred to keep the transaction
quiet.

 

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