Is Twitter worth $10 billion?

Famed startup investor John Doerr recently said that turning down a chance to put money in Twitter, the fast-growing, San Francisco-based microblogging company, was one of his biggest mistakes.

He may be set to correct that mistake, according to Bloomberg, which reports that his firm, Kleiner Perkins, and Russian Internet investment group DST, are set to invest in Twitter in a deal that would value the young company at $3 billion. Its most recent fundraising round, in September 2009, valued it at $1 billion.

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That’s a hefty price for a startup whose revenue strategy is still questionable, as even its own executives admit. Twitter has launched a suite of advertising products based on users’ posts, or tweets. Twitter’s Promoted Tweets, Trends, and Accounts allow businesses to highlight search terms or particular posts, or sign up new subscribers to their posts.

But to date, most of Twitter’s revenues appear to have come from deals to license data to search giants like Microsoft and Google, as well as smaller companies like Jive and Gnip.

So the notion that Twitter is worth $3 billion on the current state of its business is nonsense, of course. And anyone who argues that it’s based on some solid projection of future growth is huffing whiteboard-marker fumes.

There is a classic investing theory that explains the price Kleiner and DST are willing to pay: It’s called the greater fool. If Doerr and company are paying such a high price for Twitter, they must be betting that in short order, someone else will be willing to pay much, much more.

If you’re willing to say Twitter’s worth $3 billion, why not $10 billion? The beauty of the speculative market for startups is that there’s no need to actually analyze a business: If someone actually pays the price, it’s true.