Two Top VC Firms Bet on a Second Life for Twitter as a Startup

Twitter Inc. is a strange target for venture capitalists. It’s 16 years old, growing slowly and publicly traded, all anathema to what VCs want. Yet, Elon Musk somehow persuaded two of the world’s most prominent VC firms, Andreessen Horowitz and Sequoia Capital, to invest in his effort to take Twitter private.

The deal may have been a nonstarter for these firms a few years ago, but recent changes to how they operate would allow more of these sorts of nontraditional investments in the future. Although each firm began as a pure VC outfit, they’re now both so-called registered investment ...