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Summary:

Snapchat, a service allows you to send and receive photos or videos that sort-of-maybe disappear afterward is getting $100 million in new funds from undisclosed investors, a few months after it snagged $13.5 million from Benchmark Capital.

snapchatscreenshot

That quality possessed by some which draws all others with its magnetic force. With ‘It’ you win all men if you are a woman and all women if you are a man. ‘It’ can be a quality of the mind as well as a physical attraction. Elinor Glyn (It)

The It girl of web services, Snapchat, is close to snagging about $100 million in new investment at a valuation in excess of half a billion dollars, sources familiar with company’s fund raising efforts tell me.

Snapchat is a mobile service that allows you to send and receive photos or videos that sort-of-maybe disappear afterward. It raised $13.5 million in Series A funding from Instagram-backers Benchmark Capital. The company is based down in Los Angeles and has eschewed the Valley way to chart its own course.

The red-hot company has been fielding funding overtures from a lot of usual suspects in Silicon Valley, but sources tells us that founders have settled on an unnamed non-tradition investors (read: hedge-fund) as the source of this new money. In February 2013, the company was valued at around $70 million and now is being valued around half-a-billion dollars. One source put the post money valuation at around $700 million. The new round of funding includes some sort of a secondary component as well.

snapchatscreenshotSnapchat CEO Evan Spiegel who co-founded the company with Bobby Murphy, both Stanford students, recently said that the company is seeing its users upload 150 million images every day, quite a leap from 20 million a day in October 2012. It is said to have 5 million daily active users, which actually is a pretty impressive as it is the only real measure of the actual popularity of a web service.

So why such a rich valuation? One argument — or at least the one I can make — is that as we shift to mobile there are opportunities to recreate and reinvent the social experience. Facebook is decidedly web and despite its mobile efforts, doesn’t have the purity of an experience built for mobile. Instagram was built for mobile and it created a unique culture around the service (that ultimately was worth $715 million to Facebook.) We are seeing something similar with Snapchat — which is part of what I call the “Alive Web.”

snapchat-500Of course, the challenge with all these services is how to take actual usage (aka engagement) and turn into dollars without impacting the community and the core service. We have seen the challenges of monetization in a mini-backlash over on post-Yahoo acquisition Tumblr. Facebook, in its attempts to grow revenue, has polluted the experience with too many ads and its division. Instagram is still searching for possible revenue streams.

But for now, Snapchat is having its moment and that means getting the cash into its coffers.

Here are some of our posts that outline and provide context as to why we find Snapchat a company and a story worth writing about:

  1. Bryan Goldberg Friday, June 7, 2013

    Great… another trendy product that way over-values itself, not realizing the full consequences of that “awesome” valuation…

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    1. Bryan

      Only age teaches you those lessons. I am pretty sure you and I know this now after being in the trenches for so long.

      Best

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  2. Mike Vasquez Friday, June 7, 2013

    I think Snapchat is going to have a very difficult time monetizing its community. It’s a basic service that’s all about its simplicity. It will be interesting to see what they come up with.

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  3. Alan Edgett Friday, June 7, 2013

    @Mike — They won’t come up with anything. And, won’t have to. This is yet another service that will be M&A fodder…continuing the corporate funding of free, consumer web services that simply build goodwill and add little to earnings.

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  4. David Catalovski Friday, June 7, 2013

    @Om You would think $100 million would be better spent on developing ACTUAL technology which positively impacts the world, renewable energy, hardware not a teen sexting app. You can only blame VC’s for lacking vision and giving such ridiculous valuations based on hype.

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    1. Please don’t ever expect VCs, who are self interested by nature and only motivated by profit, to solve global problems. Those can only be solved through political means with the full weight of government efforts backing public sentiment. Witness the successes of the civil rights, environmental rights, and gay rights movements. Please do not wait around for rich people to solve your problems. They won’t.

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      1. David Catalovski Monday, June 10, 2013

        Not ALL VC’s are self interested by nature and only motivated by profit. The ‘premier’ VC’s in the world (Vinod, Doerr) don’t throw their weight behind fleeting garbage like SnapChat, nor do they rely on government or politicians to step up to the innovation plate. Witness Uber, Airbnb etc who are changing social norms and transforming government supported monopolistic industries. 99% of VC’s are sheep, and as Gordon Geeko correctly said – sheep get slaughtered.

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  5. “In February 2013, the company was valued at around $70 million and now is being valued around half-a-billion dollars.”

    How does one either undervalue or overvalue a company that much in 5 months? I agree with all the comments above. I hope they find a path to making money but I am getting a very uneasy feeling in my stomach by all the consumer apps that have little to no chance of making money other than sell to a larger company who then has to figure it out.

    The moment they turn on the “revenue engine” is the moment we will see if the house of cards falls, what they are really worth in terms of actual dollars and cents and who the last one standing is if it does fall. Again, I still do wish these guys the best of luck and hope they have it all figured out.

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  6. There is no one face to Snapchat. Every day millions of us in the Snapchat community share how we feel, where we are, and what we are doing. Sometimes its happy or funny, sometimes sad or bored, but most importantly – we communicate who we are in the moment.

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    1. Well said Bracken!

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  7. Gregory Kabitsky Saturday, June 8, 2013

    Valuation from $70M to $700M in 4 months… It looks like another one bubble..

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    1. Gregory

      What is happening is belief that a new social platform can be built, this time on mobile. So that is the reason (justification) for nose-bleed valuations.

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  8. Umm The reason Snapchat is hot is not because of mobile first (what isnt ?) but because its a transient experience. Expect that to catch on more and more now…

    Interestingly that is driven by Mobile because where else would you catch a fleeting memory ?

    And as for crazy money / crazy valuations etc etc Thats always a part of the Silicon Valley star culture. Best of luck to the Snapchat founders :) I do not want to be them :)

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