In 2013, Facebook offered to buy Snapchat for a rumoured $3 billion. Everyone thought that Snapchat’s CEO Evan Spiegel was insane to turn down that offer. A year later, with an investment from VC firm Kleiner Perkins Caufield & Byers, Snapchat raised $20 million, putting their estimate at around $10 billion. All this while their revenue was still at $0. That’s right, the company was not making any money at all.
In March of this year, following a whopping $200 million investment from Chinese giant Alibaba, Snapchat’s valuation skyrocketed to $15 billion. Today however, that changed. According to government reports, Snapchat has raised over $537 million, with another possible $112.3 million on the way. If this is true, that would bring their funding for this year alone to around $850 million. According to CNBC, this latest funding round brings their total valuation up to $16 billion dollars, a mere 2 years after they were hissed at for turning down $3 billion. Not bad for a company with a 24 year old CEO.
If you’ve never heard about Snapchat (which isn’t likely given my 70 year old grandmother has heard of Snapchat), it is a picture sharing / messaging platform that lets users send ephemeral picture messages to their friends, that self destruct after a set period of time. Since it’s launch Snapchat has introduced a host of new features, most notably text chat, stories (which is a timeline of snaps that disappear after 24 hours), video chat and more. In order to try and monetise their platform, Snapchat introduced a Discover platform last year, which basically built in a news discovery feature where content creators could pay to display their content on the app, and the revenue generated from advertisements would be split 50/50 with Snapchat and the content creator. Heaps of sources such as Yahoo News, CNN and the Vice network signed up for Discover, but a year in, the service hasn’t really generated any traction.
Now for those unfamiliar with how valuation works, Snapchat is worth $16 billion dollars, but that isn’t how much money they have. Essentially it means that the company as a whole, aka 100%, is worth $16 billion. So if someone wanted to say invest in Snapchat at a stake of 3.5% ownership, they would be paying 3.5% of $16billion which would be about $560 million.
On top of that, there are rumours that Snapchat is thinking of going public on the stock market, and if that happens, they’re going to be rolling in more green than they know what to do with.