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Snapchat reportedly raising funding at $3.5B valuation

News comes only four months after Snapchat raised $60 million in June

Financial trends and news by Steven Loeb
October 26, 2013 | Comments
Short URL: http://vator.tv/n/32d1

Is it safe to call Snapchat a phenomenon at this point?

Only a few months after raising its last round of funding, the company is now consider raising another round, according to a report from AllThingsD on Friday. This time the amount will probably in the range of the hundreds of millions, and will likely come from investors in Asia.

The speculation at this point is that the funding will most likely be coming from Tencent, a Chinese Internet giant, which makes money from in-app transactions. And that seems highly likely. As Forbes pointed out, CEO Evan Spiegel told them back in June "that Tencent is a huge role model for us.”

Astoundingly, the new funding could put the company at a $3.5 billion valuation.

This new funding would come only months after the company raised $60 million in Series B funding from IVP, with help from General Catalyst, Benchmark Capital, Lightspeed Venture Partners, and SV Angel in June. The company has raised a total of $75 million altogether. 

VatorNews has reached out to Snapchat for comment, and we will update if we learn more.

The rise of Snapchat

What is really striking about this news is how young Snapchat is, and how quickly it has risen to become extremely popular.

In case you aren't familiar, Snapchat allows users to snap images, write a message on top of the photo, and designate a certain number of seconds for which the image will be viewable before self-destructing.

Launched in 2011, Snapchat has seen some surprising growth. It recently announced that its users were sending 350 million snaps every single day, up from 200 million in June. 

The app grew so quickly, in fact, that it attracted the interest of Facebook, who tried to buy the app for over $1 billion, according to a report from the Wall Street Journal Friday, which is what the company paid for Instagram last year.

Facebook was reportedly turned down, and instead tried to build its own Snapchat competitor called Poke. The app allowed users to send each other messages, photos, or videos that will only had a set time limit before they expire.

Needless to say, the app completely bombed, while Snapchat is still going strong.

Facebook was not available for comment. 

Can it make money?

What is most impressive is that the company is getting all of this money and attention while it has not even proven that it can make any money yet. 

Spiegel addressed this at the TC Disrupt last month, saying he wanted to company to start generating revenue before its next funding round.

“We’ve been thinking a lot about the future of the product,” he said. “We are a business, and we want to make money, but the way we think about monetization has changed. We’ve looked to Tencent [an Internet portal], which makes the vast majority of their revenue from in-app transactions. They had to build things that people wanted to buy. That’s a really scary challenge, to make things that people want.”

The most obvious comparison to Snapchat is Pinterest, which just this week raised $225 million in new funding, despite the lack of a revenue stream, though that will probably change very soon

Such a big valuation for Snapchat would probably take it out of the running to be acquired. But if the company eventually wants to go public it is definitely going to need to find that revenue stream.

(Image source: https://social.ogilvy.com)


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