Snapchat close to raising $100 million | Hacker News Reader

Snapchat close to raising $100 million

gigaom.com

42 pointsmikegreenspan48 comments

For those wondering why, check out slides 14 and 15 of the 2013 KPCB Internet Trends report:

http://www.slideshare.net/kleinerperkins/kpcb-internet-trend...

To your point, PG wrote a complete essay on exactly why GROWTH matters so much to valuations - http://www.paulgraham.com/growth.html

Uh, that doesn't explain how they're making money, or plan to. More users = more photos transmitted = more bandwidth = more money burned, and not earned.

I imagine it's actually fairly simple for them to integrate ads: you'll have to watch a ~10 second ad before you can see your message.

Edited to add: Not to mention that they have a captive audience--you'll have to watch the ad, which I have to think is prime ad space that they can charge for.

I don't think that model will ever work. Most SnapChats are trivial random stuff. Cute but you're not going to sit through 10 seconds of Citibank's credit card pitch to see your buddy with a small carrot sticking out his nose. Secondly, SnapChat's are typically under 5 seconds. So it's like watching 2 hour long commercial for a 1 hour show.

On the contrary, 5 seconds for an Ad is the sweet spot before people get pissed off. Look at YouTube videos. They require you to watch about 10 seconds before you get the "skip ad" option and it seems to be working great for them.

Ooooh, they know exactly where the future lies and where to invest. That is why they have had such stellar performance.

http://www.businessinsider.com/venture-capital-kingpin-klein...

Everyone looks at these kinds of things with wide eyed astonishment. We are talking Pets.com era stupidity in valuations.

What does Snapchat need $100M for? The idiocy continues.

Trying to build out the next generation mobile platform? People never raise money for their current product.

What does that even mean? What is "the next generation mobile platform?" I'm not even sure what you mean by "mobile platform." Snapchat is a mechanism for sending photos to friends. Privately. People don't want to send messages on it. They don't want a Snapchat "news feed"(doesn't make sense since the whole point is privacy).

Why do they need to become a mobile platform? The founders can charge $0.99 for an annual app subscription and sit back and have a great income. Instead $100M will evaporate trying to become another FB/Twitter, which doesn't even make sense.

Except, not many would pay for that and will move to alternative.

Again, everything you mention is based on the current state. No successful entrepreneur raises money (or runs there company for that matter) planning on the status quo not changing.

Why is Snapchat better positioned to convert $100M into the next "mobile platform" than any other entity?

Number of users.

Diversity of product use.

Lack of existing brand stigma.

Why doesn't it make sense? Snapchat has become massively popular on mobile devices, and much moreso than even Facebook and Twitter in terms of engagement and growth.

People had literally this exact same sentiment about Facebook in 2008-2010. ("It's just a photo sharing site for kids...") And they also suggested adding a subscription service. Instagram sold before they got along to integrating ads (they had less than 20 employees), but that product was/is on a similar trajectory. There doesn't exist a single large social network that directly charges users, so I don't think you can just assume that's a valid strategy.

When you're on a wave like this, you ride it. They likely sold <15% of the company for that $100MM. Sure, the current product is silly. But it's unbelievably sticky for users and really fun. If you don't understand this, I bet haven't used it at length. It feels surprisingly like Twitter did early on. A new medium. A new protocol. A new way of interacting with friends.

"Toys are not really as innocent as they look. Toys and games are preludes to serious ideas.” - Charles Eames

I wonder how many millions will end up at Google since Snapchat is built on Google App Engine. [1]

[1] http://gigaom.com/2013/05/07/snapchats-act-of-faith-in-build...;

And then the kids will move on to the next thing. Hopefully, for the sake of their investors, that happens after they've been acquired for a billion. Rinse, repeat.

Didn't people say the same about instagram and twitter? There are services that have the ability to stick around.

I've read teens are slowly moving away from facebook to Twitter & Instagram. Probably because it has less drama. It is more about narcissism without needing to reply to anybody.

Oh you read it? I'm glad you read :)

However, note that everything you read is not necessarily true. Unless you have HARD DATA, whatever you read may very well be made up.

just following the format of who I was responding to sherlock.

"Didn't people say"

We'll never truly know if instagram could've stuck around had it not been acquired.

Twitter is an indispensable communications medium that has more than 1 use case (read news, talk to friends, overthrow a government, etc). Thus ads makes sense (and I would even pay a low, yearly fee to keep it around).

Snapchat is interesting, but $100 million interesting?

Non-tech people probably say the same thing about GitHub...

Github has a proven business model.

And those will be a different set of kids - next generation.

Does snapchat really need $100M?

If I were guessing (and I am): probably not, but later stage investors usually want their ~10-20% of the company in a round. After a string of "no, we don't need that $YYm++", the valuation (the only truly negotiable number in the negotiation) gets high enough that it is insane to continue saying "no".

I tutored teenagers in physics and math for a while to make ends meet. And they love snapchat. They are also basically ready to be done with facebook.

There are two reasons they prefer snapchat to facebook and texting, respectively, both of which basically come down to privacy:

1) Their parents are on facebook

2) They know that what they say today might look stupid tomorrow, and facebook (and the phone companies) save everything, forever.

Basically, they have figured out that what they say when they are 13 will look ridiculous when they are 17. And what they say when they are 17 will be really cringe-worthy when they are in college. They also know that facebook's track record on privacy is awful, so even if they went through the trouble to create different types of friend lists, with different access settings, etc., facebook could just change everything tomorrow.

I could easily see snapchat expanding to build an entire social network built around the "only see for 10 seconds and its gone" feature, and droves of teenagers moving onto it. If they do, facebook could be in serious trouble.

How could an entire social network be built around the "only see for 10 seconds and its gone" feature? I'm genuinely curious.

Conceivably they could build out the address book/friends list features to create a persistent profile, and then all the other media content is temporary.

It is important to note that in the startup community it is generally a good tactic to raise money when you don't need it, because that gives you enormous leverage in the negotiation. If, on the other hand, you're in a negotiation where the other side knows you need the money, you are going to get much worse terms.

This holds true when you are building a product where you'll potentially need money to scale but you know that though you are growing rapidly, your current infrastructure be enough for a while. There, you can raise money against the future.

But this is snapchat. Don't expect them to become another Facebook, don't expect them to become another twitter. Because they've already defined their use case, which is simple and straight forward so why $100m?

Great for them. Snapchat is the only service in recent memory that I've actually overheard high schoolers use as a verb. If you can define a new way to share something that gets its own language, you've got something pretty interesting.

these valuations just don't make any sense.

What I'd be curious about is how much of this round (if any) is secondary / going to cash out some early employees / founders / early investors.

It's all going toward Snapchat R&D and sales, of course. Staying on the cutting edge of technology and maintaining your paying customers is tough in today's market.

I've never seen that sort of ratio discussed here, is it normal to be raising at 20% of your valuation?

Yes. That is a very standard ratio.

The early investors in Zynga have some extra cash to invest?

My favorite part is they appear to be snubbing the Valley and the traditional VC's. That's brave and admirable and healthier for the entire ecosystem.

So when is Facebook going to buy snapchat?

Rumor is they already tried to buy them and after the snapchat CEO rejected them they built Facebook poke (which is a prettier snapchat clone). Details about potential purchase price were never leaked.

Snapchat CEO welcoming Facebook: http://www.theverge.com/2012/12/21/3793648/snapchat-ceo-on-p...

http://news.softpedia.com/news/Facebook-s-Poke-App-Is-a-Snap...

http://techcrunch.com/2012/12/21/facebook-poke-app/

Ha ha ha thank you Bernanke, this is amusing. Dot com 2.0 has arrived! When is the IPO?

Interesting to see everyone speculate on how terrible of an investment this is when most users couldn't wrap their head around the concept of Snapchat ~7 months ago.

Here's why the need $100 million: They are building the future of chat and they already have incredible engagement and growth month over month.

How to make $100 million disappear in 10 seconds.

Porn pays.

havent seen this cinderella story before....

LOL that is all

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