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Comment by ankurpatel | Hacker News Reader

A $19B company created in 3 years without any revenue model from nothing by a college kid. This is bit shocking. This smells like a Ponzi scheme as the valuation keeps increasing over time even when there is no revenue generated. The losers in this scheme will be the last round of investor who will lose it all.

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They are asking–and getting (allegedly)–$750K a day from big brands for ads.

Smells like revenue to me.

http://www.adweek.com/news/technology/snapchat-asks-brands-7...

The risk of loosing the users to another app in the future is not taken into account in this valuation. What if all the teens grow up and move on to another app and the new teens do not use Snapchat and use another app that goes viral?

And Snapchat's very design (no history) makes the app not very sticky. There is practically no switching cost.

Are brands paying though? I don't see any ads.

This is nothing like a Ponzi scheme, which is where new investments are used to pay off old investments, and investors are kept in the dark. Old investors get nothing additional from this kind of deal besides maybe a chance to liquidate a small portion of their shares at each round.

It also doesn't actually mean the company is worth $19B if you say, compare it to a public corporation. There's a huge difference. It's still a highly speculative investment, which is why they're not public. If Snapchat was to go public today, Wall Street would likely eat them alive. This just means that some venture capitalists can be convinced to buy something like 2.5% of the company for something like $475M.

It's a bit terrifying.

There are enough real companies with real revenue outside of marketing that we can probably safely say this isn't complete repeat of the Dot Com Bubble.

But damn does it rhyme in some parts. Damn does it rhyme.

I don't think there is an overall sector-wide bubble today, but there may very well be isolated pockets and individual companies with bubbly Ponzi-like characteristics.

The late 90s was just insane. Basically you had hundreds of companies much airier than Snapchat, some without even a product. Some of them even went IPO like this. It was crazy. Today looks nothing like that.

If Snapchat is well run, it will use its current ability to raise capital to build or buy other assets that can generate revenue. For a mature company version of this, look at present-day Yahoo-- its core brand is almost dead but it owns a lot of other stuff. If it's not well run (or if the founders don't care) it'll eventually deflate and the latest stage investors will lose big.

SnapChat is starting to sell ad space. So I'm sure they'll generate hundreds of millions of dollars and end up being fine. A company that large doesn't just fail over night. Founders and early employees are set for life.

The real tragedy imo is that these companies are idolized by the valley hive mind. Smart, young developers seem to be more interested in building social-mobile-ad-generating-app-number-twomillion than work on something worthwhile.

Worthwhile being healthcare, education, space travel, energy, etc. Not some viral app that sells ads.

this is nowhere near the repeat of the Dot Com Bubble. It's WAY BIGGER, but played with VC money instead of public money. We've got several startups valued at over $10 Billion each. Back in dot com bubble, a billion dollar startup was a huge deal. These days a startup raises $50 million and no one blinks an eye.

No revenue model? No revenue perhaps, but they do have a revenue model through Discover and sponsored Our Stories

Making money through ads is probably the least creative way to do so. Also if ads become annoying people will switch to another app.

Snapchat doesn't have revenue, but it has a lot of _potential_ revenue in the form of users.

You mean like Facebook?

EDIT: Facebook 2004 to 2009 for a $10B valuation, Snapchat 2011 to 2014 for the same valuation.

Snapchat did it in 4 years compared to FB and FB was a site/app/platform back then where you logged into a site using Facebook. This is not the same. It is just an app.

Does it matter if it’s a 5 y’o or 19 y’o?

Does it matter if its only 3 years old?

All that matters is the TAM and growth rate.

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