
Snapchat Discloses $650M Private Placement - abetaha
http://www.wsj.com/articles/snapchat-discloses-650-million-private-placement-1432913945?mod=WSJ_TechWSJD_NeedToKnow
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kvcc01
Snapchat is doing well. I sometimes get on the bus around the same time when
the local high school is dismissed, and watch in amazement all the kids pull
out their phones and work through their accumulated snaps for the day. Some
have hundreds. It's a 45-minute ride to my stop and they’re still watching
when I get off.

Few months back I got jealous and installed Snapschat myself. It conveniently
scanned my contacts, and found that none of my friends are on it. (I’m late
30s.) To this day, the only snap I received is the default welcome message
they send to everyone.

They’re doing a good job of confining their appeal to their target age group.
The minute I and my peers appear on Snapchat, it's time to get worried.

And then there's snapchat.com, which is another enigma. I consider myself a
reasonably competent technologist but Snapchat makes me feel like an ape
trying to figure out a mysterious monolith.

~~~
bkjelden
This is why I think their valuation is less absurd than it seems. Their rate
of adoption among college age and younger demographics is astounding. Way
faster than facebook, or twitter, or any other social network was adopted.

I think a lot of people are skeptical because the concept seems really dumb.
But I've just kind of accepted that social networks get popular for very
subtle reasons, some of which are non-technical.

Building a social network seems to be more of an art than a science.

~~~
notahacker
Most people are sceptical for the simple reason that the social networks that
shed most of their user base long before ever threatening to make a reasonable
profit actually had far more lock-in. If Snapchat's user base - a demographic
not exactly noted for their long attention spans - gets bored or sick of ads
once Snapchat actually manage to sell them in significant numbers, they're not
leaving anything behind when they download the next flavour of the month.

The terms attached to this probably make their chance of selling out to
Facebook for ~$20bn slim too.

~~~
lotso
Couldn't you have said the same thing about early Facebook?

~~~
notahacker
Early Facebook had the facility to get in touch (or stalk!) people I had no
contact details for provided I knew their name, and check out upcoming party
details, not mention a photographic record of my university life complete with
comments and status boosting likes. Facebook didn't need to remain cool to be
relevant and _useful_ , and I logged in far more often than someone sent me an
actual message from the service - still do a decade on.

Snapchat is a messaging app which distinguishes itself from the other
messaging apps users also have installed on their phones by the fact it _doesn
't_ preserve any past interactions. Much like when I stopped bothering to log
into MSN Messenger because people sent me messages in other ways, it dies in
the eyes of its users once the daily updates stop, or even more quickly if the
daily updates become near-exclusively advertising of the unwanted kind

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entee
I'm curious given these kinds of deals, what the point of an IPO is anymore?
For some of these companies the valuations are so high, and private capital so
available that it seems incredibly unlikely that they'd get a better deal on
the public markets. Who wants to abide by public market standards if you can
avoid it?

I wonder if there's a new model, kind of like large privately held companies
such as Mars or Cargill, but with multiple investors. Granted, many of the
tech companies getting these valuations have unclear economics, but what if
they had real revenues, profits and paid a dividend?

Honest question, why go public at all these days?

~~~
mathattack
3 major reasons:

1 - After a certain point in time (based on # of shareholders) it becomes more
onerous to be private, and you wind up with all the reporting responsibilities
of being public.

2 - It's easier for a public company to engage on both sides of M&A. There's
less quibbling about theoretical valuations since the company has a price.
(When one private firm buys another with stock, there's 2 theoretical prices
that need to be negotiated)

3 - For enterprise deals (not Snapchat) some customers prefer the stability of
public ownership.

~~~
entee
Cool, thanks!

That said I wonder if 1 will always be that big an issue. What if you
structure it so that you have a small number of large shareholders that
represent larger groups? For example, in the case of stock options, a sort of
labor union owns the stock, sits on the board and is responsible for
distributing dividends to employees following a schedule of percentages.

2 is clearly troublesome, but perhaps more in the M than the A. If you acquire
small companies, you may be able to do it in cash or again as some sort of
contract entitling people to percentages of dividends. After all, that's kind
of what a stock certificate used to be in practice, not just theory (yes
oversimplification, but it seems people care far more about stock price than
dividend these days).

I wonder whether these issues will always be as troublesome. As these kinds of
mega deals become more common, it seems quite possible that a sort of parallel
private market could emerge. Anyway, thanks for the reasoning!

~~~
mathattack
The trend is against all three of these, but it's a slow trend.

On #1 - the issue is individual employees each have shares tied to their hire
date. It's possible that someone could do some kind of financial engineering
to make it look like 1, but this hasn't been done yet. This is the issue that
forced Facebook to go public.

On #2 - If it's a cash purchase, the problem is less an issue. It gets tricky
when the acquirer is significantly away from a funding event. The values of
many high tech firms can be +500% or -80% just 6 months after a prior event.
This has a massive impact on share-based acquisitions. Less of an issue with
more mature companies.

All this said, it's fairly easy to see a world 20 years from now where there
are much fewer public firms.

~~~
entee
My guess is for these things to change (if they ever do) there would have to
be a crisis event. Maybe after the next crash employees will be more reticent
to take pure stock and will go for an alternate arrangement. Maybe the
structures built for those arrangements will allow contracts for acquisitions
to be structured differently.

It's going to be interesting to see how long this private valuation explosion
will last and what the fallout will be after it pops.

~~~
mathattack
A fully private market isn't great either. There's a lot of value for the
investment community in general to know what the daily value of a given stock
is. If you try to get this transparency via off-market transactions, aren't
you just recreating the public market?

~~~
entee
Oh totally. I think it would be a bad thing overall, but that doesn't mean it
won't happen. If you have enough capital in a relatively small number of
private entities, perhaps they will find it to their advantage to compromise a
little on clarity, in exchange for more control or less regulation.

Overall, I suspect a shadow market would be a bad thing, but it's hard to
argue that for the moment there isn't something like a shadow market in
silicon valley. I don't think it's a sustainable one, and it certainly is
opaque (what's in those term sheets?), I'm just thinking of whether something
similar could exist in a more permanent form.

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espitia
A year or two ago I saw my little brother and sister on Snapchat (16 and 15
respectively). I didn't understand it at all. Soon enough I was on it and let
me tell you, it is used far more than Instagram and if not more, the same as
Whatsapp. It is because you can share real moment of your normal everyday
life. They mentioned how on Instagram most of the pictures they see there are
uploaded celebrities/funny accounts/etc. Normal people don't have amazing
moments to share everyday. Plus, they would be embarrassed to share what they
share on Snapchat in any other network (i.e. funny faces, what you cooked, the
funny kid on the school bus, your boredom).

I believe they are in unchartered territory thus comparing it to anything else
is just a shot in the dark. If you could wave a magic wand and ask for the
best way to share moments of your life you would probably get a hologram of
your friends to show them that instant of you life that you wanted to share.
Snapchat gets closest to this. Moments come and go, not all moments should be
forever saved, moments should be only for those you intend to share with,
moments should be feel lively (video/images) not text, etc.

Also: Discovery feature - I give Snapchat so much credit for this. They got
the younger demographic watching 'TV' again. Snapchat accommodated the channel
these kids are using (mobile) to connect with the big media outlets in a way
that they actually consume content. That is, by short clips of < 5-10 minutes.

------
randomname2
Bloomberg: Snapchat Said to Be Valued at $16 Billion in New Fundraising

[http://www.bloomberg.com/news/articles/2015-05-29/snapchat-s...](http://www.bloomberg.com/news/articles/2015-05-29/snapchat-
said-to-be-valued-at-16-billion-in-new-fundraising)

Any bets on what market cap this will get to at IPO time?

~~~
foobarqux
> Investors in the latest round include Access Industries, York Capital
> Management, Glade Brook Capital Partners and Alibaba Group Holding Ltd.

Besides Alibaba I have never hear of any of these funds.

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joshdance
I am 29 and a lot of my friends and I use SnapChat. I don't love it, but it is
useful enough that I post pretty regularly to it.

~~~
mooreds
What do you use it for?

~~~
cmdrfred
I ask the same question. What can snapchat do that mms cant?

Edit: So they took a service that was as simple and flexible as could be, put
arbitrary restrictions on it, and wrapped it in pretty UI. Kids are dumb man.
(I'm 26)

~~~
rezistik
Do it's best to guarantee that a post will be removed.

In a world where everything you do is recorded and stored long term the
promise of something fleeting is a beautiful promise.

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AndroidJunky
unbelievable :) $32B at IPO

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tomkin
When it comes to a new article being behind a paywall, I would rather not know
the news than have to make an account to view it. Can we ban wsj.com from HN?

~~~
txttran
You could save a bookmarklet that allows you to bypass the header:
[https://gist.github.com/jashkenas/9a4d9e648eb11aab394e](https://gist.github.com/jashkenas/9a4d9e648eb11aab394e)

Or you could just skip the article when you see it. I don't see why we'd ban
wsj.com just because you have trouble reading it.

~~~
dang
> just because you have trouble reading it

Please don't make comments needlessly personal.

