
Snapchat has raised $485M more from 23 investors - drum
http://techcrunch.com/2014/12/31/snapchat-485m/
======
olalonde
I have never used Snapchat so I might be off here but if I understand
correctly, its main distinguishing feature is the ephemeral nature of content
shared with it.

I find the concept of imposing artificial constraints on apps/interactions
fascinating. Twitter was arguably the one to popularise the idea with its 140
character limit (perhaps by accident, the limit was initially there to support
SMS) and now Snapchat (ephemeral posts). Are there any other apps that play on
this theme?

Makes me wonder if there are other apps out there waiting to be "constrained".
Here's some dumb ideas off the top of my head. What about a social network
where you can only have 10 friends? What about an email inbox where you are
limited to receiving X emails/hour (perhaps senders could bid on delivery
priority?). What about a HN where you are only allowed to comment once a week?
What about a continuous delivery system where you are blocked from releasing
after you reach a quota of defects (I heard Google uses such a quota system
internally)? What about a package repository which rejects packages with over
150 lines of code or some other quality metrics?

~~~
bkjelden
Instagram has restrictions on the aspect ratio of pictures.

Sometimes I like to consider an analogy between social networks/apps and bars.
Just like a bar has a certain decor or a unique beverage or some other quirk
that gives it its charm, each popular social network has some different
constraints that give it it's unique feel.

~~~
Kiro
> Instagram has restrictions on the aspect ratio of pictures.

I definitely think this is one of the reasons Instagram is so popular,
together with the low resolution. It lowers the bar for when a picture is as
good as it gets which makes people more prone of posting it.

------
elberto34
This talk of bubbles reminds me of 2007 when everyone, including all the
experts, was certain Facebook was a bubble at a valuation of $15 billion after
Microsoft invested; now it's worth $200+ billion. Then in 2012 after
Facebook's hugely publicized botched IPO and Nasdaq error, all the experts
again said the web 2.0 bubble had burst; the stock price and earnings have
since doubled. Unlike the big blowups of Friendster, Myspace, Digg, etc..these
post-2008 web 2.0 valuations have proven to be extremely sticky. Pinterest,
Twitter, Dropbox, Air B&B, Tinder, Snapchat, Whatsapp, Uber, Instagram...all
keep going up with no end in sight, year after year until either IPO (which
finally creates volatility) or buyout. There's hardly any big failures or
blowups, except perhaps Zynga and Groupon (although it's still worth $5
billion). My prediction is these web 2.0 valuations will keep rising for many
years to come because that is the path of least resistance, and the investor
demand and user growth for these companies is seemingly unquenchable. The
unending web 2.0 boom and unending wrong predictions about its demise show how
these 'obvious' parallels to the old tech bubble of 1995-2000 are just so
wrong. There's more at play here, such as the investor flight to quality (more
money chasing fewer companies), huge user growth, huge monetization potential
from smartphone engagement, the very large millennial population that use
these services, and ability of these web 2.0 companies to carve out niche
dominance and then keep it. Within the next year or two, we're probably going
to see Uber being worth $100 billion before IPO, Snaphat $50 billion, Tinder
$10 billion, Air B&B $50 billion, etc. Take every valuation and quadruple it.
Back in the 90's, $100 million was a big deal; now that's just a rounding
error or the equity of just a single early employee. Insane, but very
prosperous times we're living in. And it's got a long way to go.

~~~
Klinky
There were plenty of cheerleaders back in the late 90s too, saying it's just
the beginning.

Most of the social companies have yet to really show they can be profitable
other than being bought out. Valuations are often grossly overinflated.

AirBnB and Uber are both skirting regulations and pushing risks onto their
userbase. Regulations or a few continued instances of bad PR could pop their
valuation bubble in an instant.

Compare companies overinflated valuations with how much they are actually
being sold for or how much they're getting through IPOs.

~~~
flyinglizard
I feel like Airbnb and Uber are both large and popular enough, at this point,
to push regulation in the direction they see fit. Anyone standing in their
path will be labeled protector of the old monopolies and anti-consumer.

~~~
desdiv
Regulation change doesn't benefit _only_ Uber though. It benefits all current
riding sharing companies, as well as any future ones that might join the fray.
In that sense, regulation change doesn't increase Uber's intrinsic value at
all. If Google, for example, joins the ride sharing game then Uber will be in
serious trouble.

~~~
chambo622
Google Ventures is a major investor in Uber - does Google often invest in
companies that they go on to compete with?

~~~
blister
If they can build an entire fleet of automated cars? Abso-freaking-lutely. How
much would you be willing to pay annually to not have to own a car but have
one available at your fingertips at any time? My car payment + insurance comes
to be about $7000/year. Throw in gas prices and we're probably at around
$10,000 per year for my vehicle.

Factor in my girlfriend and our household is at around $20k.

If Google can charge me $10k-$15k annually to not own a car but be able to
have it available all the time? What's $10k * 137,000,000? [1] At those
levels, the failed Uber experiment can be a whimsical write-off. Or perhaps
it's a strategic venture to handle some of these pesky regulations we're
always talking about Uber fighting.

I don't want to own a car. I just want to have the freedom to be mobile at a
moments notice.

[1]:
[http://cars.lovetoknow.com/Car_Ownership_Statistics](http://cars.lovetoknow.com/Car_Ownership_Statistics)

------
mehwoot
_Snapchat originally set out to raise $40 million, but demand for the round
skyrocketed, and it decided to shoot for an ambitious $900 million instead.
When that didn’t work out, it dialled it back to $500 million._

Mind boggling.

~~~
sadgit
On what does a software company spend half a billion dollars?

~~~
krschultz
Marketing.

~~~
robbiemitchell
You don't spend heavy marketing dollars on a free app. (Not in the way most
people would define "marketing", anyway.)

------
tonyjstark
I always thought if you raise money the investors want the money back in the
end. Maybe they want even more than they invested. So if a company raises more
money than some of the old players of the game who actually having big
revenues one has to think how much revenue the inverstors expect from this
company in the next years. It seems like everybody only bets on Snapchat being
bought by a bigger player which is a strange model of buisness case because
there is no value but only assumptions generated. I believe (and that is very
subjective) that that kind of investing is sickening the whole industry, it
feels more like some sort of speculation which caused already problems in the
banking sector. But it will be fine as long as the majority plays along. I
found myself feeling rather conservative when I think about a valuation of one
of those startups comparing them to other companies and for me that doesn't
work out. Maybe it's because the whole market changed the last few years but
maybe it's the b-word. I look forward to find out.

------
moab
I'm incredibly curious about how they're planning on monetizing, considering
that that recent stab at pushing micropayments was a major flop. Ads that
aren't full-fledged 'snaps' (and don't feel spontaneous) seem like a sure way
of pissing off their userbase. Stories seem like an effort to push for fb's
ads strategies, but whether this will pick up and become a real competitor is
questionable.

Props to them for not getting acquired though, and pushing on.

~~~
aswanson
It doesnt matter. As forrest pointed out, users are king, monetization can be
delayed to infinity as long as someone with billions of dollars wants said
users. Snapchat is far more engaging with younger users than fb, and fb is
valued over 100 mmm. As I said awhile ago, rock on, Spiegel and Murphy.

~~~
RandallBrown
Yeah, but Facebook is valued that much because it actually makes a lot of
money right?

Has Snapchat made a dollar?

------
joeblau
It seems like Yahoo! makes more money investing in other companies than it
does as a company. They seem to invest lots of startups, including this one,
that end up being huge.

------
barnacs
Let's waste an enormous amount of resources to create Yet Another Messaging
App. That's exactly what the industry and humanity in general needs to
advance!

~~~
ulfw
Yea but but... this one is different. It it... well... it deletes the messages
automagically too! Well worth the billions, don't you think?

------
nnain
It's still difficult for people sitting outside North America to make sense of
these high valuations. To me, dropbox and youtube were even interesting case
studies. It all seems quite simple now, but in the initial stages, people
wondered how they are going to make enough revenues to recover the
infrastructure costs. But I have begun to see a clear trend in how the Social
Apps, Sharing (Rental) Economy apps, and Ecommerce are behaving at different
places across the globe.

100 Million users of a social app in US (followed by other western countries)
are several times more revenue generating than the developing countries. The
one metric that matters here is the Average Revenue per User (ARPU). Mobile
advertising is growing in second and third world countries, but still lags
behind. Not to say that users elsewhere are any less useful; Facebook has a
huge focus on the Indian Market.

Apps for rental(sharing) economy, Uber et al, work more evenly everywhere,
since they bring a straight cut out on the amount paid.

The segment that seems to works most at par globally has to be Ecommmerce.
Amazon committed a $2Bn investment in India in 2014, as Flipkart got over
1.5Bn in funding.

------
mattbarrie
Big raises like this are primarily secondary. Probably someone like lightspeed
selling out (was mentioned in leaked email
[http://www.businessinsider.com.au/snapchat-ceo-evan-
spiegels...](http://www.businessinsider.com.au/snapchat-ceo-evan-spiegels-
email-memo-2014-12)).

------
forrestthewoods
My rule of thumb for awhile has been that if you can get one hundred million
users (100,000,000) you can sell your company for one billion dollars
($1,000,000,000). It doesn't matter if you have any revenue or not, 100m users
= 1b dollars.

Snapchat is at 200m users, but has doubled since August. If you think it's
headed for 500m users then 10b is only a 2x premium for an unusually large
pool of users in one place.

WhatsApp sold for 18b with 500m users. It was headed for 1b users so 18b is a
similar 2x premium.

At first I thought the math didn't work but I guess it does. Users are king.
Engaged users are directly convertible to money.

~~~
AndrewKemendo
_Engaged users are directly convertible to money._

I don't see how this is a given. Monetization is no simple task, otherwise
Snapchat etc... would have a fairly straightforward way of implementing it
without disrupting the core business. Last I checked there is no good strategy
and the in-app purchases doesn't seem to be working that well outside of
games. The idea of push ads like they are doing with their snapchat self-
promotion stuff is a recipe for disaster from unsolicited companies.

~~~
elberto34
making money is almost never a problem. Everyone says it is and then the said
company blows the doors off expectations . Facebook did it with mobile in 2012
when all the experts said it couldn't be done. Mobile engagement is higher
than desktop. Look at amazon and how long wall st. has ignored profits. All
the company need to do is flip a switch and the money will pour in, and the
users won't leave either, despite all the predictions that they should.

~~~
AndrewKemendo
_Look at amazon and how long wall st. has ignored profits._

Totally different. Amazon has revenue - they just take that revenue and pump
it back in. Snapchat etc... doesn't and can't even prove they will have
revenue.

------
DigitalSea
Honestly, I am surprised Snapchat is still around. I never receive or send
Snapchats to my friends any more. About one year ago me and my friends used
the app on a daily basis, it was fun and you could send funny things, now it
is mostly dead whenever I do check it.

It was only ever a trend. They should have sold it when they had the chance to
sell to Facebook, because if the numbers are to be believed, they're not doing
that well. Eventually we will see Snapchat either pivot or die.

~~~
prezjordan
I think you're completely wrong here. My 7th grade cousin is on it every
minute of every day (battery-permitting). So are all of his friends.

I don't think you're the target audience (but I don't know how old you are,
sorry!). Truth is, pre/young teens are all over Snapchat and Instagram, and I
don't really see an end in sight.

------
auganov
As long as Snapchat has a good case for maintaining the monopoly on ephemeral
messaging the valuation is pretty reasonable. It's the best thing since IM and
nobody else seems to get it. FB messenger could shake things up, but they seem
reluctant. It's hard for any social/messaging incumbent to do it without
cannibalizing their existing user activity. And they have 2 patents which may
or may not be valid. My prediction is 1B users by 2016.

------
logn
I wonder about the wisdom that hardware is cheap and programmers are
expensive. "One source said that Snapchat has an over $30 million-per-year
burn rate, and pays half of that to Google Apps Engine to host all its photos,
though this number seems low to us."

------
chad_strategic
With interest rates near zero for the last 6 years, what is really the value
of money?

~~~
logicallee
could you elaborate or be more specific?

~~~
chad_strategic
Yes, The Federal Reserve has lent to banks since 2008 at a ~.15 interest rate.
Banks then turn around and lend to you or business at a hire rate.

The reason that you are not getting interest on your bank account is because
the banks don't want your money when they can get it from the federal reserves
at cheap rates.

The federal reserves in 08 wanted consumers and business to spend money
instead of keeping it in savings to spur the economy. (Let's not forget ~70%
of GDP is consumer spending) Some will argue it has worked, others will argue
it hasn't worked.

Snapchat is an example of an unintended consequences of very low interest
rates.

[http://en.wikipedia.org/wiki/Federal_Reserve_System](http://en.wikipedia.org/wiki/Federal_Reserve_System)

[http://en.wikipedia.org/wiki/John_Maynard_Keynes](http://en.wikipedia.org/wiki/John_Maynard_Keynes)

~~~
logicallee
I don't see what any part of this has to do with the VC economy and you have
not elaborated. None of the $485M is coming from banks. VC's (the 23
investors) don't borrow money from banks to invest into Snapchat, and LP's
(their investors) don't borrow money from banks to invest into the VC's. And
anyway these funds were mostly raised years ago. So I just don't see even a
third-level connection (which would add years to the effect becoming visible.)
Snapchat isn't something everyday individuals or banks are investing in -
these are investments by VC's with funds already set aside for this purpose.
If there's a closer connection with low interest rates, you haven't made it
clear to me.

~~~
chad_strategic
Not sure if I can really explain a complicated economic system in a comment
section.

Please feel free to invest however you see fit, if you think that VC, stock
markets, interest rates, speculation, investments are not intertwined, best of
luck.

In the meantime I'll just leave this right here.

[http://www.washingtonpost.com/blogs/wonkblog/wp/2014/07/22/j...](http://www.washingtonpost.com/blogs/wonkblog/wp/2014/07/22/janet-
yellen-thinks-social-media-is-overvalued/)

------
apunic
Probably I am alone here but I think that Snapchat is the biggest innovation
in the social space since Facebook and not just because of it's ephemeral
nature. Let me elaborate and give my view why I think Snapchat is great and
one of my most used apps.

\- To start, Snapchat changed my communication behavior heavily. Before
Snapchat people used any kind of messengers when they had a clear intent to
start an interaction with another person. With Snapchat you just send
something. You do not want to start a conversation, often you just share what
you do right now, how you feel and very often it's so close to what you are
and not some polished something you would like to be. You share emotions in
forms of pics also on Instagram and Facebook but this is different since the
emotions you present there are highly curated, see below for more.

\- There are no 'likes' and this is wonderful. The existence of likes sets us
under pressure. If we post something on Facebook and do not get a single like
it's embarrassing and leads to postings which are only of outstanding nature
painting a distorted picture of our life. Facebook is anything but not
reflecting reality.

\- Sending and selecting a few contacts is so fast and I do not know one
single app which has a slicker process. This again leads to so much more
honest and personal messaging. Since I target on other platform many more
people I have to take care about my postings. On Snapchat I can quickly select
a bunch of people and leave those out who might be bored by a single snap.

\- The process of taking a picture is different than with the stock camera of
a phone. You take a pic which is NOT saved—usually it's immediately saved and
if you do not like it you have to go the the gallery, delete it and confirm
again that you want to delete it. This is very annoying if you take selfies.
Snapchat turned this around and once you find the right shot you can send
and/or save it. Small thing but so convenient.

\- Features like slide-in filters, painting on the pic, amazing video calling
are just nice amenities but again show that Snapchat's interface is just great
and miles beyond other cluttered UIs.

\- One feature which I want to mention is putting text on pictures, no rocket
science but again sometimes so funny and shows similarities to those meme
generators.

\- Finally, the ephemeral thing is not the key feature but it's the brand and
the DNA of Snapchat, everybody knows that there's no privacy, people can
screenshot the snaps and share it, period. But it's about being oneself and
understanding that the pictures are just 'throw-away products', no shiny thing
kept forever. This again leads to a very honest snaps. Snapchat is not about
looking good.

I encourage everyone who doesn't 'understand' Snapchat's success to try it, it
strengthens the relationship to close contacts and friends much more than
other 'social app'.

------
iloveluce
Magic Leap raised $542M and I don't know of anyone that uses their product so
there is also that [http://www.campaignlive.com/article/google-
puts-542m-augment...](http://www.campaignlive.com/article/google-
puts-542m-augmented-reality-startup/1318362)

------
logicallee
will be interesting to see what happens when the rest of the VC's get back to
their offices on Monday.

------
sunasra
Is it worth of it?. I dont think so.

------
_almosnow
I like Snapchat, I still can't grasp their plan to become the next great thing
but at least they have a lot of users and their users 'don't want to leave'.

I always thought that Facebook were too big to fail, like in no one would
close their account because of what they've invested there (friends, pics,
etc...); yet, people are leaving it at an unprecedented rate. I remember
Facebook desertion not being much more than a statistic even a year ago, now
it's pretty common to encounter people that don't have an account there
anymore. I think that the bandwagon effect that is behind the growth of online
communities is a double-edged sword; once the trend shifts to users leaving,
the more they leave the more users are likely to leave later and everyone
snowballs out until there is no one left. Fortunately for Facebook, many of
those peers left because of WhatsApp/Instagram, so business' still in the
family... for now, albeit much less profitable. Sooner than later, FB will be
gone and its place will have to be filled up by something else. Snapchat has a
seat reserved in the post-FB era and apparently that is worth at least $20B.

Anyway, derailing the discussion a little, I'd like to hear what you'd think
if 'Core Facebook' went out of business right now (but not
WhatsApp/Instagram). Would you consider it a success or a flop? Was it a
profitable endeavour or not?

~~~
dopamean
I don't have a Facebook account but I do have WhatsApp and Instagram. I'd use
a Facebook standalone messenger that didn't require a Facebook account to
communicate with those that do if such a thing existed. I closed my FB account
a year ago and I don't miss it at all. Sure there are times where someone asks
if I saw something and it was only posted to FB but that is so rare now.

I imagine that one day I'd use many Facebook properties without ever
encountering the news feed.

~~~
mingfli
I'm pretty certain you can have a Messenger account with just a phone number,
no FB account required.

------
curiously
The bubble has reached it's peak folks.

