Snapchat Gets $537 Million in Fresh Funding

30 May 2015 | Author: | No comments yet »

Snapchat Raises $537.6 Million In New Funding As App Makes Media Push.

SAN FRANCISCO: Snapchat on Friday informed US regulators that it has raised US$537 million (RM1.9 billion) in a new round of equity funding that could climb as high as US$650 million.Snapchat, the fast-growing messaging app, has sold $537 million in common stock to nearly three-dozen investors since mid-February — part of a hoped-for $650 million equity cash raise, the company said in a regulatory filing on Friday.LOS ANGELES — Snapchat Inc. is ready to start collecting serious revenue from advertisers, but that doesn’t mean it’s done raising money from investors.

The demand to own private shares in Snapchat Inc. has become so fierce that its newest investors are willing to receive second-rate stock in exchange for their money. The vanishing-message service did not disclose who bought stakes in the Los Angeles-based company, which came at a price estimated to give Snapchat a value of more than US$15 billion, according to media reports. “We need to IPO, we have a plan to do that,” chief executive officer Evan Spiegel said on-stage at a Code Conference in California when asked about the potential for an initial public offering of stock. That’s despite the fact that investors were forced to take common stock, rather than preferred shares or other instruments that typically offer more protections to early-stage investors. Spiegel acknowledged plans for a Snapchat IPO during a talk in which he agreed with the notion there is a tech industry bubble that will at some point burst, with low interest rates, easy money, and risky investments calling for a “correction.” Smartphone app Snapchat late last year began letting users in the United States send money to friends by simply typing dollar amounts into new “Snapcash” messages.

The unusual move by 24-year-old CEO Evan Spiegel hasn’t hurt Snapchat’s valuation, which has added $1 billion since a $200 million fundraising earlier this year that attracted investors including Alibaba. The $537.6 million was done in the form of common stock, and the first securities in the round were sold in February, according to the Securities and Exchange Commission filing. The financing values Snapchat at $16 billion, said a person familiar with the matter, a 60% bump from its previous round in December when the company began stepping up plans to make money. The new service was added as Snapchat worked to boost the money-making capabilities of its popular app, which sees messages disappear shortly after being viewed. New investors in Snapchat, whose disappearing photo-sharing service is popular with the teen set, include Fidelity Investments, York Capital and Glade Brook Capital, according to CNBC.

As standard practice, venture-capital investors typically receive preferred shares when they invest, meaning they receive certain rights over common stockholders. Both sides say they don’t want any military confrontation on China’s extensive coastal waters, but both are acting as if a military conflict is increasingly likely. Spiegel also said this week that the app is approaching 100 million daily active users in developed markets and that about 65% of those users create content on the app daily. Snapchat’s ability to sell common stock at such a large valuation underscores investors’ strong desire for a piece of the fast-growing mobile-messaging service.

Such is the thesis of an important new book just out, The China Dream, by Professor General Liu Mingfu, a leading Chinese military thinker and commentator who speaks with the voice of China’s military. Discover features a range of media brands such as ESPN , National Geographic, Yahoo and People, delivering a new set of articles and videos to users each day. Snapchat’s jobs page currently lists a handful of openings for both its Discover and content teams and plans to offer coverage of the 2016 U.S. presidential election. Vertically oriented trailers, about 10 seconds long, for the movie appeared in the National Geographic channel on Snapchat and the short cosmetics ads came inside the Cosmopolitan magazine channel.

Other investors include Yahoo, Kleiner Perkins Caufield & Byers, Benchmark, General Catalyst Partners, Institutional Venture Partners, Lightspeed Venture Partners, Coatue Management and DST Global. When asked at the Code Conference this week about the current climate around tech investing, the 24-year-old CEO and co-founder said he predicts a “correction” is coming and he has factored that into his plans.

History is replete with examples of rising powers eventually going to war with the status quo powers resisting their rival’s economic and military growth. The company runs one of the most popular messaging services in the U.S., especially among teenagers, in part because of the ephemeral nature of its messages.

By 2030, China will be the world’s largest economy in absolute terms (today it rivals the US in purchasing power parity), regaining the geopolitical primacy it formerly enjoyed until the 1500’s when it was the world’s leading economic power. He insists that China has no territorial ambitions and never will. “China suffered 470 foreign invasions within 65 years from 1840 to 1905,” asserts Liu, though incursions would be a more accurate term. Liu asserts that China is devoted to peaceful relations, non-interference in other nations, and the desire to help build world prosperity, not just its own power or political system. What’s more, Liu modestly asserts, China should lead world development since Chinese are more intelligent and cultured than any other people and heirs to a 5,000-year history! Interestingly, Liu depicts the 1950 Korean War as a major victory for China because it showed that an Asian nation could fight off the world’s greatest military power.

Second, as I read Liu’s panegyric to Chinese greatness and peaceful humanism, I kept recalling Lord Acton’s wise maxim about absolute power corrupting absolutely.

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