Snapchat gets US$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.

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. 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. CEO Evan Spiegel said earlier this week that Snapchat would eventually seek an IPO, but warned the current tech bubble could burst, and that “people are making riskier investments.” 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.

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. Since its inception, Snapchat has raised more than $1 billion in outside funding, and has been said to be raising at a valuation of more than $15 billion. As standard practice, venture-capital investors typically receive preferred shares when they invest, meaning they receive certain rights over common stockholders.

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. 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. Generating a steady stream of revenue will be key to raising investor confidence as Snapchat marches toward a potential initial public offering, perhaps sometime late next year. 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.

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.

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