Snapchat hasn’t made any money yet: it doesn’t sell ads, charge people to download and/or use its app, or sell extras as in-app purchases. But money has been flowing into the company from another source: venture capital firms.
Snapchat raised $485k of seed funding from VC firm Lightspeed Venture Partners in , after one of its partners discovered that the three most popular apps among his d and Snapchat. “That’s interesting company. Of those, the one we’d never heard of was Snapchat,” Lightspeed’s Jeremy Liew told TechCrunch in .
That was followed by a $13.5m round of Series A funding in led by another prestigious VC firm, Benchmark Capital, with its partner Mitch Lasky telling the New York Times that “I started hearing Snapchat in the same context as Twitter, Instagram and Facebook. That got me curious”.
Think Twitter
In personal blog posts, some of these investors have rhapsodised about Snapchat. “At Benchmark we search for entrepreneurs who want to change the world, and Evan and Bobby certainly have that ambition,” wrote Lasky in February. “We believe that Snapchat can become one of the most important mobile companies in the world.”
See also IVP’s Dennis Phelps providing Ten Reasons Why IVP Invested in Snapchat: “The growth and engagement metrics are off the charts. Seldom have we seen a consumer application with this type of user momentum and excitement. think Instagram … think Pinterest … and Snapchat is just getting started,” he wrote. “The type of connection that a Snapchat message brings to people is unique.”
More giddy blog posts may lie ahead: All Things Digital claimed in October that Snapchat is in talks about yet another funding round valuing the company at a startling $3.6bn, with a lead investor potentially being “a strategic party from Asia” – later fingered as internet firm Tencent.
Not everyone is so excited by the spiralling valuation of a company that has yet to prove it can make money. Witness Roy Murdock’s Am I Going Insane? Snapchat is Intrinsically Worthless blog post for an opposing point of view:
“$4bn for an easily replaceable service that is little more than Microsoft Paint duct taped to a disposable camera? A service that voluntarily throws away its own data in the golden age of data hoarding? A service devoid of the nature of competition that is the driving force behind every other profitable company in the world? A service that is intrinsically worthless?”
Well, Reggie Brown says he’s a co-founder, although the outcome of his lawsuit against Snapchat will rest upon how important a role he’s deemed to have played in the early days of the company.
Just four months later, Snapchat raised an even bigger round, $80m, reportedly including https://hookupdate.net/escort-index/lewisville $20m in a “secondary offering” that likely helped Spiegel and Murphy cash out some of their equity in the company
Brown was at Stanford with Spiegel and Murphy, and in a lawsuit filed in , claimed to have come up with the idea for “a mobile device application allowing users to send pictures to others that then quickly disappear from the recipient’s mobile device”.
The lawsuit claimed that “this is a case of partners betraying a fellow partner”, and alleged that Spiegel and Murphy had reneged on an agreement to split the ownership of Snapchat three ways:
“Despite the fact that Plaintiff devised the idea for Snapchat and fully performed all his obligations in the joint venture/partnership, the individual defendants then improperly excluded Plaintiff from all participation, profit and interest in the joint venture/partnership, just one month after the Application was publicly launched in .”
