Bloomberg News

Snapchat Near Funding With Kleiner at $10 Billion Value

August 27, 2014

Snapchat CEO Evan Spiegel

Evan Spiegel, Chief Executive Officer of Snapchat. Photographer: Steve Jennings/Getty Images for TechCrunch

Snapchat Inc. is near a round of funding at a valuation of about $10 billion from investors including venture capital firm Kleiner Perkins Caufield & Byers, according to a person with knowledge of the matter.

The Los Angeles-based startup, which makes a mobile application that sends disappearing photo messages, earlier had been in talks for financing at a $10 billion value, including discussions with Alibaba Group Holding Ltd., people with knowledge of the situation have said. While the conversations with Alibaba ended without a deal, the startup continued to meet with other investors, the people said earlier this month.

Snapchat, led by Chief Executive Officer Evan Spiegel, makes the third-most popular app among millennials, after Facebook Inc. and its Instagram photo app, and it’s used by 33 percent of 18-to-34-year-olds in the U.S., according to ComScore Inc. The funding would value Snapchat at more than three times what Facebook CEO Mark Zuckerberg offered to pay for the startup last year, making Spiegel look prescient for turning it down.

Snapchat has yet to unveil a business model. Even though advertising isn’t an option, marketers have been experimenting with ways to reach the application’s users, said Debra Aho Williamson, an analyst at EMarketer Inc. Taco Bell, for example, has been sending out doodle-enhanced ephemeral photos using the company’s Stories feature, which makes posts available for 24 hours.

Younger Demographic

“They’re intrigued with Snapchat because they see that usage is growing and it’s getting popular among the younger demographic,” Aho Williamson said of advertisers. “They see an opportunity to be more creative and test out new types of advertising they can’t do on Facebook or Twitter.”

In a corporate filing in Delaware on Aug. 4, Snapchat authorized 17.4 million shares of new preferred stock, an increase from the 1.2 million shares a month earlier, in a precursor to selling a stake in itself. The shares are valued at a fraction of a cent, according to the filing.

“The valuation of our business and our capital requirements are the least exciting aspects of supporting the Snapchat community,” Mary Ritti, a spokeswoman at Snapchat, wrote in an e-mail yesterday. “We have no further comment at this time.”

Christina Lee, a spokeswoman for Kleiner, declined to comment. The Wall Street Journal earlier reported Kleiner’s involvement in Snapchat’s funding round.

To contact the reporter on this story: Sarah Frier in San Francisco at sfrier1@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Jillian Ward


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