Back in the day, we reported that messaging app Snapchat was raising over $100 million in a round led by Kleiner Perkins and then the WSJ stated that it was $20 million, which left us wondering why a growth round would be so small in terms of total principle. Well, it turns out it's not.
Snapchat has raised a much bigger amount nearly $500 million in aggregate, according to an SEC filing that it slipped out as the working day for New years Eve was coming to a close. The filing notes that 23 investors took part, although it is not clear from the SEC document who led the round.
Here is what happened, according to our sources. Snapchat originally set out to raise $40 million, but request 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. Rumor has it that Kleiner is leading this latest round, with GIC, Yahoo and maybe wildcards August Capital participating. Portion of that, such as the Yahoo part of the fund-raise, shut out some time ago. The SEC filing notes that the date of first sale was in April 2014.
We have also heard that the current post money valuation is $20 billion, although others have disputed this and said it is closer to $10 billion.
The cash is much needed. 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 it's photos, though this number seems low to us. Another noted that at one point the company was paying $3 million each month in legal fees alone. Snapchat's had its share of lawsuits.
Alibaba was the initial lead on that round as Re/Code stated. According to a source, the Alibaba position was then punted to Yahoo, which put in $20 million of its own cash on hand post the Alibaba IPO. We have also heard that Yahoo has really put in more than this but have been unable to verify that beyond the $20 million close.
The cause of the numerical ups and downs of Snapchat's fundraising is the company's unique spin on financing, which works on a ''rolling'' basis, from how one source describes it.
Snapchat is interesting in that they break the conventions of traditional fundrasing, one source tells us. Traditionally an entrepreneur will set out raise a round for a specified amount of money, and then you get interested investors on the same page based on an agreed valuation and then you close it. Spiegel does this some what differently. ''He goes after individual investors at different valuations. It is a rolling contribution and a rolling close. In theory you could say he is already done 40 rounds.
What this means is that, if it is true, then yes, Snapchat may have raised nearly $500 million in the last six months. of that $ 500 million, it may be that only 75% of it is closed, and with portions at different valuations, some getting in pre $10 billion, like Yahoo, and some above it and closer to $20 billion.
The logic for the high valuation is fascinating, and points to some of the big hopes Snapchat and its investors have for the app. The last announced number of active monthly users of the ephemeral message app was 100 million back in August 2014, but things moving fast. From what we get the MAU number is now approaching 200 million users. The company in May 2014 announced 700 million photos sent per day on the app, with 500 million Snapchat Stories.
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