by voidfiles on 10/25/13, 6:32 PM with 78 comments
by pud on 10/25/13, 7:32 PM
Snapchat could easily get acquired, making the founders (and early employees) very rich.
But investors don't want them to sell yet. So investors buy a lot of common stock (from founders/employees) at a big valuation, making the founders (aka the only board members who aren't already rich) rich, so that the founders are less interested in selling.
Some of the money goes to the company. But it's not usual for 20-25% of big rounds to go to founders/early employees.
by wil421 on 10/25/13, 7:10 PM
Honestly I am afraid that Snapchat will suffer the same fate as MySpace or DIGG once the younger generation finds something new (look at who uses google+, no one and I am not talking about your techy friends). We can already see young teens are leaving facebook. To be honest I stopped using it once my parents and other older adults started joining and that was 2-3 years ago.
by programminggeek on 10/25/13, 7:28 PM
I mean, does anyone believe that Snapchat is going to ever be a service that brings in billions of dollars in revenue?
by w1ntermute on 10/25/13, 7:12 PM
by dfrey on 10/25/13, 7:32 PM
by nwh on 10/25/13, 7:15 PM
by npalli on 10/25/13, 7:27 PM
by cs702 on 10/25/13, 7:31 PM
I don't know anything about Snapchat's internal operations or plans, and therefore can't really judge whether the company will eventually figure out how to make enough money from its self-destructing messages to warrant a $3.5 billion valuation today. What I DO know is that whenever investors start "jumping in and ponying up with huge amounts of cash for the privilege of investing" (in new companies with no revenues), there's a good chance that valuations are getting too optimistic -- and that never ends well.
Maybe this time things really are different, but it's hard for me not to see some parallels with the "dot-com bubble" of the late 1990's.[1]
--
by cygwin98 on 10/25/13, 7:59 PM
I know I don't belong to the targeted demographics, just out of curiosity.
by biot on 10/25/13, 7:33 PM
by brd on 10/25/13, 7:16 PM
I would think there is a pretty huge difference between their potential revenues
by akuma73 on 10/26/13, 3:56 AM
Instagram was bought for $1 billion, not because it had any billion dollar revenue generating potential. It, however, had the potential to erode Facebook. So Facebook buys it out as a defensive move.
Snapchat, given its huge user base, could potentially threaten Facebook, so Facebook would be forced to acquire them, purely as a defensive strategy.
Think of it as the cost of defending their empire.
by davtbaum on 10/25/13, 7:46 PM
Sure, advertisements seem like the end game, but how will they be targeted? How can they be implemented without severely affecting application experience and user expectations?
by sksksk on 10/25/13, 7:31 PM
A lot of these investors probably have multiples. So if someone $1m in a company for 10%, and the company sells for $5m, they'll get back at least $1m, rather than $500k.
If investors are only putting money in with these multiples, then doesn't it artificially raise these valuations? If so, is there a measure for the valuation of a company that takes this into account?
by adventured on 10/26/13, 2:57 PM
The Fed has finally done it with their hyper loose monetary policies (for the third time in 15 years). I think it's safe to assume the dotcom insanity has begun again. It's also drastically pushing up dotcom valuations in the public market as well.
by confluence on 10/26/13, 5:28 AM
Valuations are just numbers that are pulled out of a hat.
/tip
by alt_f4 on 10/26/13, 1:29 AM