A couple of weeks back, news spread across reporting that messaging app Snapchat had been raising $100 million in a round led by Kleiner Perkins, a Venture Capitalist based in Silicon Valley. After that, the Wall Street Journal reported that the actual funded amount was $20 million, which left us wondering as to why a growth round is so small in terms of total principle, or was it?
Turns out Snapchat raised a much, much bigger amount. According to an SEC filing that slipped out as the last working day of the year was drawing to a close, which revealed the funding amount – nearly $500 million in aggregate. The SEC filing also revealed that 23 investors took part in the funding round, although it’s not clear who actually led the round. The SEC filing also notes that the date of the first sale was in the month of April, 2014.
According to sources, Snapchat had originally set out to raise $40 million, however the demand for the round increased manifolds and the company finally decided to aim for an ambitious $900 million, which did not work out in the end, so it came down to $500 million.
Rumors hinted that Kleiner is supposed to be leading the latest round, with Yahoo, GIC and maybe even wildcards August Capital also participating, which later came out to be not completely true, such that the Yahoo part, closed some time ago.
Rumors continued, with some saying that the current post money valuation is $20 billion, while others dispute and say that it’s closer to $10 billion.
One source said revealed that Snapchat apparently has an over $30 million-per-year burn rate, half of which the company pays to Google Apps Engine to host all its photos, while another pointed out that Snapchat was paying $3 million standalone every month in terms of legal fees.
Now, many of us kept wondering the principle reason behind all these ups and downs of Snapchat’s fundraising amount. Apparently it is because of company’s unique spin on financing, which works on a ‘rolling’ basis, as one source describes it. In conventional crowd funding, an Entrepreneur sets out to raise a round for a specific amount of money, and interested investors come forward and agreed evaluation takes place. Spiegel however took a different approach, where he goes after individual investors at different valuations, which in theory means that he’s done about 40 rounds (figuratively).
Which means that if it’s true, then indeed Snapchat may have raised $500 million in the half-year or so, which is quite justified considering the 100 million active monthly users in August 2014 which according to sources is approaching to 200 million, with 700 million photos send every day and 500 million Snapchat stories.