Snapchat has closed a $486 million (€401.7m) round of funding, the secretive photo-messaging start-up quietly disclosed in a regulatory filing on New Year's eve.
The huge new injection of cash follows an unusually long series of funding negotiations for the Los Angeles-based company, which began in April. People close to the company said earlier this year that the fundraising values the three-year-old company at $10 billion.
The closing of the fundraising is a vindication of the decision to reject a $3 billion takeover offer from Facebook just over a year ago.
It is also another sign of the fast-rising valuations for private tech start-ups, even those – like Snapchat – in the earliest stages of generating revenue.
Snapchat’s quiet disclosure of its fundraising late on Wednesday, at a time when much of the world was celebrating the new year, is typical of a company that has tried to remain as secretive as the self-destructing messages that are sent between its tens of millions of users.
Snapchat declined to comment on its filing to the US Securities and Exchange Commission, which showed that 23 unnamed investors together bought $485.6 million worth of equity.
Yahoo and venture firm Kleiner Perkins Caufield & Byers were among the names linked with Snapchat’s funding round in recent months. Existing investors include Benchmark, General Catalyst, Lightspeed Venture Partners and DST, as well as hedge fund Coatue Management.
Last month Snapchat poached a leading tech banker, Imran Khan, from Credit Suisse to become its chief strategy officer.
Two weeks ago Snapchat's co-founder and chief executive, Evan Spiegel, criticised the leak of a trove of emails, stolen in a hack attack on Sony Pictures, which revealed its fundraising plans, recent acquisitions and other aspects of its future strategy, saying he was "angry" and "devastated". Sony Pictures chief executive Michael Lynton sits on Snapchat's board.
“We keep secrets because we get to do our work free from judgement,” Mr Spiegel wrote in a letter that he published through Twitter. “I am so sorry that our work has been violated and exposed.”
Despite the huge valuation and new funding, the company’s advertising business remains in its nascent stages, with only a handful of brands paying to promote themselves on Snapchat’s ephemeral messaging app so far.
However, the scale of its ambitions was highlighted in a New Year’s eve deal with Clear Channel Outdoor, the billboard company, and Cover Girl, the make-up brand, to display photos of Snapchat users’ celebrations on the big screens in New York’s Times Square, as the clock turned midnight.
The tie-up displays photos and videos that users choose to share on Snapchat’s “Our Story” feature, the best of which are then hand picked by the company’s employees for public broadcast – both within the app and, for the first time, on two giant video billboards. After 24 hours, all the images will disappear.
That ephemerality has made Snapchat popular with younger users who do not want to leave a permanent record of their daily lives on other social media sites such as Facebook and Twitter.
However, in May, the US Federal Trade Commission charged Snapchat with deceiving its users about how fully those messages really did disappear. Snapchat’s final settlement with the FTC, which includes a commitment to 20 years of independent privacy audits, was approved on Wednesday.
In an update to its privacy policy earlier this year, Snapchat warned users that while "delete is our default", other users can capture images sent over its network and that the company "can't guarantee that messages will be deleted within a specific timeframe". – The Financial Times
