Remember the Internet bubble when venture capitalists were throwing cash against online startup walls to see what would stick? Apparently, Snapchat remembers those days and is holding out for a big payday.
But will Snapchat, the mobile app that lets you send photos that appear for 10 seconds or less to your friends, live to regret its decision to snub a $3 billion acquisition offer from Facebook? Some industry watchers think so. Others don’t.
According to the Wall Street Journal, the 23-year-old CEO of Snapchat rejected the $3 billion buyout offer despite the fact that the two-year-old social media phenom has zero revenue to build on. Apparently, Evan Spiegel thinks he can do better with one of his other suitors, like Tencent Holdings. The Chinese Internet giant previously offered to lead an investment that would value Snapchat at $4 billion.
Believing in the Vision
Neither Facebook nor Snapchat could immediately be reached for comment. Snapchat, though, is not without funding. Lightspeed Venture Partners, Benchmark Capital, SV Angel, General Catalyst Partners, and Institutional Venture Partners led a round of funding that raised about $73 million.
But with Instagram grabbing $1 billion from Facebook in 2012, some are questioning the wisdom of Spiegel declining an offer three times that size for an app that’s less established. Julie Ask, an analyst at Forrester, pondered Snapchat’s rejection in a Forbes column:
“There could also be some technology, patents and people in the mix -- but less likely though possibly to be the drivers of billions in valuation at an early stage,” she said. “The founders most likely have a belief or a vision of great things to come -- it’s at the heart of why entrepreneurs do what they do.”
Déjà vu of 1999?
We asked Marcus Nelson, former director of Social Media at .com and CEO of Addvocate, a social platform for empowering employees to build brands, for his take on the Snapchat shun. He told us Snapchat's stunning rejection of Facebook’s offer of $3 billion in cash is just that: stunning.
“Because it's being courted by a bevy of VC firms and cash-flush technology companies, it’s like déjà vu of 1999 all over again, irrational exuberance over products with absolutely no redeeming value,” Nelson said.
Nelson sees Snapchat’s move as similar to Chatroulette and the ghosts of other management teams that thought their products were the next big things. In other words, passing on this deal may come back to haunt Snapchat.
“While Facebook sees inherent value in acquiring Snapchat in an attempt to win back the younger demographic that's now steering away from its own platform, one has to question how a mobile image-sharing app that erases images seconds after you receive is anyone’s idea of a killer app,” Nelson said. “I believe the company has a ‘now you see it, now you don't’ future."
Posted: 2014-01-20 @ 7:08am PT
What I will say is that I would have accepted! I presented this idea in March 2006 to a group of Portuguese investors, who did not believe in its potential; (