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Snapchat In Funding Talks with Alibaba
Snapchat In Funding Talks with Alibaba
By Andrea Chang and Paresh Dave Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Last year, Snapchat decided Facebook's $3-billion offer wasn't cool. You know what's cool? $10 billion. The Venice Beach start-up, whose app enables users to send photos and videos that disappear seconds after they're viewed, is reportedly in talks with investors including Chinese e-commerce behemoth Alibaba Group Holding for a funding round that would value the company at $10 billion.

The discussions are ongoing and terms could change, according to a Bloomberg report, which cited unnamed sources with knowledge of the situation.

If a deal happens, it would be vindication for Snapchat, which spurned hefty takeover offers from Facebook and Google to the bewilderment of tech watchers. Google reportedly bid $4 billion for the mobile messaging app.

Snapchat executives insisted then that they were in it for the long run, not to sell out and turn over the reins.

Snapchat would be the latest tech start-up to net a sky-high 11-figure valuation despite little to show on the financial side: Although users now send more than 700 million "snaps" a day, Snapchat has little to no revenue and no profit.

Still, a $10-billion valuation for Snapchat "is consistent with where the market is today," said TX Zhuo, managing partner at Karlin Ventures in Los Angeles.

"With Alibaba's investment, I think the valuation is well-justified," he said. "You'd get a lot of reach having Alibaba as a strategic investor and I think the reach that they have -- that's where the monetization value is." Monetization is analyst jargon for revenue.

Airbnb, Dropbox, Uber and the Chinese smartphone and apps maker Xiaomi are the only private, venture-backed start-ups to have reached the $10-billion threshold, according to data from CB Insights.

But in a red-hot market for tech start-ups, a slew of young companies has drawn intense interest from investors this year.

The largest bonanza for start-ups since the late 1990s reflects diminishing concern from investors about the ability of companies to quickly extract profit from revenue. They say they would rather see the businesses aggressively amass a huge number of users and become staples of everyday life, with the idea that advertising or other revenue will follow.

Ride-booking app Uber last month drew a mammoth funding injection of $1.2 billion at a valuation of $18 billion. Its rival Lyft raised $250 million in the spring, including from Alibaba.

Earlier this year, short-term home rental service Airbnb Inc. raised about $450 million to reach a value of $10 billion, and the file-sharing service Dropbox Inc. accepted $350 million to also reach the $10-billion mark. Pinterest Inc., an online bulletin board for images, was valued at $5 billion after receiving a $200-million investment this spring. (continued...)

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© 2014 Los Angeles Times (CA) under contract with NewsEdge. All rights reserved.
Read more on: Snapchat, Facebook, IPO, Alibaba
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