Snapchat has raised $1.8bn in a funding round – largely since January – valuing the company at a whopping $18bn. Why on Earth are investors so keen?
Yesterday (26 May), TechCrunch reported on a pitch deck from Snapchat, claiming the company generated $59m in 2015. That’s a pretty good figure in isolation.
However, when news emerges that $1.8bn has been ploughed into Snapchat, and $18bn is the rough value of the company as a whole, it all looks a little bizarre.
That puts Snapchat’s value at well over 300-times its revenues. Apple is valued at $586bn, with revenues of around two-and-a-half times that in 2015. Facebook is valued at 17 times its annual revenues.
Investors back growth, they value expansion. The now is irrelevant with social media companies, the now is the past.
Snapchat’s growth is in its daily active users, which has been consistently, and dramatically, rising since early 2014. In documents obtained by TechCrunch, Snapchat’s user figures rose from 50m in March 2014, right up to 110m over Christmas. All segments – US, Europe and the rest of the world – doubled up.
Meanwhile, Snapchat added Stan Meresman to its board last year, only revealing the move this week. Along with his role on the boards of LinkedIn and Palo Alto Networks, he joined Snapchat last summer.
Calling himself a financial expert on his site, Meresmen describes his work as advising “CEOs & CFOs on preparing to become a public reporting company, IPO process, operating as a public company, and scaling the company for rapid growth.”
So, all of Snapchat’s valuation may soon be put to the real test, should it go down the IPO route.
Snapchat image via Dennzin/Shutterstock