Snapchat raises $50m from hedge fund Coatue
Snapchat has raised $50m in new funding from Coatue Management, the hedge fund that has been increasing its investments in Silicon Valley companies over recent months.
The messaging app, which last month turned down a $3bn acquisition offer from Facebook, revealed its fundraising in a regulatory filing on Wednesday. Snapchat confirmed that Coatue, which has previously invested in travel app Hotel Tonight and cloud storage provider Box, was the sole investor but declined to comment further.
A related filing last week suggested that investors valued Snapchat at $2bn in its latest funding round, according to an analysis by VCExperts.com – below the figures mooted for a takeover but more than double its June valuation of $800m.
Snapchat is yet to begin generating revenues but its popularity with tens of millions of users, many of them teenagers, has alarmed Facebook and excited investors.
Users of Snapchat, which allows people to send photos and videos that disappear after 10 seconds or less, are opting not to leave a digital trail of personal information as they might if they were chatting with friends on Facebook.
The addition this summer of Michael Lynton, chairman of Sony Entertainment, to its board and the attracting of new investor Coatue suggests that Snapchat’s young founders, Evan Spiegel and Bobby Murphy, have convinced their backers they can create a lasting business from ephemeral messaging.
The rapid growth of chat apps such as Snapchat, WeChat, WhatsApp Messenger and Line have taken some established social networks by surprise. Earlier this week, Twitter launched a redesigned smartphone app that featured private messaging much more prominently and introduced the ability to send pictures in direct messages.
Facebook, which tried to ape Snapchat with a disappearing messaging app Poke but failed to attract many users, admitted in October that it was seeing a drop-off in usage among younger teenagers. Analysts have cited teenagers as becoming more aware of the risks to future college places or employment of having a trove of embarrassing photographs on their Facebook profile.
Phillipe Laffont, Coatue’s founder and chief executive, said Snapchat’s “incredible scale” attracted it to the company, in spite of its unproven business model. “We think they’re revolutionising how people communicate in a mobile-centric world,” Mr Laffont told Forbes.
Snapchat has now raised a total of more than $120m. Its other investors include Lightspeed Ventures, Institutional Venture Partners and Benchmark Capital.
Coatue was among the contributors to Box’s $100m funding round last week, which valued the company at $2bn.
The appointment of Sony’s Mr Lynton to the board this summer came after he invested about $250,000 in Snapchat last year.