Snapchat is said to be going after a $19 billion valuation in a new round of funding where it seeks to raise $500 million.
Bloomberg cites a person familiar with the matter who says Snapchat executives are participating in "advanced talks" with fund managers. The round of funding could give the company a valuation somewhere between $16 billion and $19 billion.
If Snapchat is successful, it could nearly double its valuation since last year, when it raised a total of $485.6 million from 23 different investors, giving it a valuation of $10 billion.
Few companies in Silicon Valley are valued at above $10 billion. The ride-sharing startup Uber is said to have a $40 billion valuation, while Chinese smartphone Xiaomi, which is set for a soft launch in the United States, is valued at $45 billion, making it the most valuable venture-backed private technology company. If Snapchat is successful, it could become the third most valuable company only behind Uber and Xiaomi.
Snapchat quickly made a name for itself for the eponymous messaging app that, by some estimates, is used by more than 100 million monthly active users to send 700 million disappearing messages every day. The company itself does not disclose an official number of users, but it says users, mostly teenagers, view more than 500 million "snaps" daily.
Founded in a Stanford University fraternity house, Snapchat and its 24-year-old CEO Evan Spiegel bears a striking resemblance to Facebook and Mark Zuckerberg. In 2013, Spiegel snubbed a $3 billion acquisition offer from the Facebook founder, the same way Zuckerberg turned down a billion-dollar acquisition of Facebook in its early days.
Last year, Snapchat began monetizing its platform through 24-hour advertisements that appear in the My Story section. Although Snapchat does not reveal how much it makes through its fleeting ads, a source cited by AdWeek says the company is charging up to $700,000 for ad space on the messaging app.
Unlike Facebook, Twitter, and other social media competitors, Snapchat does not curate information about its users to serve to its advertisers. Instead, it is banking on its powerful hold on the teenage market, a demographic that has been found hard to please and captivate by many advertisers. Companies such as Universal Pictures, Samsung, and McDonald's have all partnered with Snapchat to promote their services on the platform.
More recently, Snapchat introduced a new section called Discover, where media outlets such as CNN, ESPN, and National Geographic Channel post exclusive, short-form advertisements that users can view for 24 hours before they are deleted. Snapchat has a revenue-sharing agreement with publishers, although it is unclear what portion of the earnings goes to Snapchat and to its partners.
In 2014, technology startups have seen a surge of funding from venture capitalists, which raised a total of $48.3 billion in the U.S., according to data from the National Venture Capitalists Association and PricewaterhouseCoopers.
