5 ms·

I know that I don't "get" venture capital, but is Snapchat even profitable (or close to) yet? If not, and it's going to take nearly 2 billion more to get there,

I know that I don't "get" venture capital, but is Snapchat even profitable (or close to) yet? If not, and it's going to take nearly 2 billion more to get there, do they really have a product that will ultimately return value? It's the cynic in me, but by a series F, and needing 2 billion, this feels like the sort of funding where early investors are propping the valuation of Snapchat in order to sell off to someone like Yahoo for a crazy amount of money, where the product will go and eventually die. All in the name of advertising. I guess I just don't get it.

JonFish85 10y ago
The article says they had revenue of $59m in 2015, so A) they're not profitable and B) they probably aren't even thinking too hard about trying to be. For now, growth numbers are enough to get them buckets of cash, so that's most likely what they're focusing on.
- carleverett 10y ago
  Given the context, the $59m revenue isn't that bad. They clearly just started trying to monetize in 2015, and averaged double revenue growth each quarter, finishing with over $120m run rate. The $250-$350m forecast for 2016 is completely reasonable. Hitting that target still means a 60x valuation (and props to Snapchat for getting that kind of valuation these days), but I don't think it takes a delusional investor to see Snapchat passing $1b in just another year or two, and soon going well beyond that.
underyx 10y ago
>needing 2 billion They probably don't need 2 billion but can grow faster by making use of this money instead of going for some aggressive monetization. I don't get why everyone acts like Snapchat is unable to monetize the platform — they just don't want to if they don't need to yet.
- edgyswingset 10y ago
  > I don't get why everyone acts like Snapchat is unable to monetize the platform — they just don't want to if they don't need to yet. I'm not convinced that's true. Reportedly, in 2014 they made 3.1 million in revenue and -128 million in net income [0]. I don't think a difference that's two orders of magnitude is a function of "not wanting" to monetize the platform. I'm convinced they're a <100 million/yr in profit product. [0]: http://gawker.com/snapchat-lost-a-ton-of-money-last-year-1706957414 http://gawker.com/snapchat-lost-a-ton-of-money-last-year-170...
  - underyx 10y ago
    Can you not imagine any steps they could take to make more money? They obviously haven't even tried yet.
  - runako 10y ago
    From TFA: "the company has estimated that revenues will be between $250 million and $350 million for 2016, and between $500 million and as much as $1 billion for 2017." Incorporating your numbers, what I see is a business that is plausibly on a path to grow from $3m to $1b in revenue (~30,000% growth) in 3 years. If you an investor targeting growth companies and you pass on an opportunity like this, you should be fired. Snapchat isn't General Mills, and it should not be valued using the same approach.
    - edgyswingset 10y ago
      That's good for them that they can pitch that to investors! But what are their actual numbers?
      - runako 10y ago
        1) Investors in growth companies care about what's next, not what's past. The past numbers are important to lend credibility to projections, but nobody values growth companies based on (presumably much smaller) numbers from the past. 2) Also from TFA: "Snapchat’s revenues in 2015 were $59 million (recall that there was no real monetization effort in the first part of the year, and only the beginnings of it in the latter part of the year)." I'm not privy to any internals at Snapchat, but based on the other metrics in the article, the projections are not implausible at all. But yeah, it's still not appropriate for people whose idea of risk is owning Procter & Gamble.
beachstartup 10y ago
i dunno, it sounds to me like you get it just fine.

JonFish85 10y ago

The article says they had revenue of $59m in 2015, so A) they're not profitable and B) they probably aren't even thinking too hard about trying to be. For now, growth numbers are enough to get them buckets of cash, so that's most likely what they're focusing on.

carleverett 10y ago
Given the context, the $59m revenue isn't that bad. They clearly just started trying to monetize in 2015, and averaged double revenue growth each quarter, finishing with over $120m run rate. The $250-$350m forecast for 2016 is completely reasonable. Hitting that target still means a 60x valuation (and props to Snapchat for getting that kind of valuation these days), but I don't think it takes a delusional investor to see Snapchat passing $1b in just another year or two, and soon going well beyond that.

underyx 10y ago

>needing 2 billion They probably don't need 2 billion but can grow faster by making use of this money instead of going for some aggressive monetization. I don't get why everyone acts like Snapchat is unable to monetize the platform — they just don't want to if they don't need to yet.

edgyswingset 10y ago
> I don't get why everyone acts like Snapchat is unable to monetize the platform — they just don't want to if they don't need to yet. I'm not convinced that's true. Reportedly, in 2014 they made 3.1 million in revenue and -128 million in net income [0]. I don't think a difference that's two orders of magnitude is a function of "not wanting" to monetize the platform. I'm convinced they're a <100 million/yr in profit product. [0]: http://gawker.com/snapchat-lost-a-ton-of-money-last-year-1706957414 http://gawker.com/snapchat-lost-a-ton-of-money-last-year-170...
- underyx 10y ago
  Can you not imagine any steps they could take to make more money? They obviously haven't even tried yet.
- runako 10y ago
  From TFA: "the company has estimated that revenues will be between $250 million and $350 million for 2016, and between $500 million and as much as $1 billion for 2017." Incorporating your numbers, what I see is a business that is plausibly on a path to grow from $3m to $1b in revenue (~30,000% growth) in 3 years. If you an investor targeting growth companies and you pass on an opportunity like this, you should be fired. Snapchat isn't General Mills, and it should not be valued using the same approach.
  - edgyswingset 10y ago
    That's good for them that they can pitch that to investors! But what are their actual numbers?
    - runako 10y ago
      1) Investors in growth companies care about what's next, not what's past. The past numbers are important to lend credibility to projections, but nobody values growth companies based on (presumably much smaller) numbers from the past. 2) Also from TFA: "Snapchat’s revenues in 2015 were $59 million (recall that there was no real monetization effort in the first part of the year, and only the beginnings of it in the latter part of the year)." I'm not privy to any internals at Snapchat, but based on the other metrics in the article, the projections are not implausible at all. But yeah, it's still not appropriate for people whose idea of risk is owning Procter & Gamble.

beachstartup 10y ago

i dunno, it sounds to me like you get it just fine.