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How does one get from Snapchat to Tencent? Just because Bob down in the van by the river is making soda pop in his wheelbarrow doesn't mean he's going to be th

How does one get from Snapchat to Tencent? Just because Bob down in the van by the river is making soda pop in his wheelbarrow doesn't mean he's going to be the next Coca-Cola. Even the mere suggestion takes so much credibility away from Andreessen. How many thousands of messaging programs have come along already? ICQ, MSN, AIM, etc. etc. Why weren't any of them the next Tencent? Perhaps, because China is not the US. Last time I was in Japan, kids were still shelling out $40 for CDs from their favorite pop singers. Different markets are different. Snapchat is a one-trick pony and about as special as a snowflake in an avalanche.

argonaut 13y ago
Venture capital (excluding private-equity-esque VC) is not in the business of making bets on sure-things. If Snapchat was for sure guaranteed to become Tencent, then they would be raising at a $100B valuation instead of a $2B valuation. If investors were even confidently sure they would become the next Tencent, they would be raising at $10-$20B. But they're not. But if they had a 2% chance of becoming the next Tencent, that $2B valuation is justified.
- aryastark 13y ago
  Of course not. VCs are in the business of inflating bubbles. That's how they make money. Andreessen has every reason to claim that we are not seeing a bubble situation here. But to pull Tencent out of your ass and compare it to Snapchat? There is no basis on planet Earth for the comparison. None. You're just tossing out random names at that point. Tencent is literally as old as Google is. They had $7B USD in revenue last year. They have 21 thousand employees. They run the China equivalent of PayPal. Their messaging service, QQ, has 798 million accounts and has seen peak usage of 176 million users at a single time. It is here that I remind you that the entire population of the US is only 313 million. Mathematically speaking, Snapchat doesn't stand a chance. No one "plans" to become Tencent. No one. I don't care how good the prospects are for Snapchat. You tell me you want to become Tencent and all you have is a sexting app? That's when I laugh at you. Then I pull up the App Store and flip through all your competitors. Then I remind you that your entire value is derived from fickle teenagers, that won't be there a year from today. $100B my goddamn ass.
  - argonaut 13y ago
    Tone down the snark. Also, you clearly didn't read my response carefully enough. I never said Snapchat had a 2% chance of becoming another Tencent. I said that if Snapchat had a 2% chance, the valuation is justified. Clearly, some investors think that chance holds. Some investors think that chance does not hold, and they did not participate in the deal! I'm also not tossing out random names. Did you even read your own post, which mentions Tencent? I was addressing your argument in the context of your post. I would also argue that a16z would benefit if investors thought there was a bubble. They would get tremendously better valuations and there would be so much less competition for the best deals. Also, anyone who says Snapchat is just a sexting app for teenagers clearly doesn't understand their product, speaking as someone in college who sees Snapchat used all the time (by lower and upper year college students alike). It's already moving upstream.
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ghshephard 13y ago
Snapchat has mindshare, and is one of maybe 10 possible contenders in North America for a next major messaging platform. Once a VC gets involved, they also reserve the right to fire "Bob" and replace him with a CEO/Management team of their choosing. Also, don't underestimate the ability of 10s of millions of dollars and some hi-powered talent (plus the VC team pushing hard) in changing a "one-trick-pony" into a category competitor.

argonaut 13y ago

Venture capital (excluding private-equity-esque VC) is not in the business of making bets on sure-things. If Snapchat was for sure guaranteed to become Tencent, then they would be raising at a $100B valuation instead of a $2B valuation. If investors were even confidently sure they would become the next Tencent, they would be raising at $10-$20B. But they're not. But if they had a 2% chance of becoming the next Tencent, that $2B valuation is justified.

aryastark 13y ago
Of course not. VCs are in the business of inflating bubbles. That's how they make money. Andreessen has every reason to claim that we are not seeing a bubble situation here. But to pull Tencent out of your ass and compare it to Snapchat? There is no basis on planet Earth for the comparison. None. You're just tossing out random names at that point. Tencent is literally as old as Google is. They had $7B USD in revenue last year. They have 21 thousand employees. They run the China equivalent of PayPal. Their messaging service, QQ, has 798 million accounts and has seen peak usage of 176 million users at a single time. It is here that I remind you that the entire population of the US is only 313 million. Mathematically speaking, Snapchat doesn't stand a chance. No one "plans" to become Tencent. No one. I don't care how good the prospects are for Snapchat. You tell me you want to become Tencent and all you have is a sexting app? That's when I laugh at you. Then I pull up the App Store and flip through all your competitors. Then I remind you that your entire value is derived from fickle teenagers, that won't be there a year from today. $100B my goddamn ass.
- argonaut 13y ago
  Tone down the snark. Also, you clearly didn't read my response carefully enough. I never said Snapchat had a 2% chance of becoming another Tencent. I said that if Snapchat had a 2% chance, the valuation is justified. Clearly, some investors think that chance holds. Some investors think that chance does not hold, and they did not participate in the deal! I'm also not tossing out random names. Did you even read your own post, which mentions Tencent? I was addressing your argument in the context of your post. I would also argue that a16z would benefit if investors thought there was a bubble. They would get tremendously better valuations and there would be so much less competition for the best deals. Also, anyone who says Snapchat is just a sexting app for teenagers clearly doesn't understand their product, speaking as someone in college who sees Snapchat used all the time (by lower and upper year college students alike). It's already moving upstream.
  - deleted 13y ago
    [deleted]

ghshephard 13y ago

Snapchat has mindshare, and is one of maybe 10 possible contenders in North America for a next major messaging platform. Once a VC gets involved, they also reserve the right to fire "Bob" and replace him with a CEO/Management team of their choosing. Also, don't underestimate the ability of 10s of millions of dollars and some hi-powered talent (plus the VC team pushing hard) in changing a "one-trick-pony" into a category competitor.