Snapchat raises $537 million in new round of equity funding


Snapchat, the disappearing message service, has informed US regulators that it has raised $537 million in a new round of equity funding that has increased the company’s valuation to $16 billion. The new fund raising has happened just three months after the company raised $200 million in March.

The popular picture sharing chat app Snapchat seems to be investors favorite. The investors are ready to throw in money for its drastic growth in the popularity among the people who belong to the age group of 18 to 24 years. Young people of this age group account to around 45% of the app users, which is till date the largest percentage among the other social networks.

Regarding the current fund raising, the company did not unveil the investors who bought the stakes in this round. Media report suggests that Chinese e-commerce giant Alibaba was one among the investors in the latest round of fund raising. Few months ago, Alibaba’s investment of $200 million in the Snapchat company raised the app’s value to around $15 billion. Other investors may include Glade Brook Capital Partners and York Capital Management.

Another information is that Snapchat is likely to go for an IPO (Initial Public Offering) but not further details were obtained about when it may happen. At Code Conference in California, the CEO of the company, Evan Spiegel, revealed they needed an IPO and are planning for it soon.

Generally, the venture-capital investors receive preferred shares when they invest in a company as a means to receive some rights, like voting rights, over the shareholder. But Snapchat’s abililty to sell as common shares at a large valuation highlights investors strong interest to be part of the rapidly growing mobile messaging app.

In 2013, Snapchat denied a $3 billion takeover bid from Facebook. When asked about the current Spiegel acknowledged at Code Conference that a correction is moving towards the company and that has already been thought about in his plan. He also said that low interest rates have encouraged much of the recent activities.

Recently, the company revealed it has more than 100 million users who log on each day. It is suprising to know that the company stated generating revenue this year only. It made some money by selling ads to marketers including Samsung Electronics Co and Universal Pictures. With its appeal to the teens and yound crowd, Snapchat aims to do much more than messaging and a next-generation media business.