Venture Capital Markets Media/Telecom

Snapchat Discussing IPO Filing with Bankers

Snapchat has been talking to investment bankers about filing for an IPO towards the end of this year or early in 2017, according to people the company has spoken to. That could put the company on track for a public offering next year, coming out ahead of other hotly anticipated private tech startups.

Snapchat doesn't appear to have hired a banker to handle the IPO yet, suggesting there isn't a firm timeline. In a statement, a Snapchat spokeswoman said: “Whether and when we go public will depend on a variety of factors, many of which are beyond our control.”

The Takeaway
A Snapchat IPO is likely next year, putting the company ahead of other large private tech companies eyeing the public markets. An offering will test investors’ appetite for mobile video, among other things.

Snapchat CEO Evan Spiegel hasn’t been shy about stating the company’s interest in going public. “We need to IPO. We have a plan to do that,” he said at a conference last year. Mr. Spiegel, who has made a habit of bucking Silicon Valley trends, has told investors that he doesn’t much buy the idea—almost a religion in Silicon Valley—that it’s better to stay private longer.

The valuation Snapchat will seek in a public offering also couldn’t be learned. But the company isn’t expected to look for a huge premium to its last private valuation of $16 billion. 

Snapchat’s revenues lag similar companies when they sought an IPO.

Snapchat only began ramping up advertising sales midway through last year and is on track to take in somewhere north of $300 million in revenue in 2016, according to people close to the company. The bulk of that is from video ads that play between user-submitted videos and photos as well as within channels run by traditional media companies like CNN. It also sells sponsored lenses that users can layer on top of photos and videos. Snapchat earlier this year was projecting $1 billion in revenue in 2017, according to documents acquired by TechCrunch.

Facebook had $3.7 billion in revenue in 2011, prior to filing its S-1 in early 2012. Twitter had $254 million in revenue for the first six months of 2013; it filed its prospectus in late 2013.

Investors in and outside of the company are bullish that Snapchat can benefit from the explosion in mobile video and television advertisers’ desire to diversify. This spring, the app was reportedly getting 10 billion views a day, although some views can be fractions of a second long. Still, it’s grown into a major force in mobile video where it faces steep competition from Google’s YouTube and Facebook.

“We need to IPO. We have a plan to do that.”

Usage has also grown thanks to the introduction of features in the chat and camera sections of the app like stickers and animated lenses that keep users engaged. Snapchat has also been expanding its user base internationally, marketing the app in Europe and opening up offices in London, Paris and Australia.

Recently, Snapchat executives have been turning their focus to hardware and augmented reality, and acquiring startups in those areas to build up in house talent.

There’s not a lot of data out there about public investors’ current appetite for consumer tech stocks. Bankers recently have been pointing to the IPO of Twilio, an enterprise software company which handles notifications for major consumer services, as the sign of some interest. The price of the company’s shares has roughly doubled since its debut in June and the company is now valued at $5 billion. But investors caution you can’t fully judge an IPO until six months later, and private tech companies valued at $10-billion plus are in a different territory.

Snapchat has raised more than $2.5 billion in financing from traditional venture capital investors like Benchmark and IVP as well as public market investors like Fidelity.

—Amir Efrati contributed to this article.

Jessica Lessin founded The Information in 2013 after reporting on Silicon Valley for eight years for the Wall Street Journal. She writes a weekly column about all things tech, media and the wild ride both industries are in for. She can be found on Twitter at @jessicalessin.
Tom Dotan joined the Information in 2014 covering the media, advertising and streaming video businesses. He is based in San Francisco and can be found on Twitter at @cityofthetown.