Estimated valuation: $20-$25 billion

Product: social networking, augmented reality

IPO Timeline: Early 2017

Date Founded: September 2011

Snap Inc., formerly known as Snapchat, has become a social media phenomenon, growing in five years into one of the four major players in social networking with 150 million monthly active users, behind Facebook, Facebook's Instagram franchise, and Twitter, according to Bloomberg. Snap has grown so rapidly that it has surpassed Twitter in daily active users. It reportedly filed confidential papers in November for an initial public offering in 2017. The company was renamed Snap earlier this year. (See also: How Snapchat Makes Money.)

Fast Start

Snap's headquarters are located in the seaside boardwalk town of Venice, California, west of downtown Los Angeles, a seemingly unlikely place for a startup and far away from tech's mecca, Silicon Valley, more than 350 miles to the north. But Snap's beginnings were also very different from most tech startups. The company was born when Reggie Brown told friends he wanted pictures he was sending girls to quickly disappear. That led Brown and two of his college friends at Stanford University – Bobby Murphy and Evan Spiegel – to work on commercializing the idea, initially calling the company Pictaboo

The company was later renamed Snapchat in 2011 after a contentious breakup of the three entrepreneurs. At the helm were the new company's co-founders: Spiegel, now 26, chief executive, and Murphy, age 28, the chief technology officer. Snapchat took off. After advertising the Apple-centric iOS app by word of mouth, Snapchat's users soared to 100,000 by the spring of 2012, according to TechCrunch. That year, it received $485,000 in seed funding at a $4.25 million valuation from Lightspeed Venture Partners, just after Facebook went public, according to CrunchBase.

Beating Facebook

Spiegel, already a millionaire on paper, dropped out of Stanford University to help steer Snapchat's growth. In December 2012, the company launched an Android app just as Facebook introduced its rival Poke app. Facebook's app failed to gain traction and was shut down. By the spring of 2013, TechCrunch says Snap was attracting 60 million active users a day. That enabled it to raise $13.5 million in a Series A funding, led by venture capital firm Benchmark. To date, Snap has raised $2.63 billion in 8 funding rounds, including those led by hedge fund Coatue Management and venture capital firm Kleiner Perkins Caufield & Byers, Crunchbase says. Benchmark has invested in companies such as Nextdoor, Uber, Instagram and Twitter. KPCB has invested in companies such as Google, Amazon, Electronic Arts and others. 

Snapchat's Audience

Snap, as the company is now called, has around 330 employees in four North American cities and in Europe. The service is still largely geared towards millennials, but has started to attract older users. The company has moved far beyond its roots by adding a broad range of features. That has made Snapchat a forum for creative expression, allowing users to post videos and pictures in a fun, ephemeral manner without worrying about taking the perfect picture or video. The company also added 30 media partners who post video-centric and print content. Snapchat is also increasingly used as an instant messaging platform, though the message disappears after the person has read it.

Snap's Planned IPO

The Snapchat app consistently ranks among the top five in Apple’s App Store even though it remains much smaller than Facebook, which has 1.66 billion mobile monthly active users (MAUs). Instagram has over 600 million MAUs and Twitter has more than 300 million, the company says. While Snap’s revenue is not yet known, it has confidentially filed for an initial public offering under the JOBS Act, meaning it has less than $1 billion in revenue. But research firm eMarketer projects Snapchat will have nearly $1 billion in 2017, taking in nearly 2% of all advertising dollars in the U.S.

The company's investors have reason to be enthusiastic even in the face of major competition. Instagram recently launched a Stories feature, similar to Snapchat’s, as well as launching live video and disappearing photos. Despite that, Snapchat has not reported any decrease in time spent on Snapchat’s app, which is constantly being updated with improvements and new features.

 

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