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Yahoo invests in Snapchat

In an year, that has already seen some of market’s  biggest acquisitions, deals and investments, another large scale investment is on the cards as Yahoo has revealed its intentions of investing in Snapchat at a $10 billion valuation. Riding high on its revenues from one of its previous investments in Alibaba, that brought heavy revenues to the company, Yahoo now looks to improvise upon its declining core sector by investing in one of the fastest growing start-ups.  Yahoo had earlier invested $1 billion for a 40% share in Alibaba, the Chinese e-commerce company and was rewarded with billions of dollars as revenue. This profitable investment helped the CEO Marissa Meyer to negotiate with the shareholders and also brought substance to the thought about deals like this where the company is ready to be one of the potential investors in a start up that has been looking for funding to raise its capital.


(Snapchat CEO and co-founder Evan Spiegel at Venice, CA headquarters.) 

(Image Courtesy- Jefferson Graham, USA Today)

Founded in 2011, Snapchat allows its users use apps that help sending photos, videos and messages that disappear after 10 seconds automatically. The company currently has over 100 million users. Run by the CEO and co-founder Evan Spiegel, Snapchat, a three year old company that has recently raised $10 million in venture-capital funding, will now be working under the new communication tool at Yahoo, the team at San Francisco start up reported. Over the past few months, it was also reported, the company was looking for capitals from from venture capital firms, companies and money managers. So this investment from Yahoo seems to be a win win situation for both the companies.

There is a risk factor though, as Yahoo aims to invest in a company that has yet to generate revenue by turning its popular mobile service into a business. But, given the circumstances and the added pressure of the investors and shareholders, whom Ms. Meyer was committed to please by paying them from the $5 billion that Yahoo made through Alibaba, this seems to be the much needed business move.

Apart from Yahoo, Snapchat has also been the attraction for many other firms that have shown interest in investing in the company. Names like Alibaba, Kleiner Perkins Caufield & Byers, Institutional Venture Partners and DST Global have been interested to raise funds for Snapchat. Now, with Yahoo’s massive funding, Snapchat is all set to be one of the world’s most valuable start ups. Facebook’s $19 million deal with Whatsapp had already created a buzz, and now, with this new valuation, Yahoo looks to revitalize one of Web’s oldest players. In 2014 Yahoo as already acquired many companies in the mobile messaging and video screening arena.

So, with two rather popular deals this year, it wouldn’t come as a surprise if the other tech giants like Google or Microsoft come up with their plans of investment on similar lines. We will have to wait, as the concluding months of 2014 unfold.