Snapchat Raises New Capital at 70x Sales

Snapchat is a cool app. All of the brainless kids love it. Therefore, venture capitalists are free to affix any valuation they feel is appropriate to it. After all, it’s the next big thing.

So, they raised new money at a $22 billion valuation. According to re/code, Snapshit will do $300-350 million in revenues for 2016, placing their price to sales ratio just about 70x. To put this into perspective, Facebook is trading about 20x and at the highest peak of the social media bubble, Twitter and others might’ve touched down at around 30x. But, for the most part, 20x sales is super bubble territory.

Because the first social media bubble worked out so well, investors figured Snapshit could be worth whatever they wanted it to be worth. For now, 70x sales will suffice.

This new financing, we understand, is a follow-on to the $175 million Series F round led by Fidelity. Snapchat was said to be valued at $16 billion in that round, flat on the year before. However, filings from earlier this month and embedded below, uncovered for us by market analysts VC Experts, show that the Series F was expanded.

Based on a share price of $30.72 per share — which VC Experts tells us was the value disclosed in an earlier Fidelity Fund filing related to its Snapchat investment — and assuming all of the authorized shares are issued, the more recent valuation could be as high as $22.7 billion. Authorized shares do not always all convert to issued shares, but this gives us a range that fits in with what we’ve heard about the $20 billion valuation.

Expanding the Series F with a Series FP, as it’s described in the document below, would also fit in with a description we’ve heard more than once about Snapchat’s fundraising: The startup is “always raising” on a “rolling” basis, partly because investors are so interested.

“They get offers all the time,” one investor close to the company said. “And once you start to grow on this path, many people come to give you money. You don’t know how to value the company, so the best way to do that is to do some kind of rolling funding. When you have a hot company and many people are approaching you, you do a market of discovery.”

Besides Fidelity, other existing investors in the company include Alibaba, which led its Series E; Benchmark (Series A lead); Coatue Management (Series C lead); General Catalyst; IVP (Series B lead); Saudi investment group Kingdom Holding Company; KPCB (Series B lead); Lightspeed (Snapchat’s earliest and most constant investor); SV Angel; WeChat owner Tencent and Yahoo. We hear that many existing investors are looking to participate in this new round, including Spark Capital

Ooh, the Saudi Prince from Kingdom Holdings is an investor, alongside a sundry of Chinese investors, such as Tencent and Alibaba. What can go wrong?