Credit: Snapchat

Could 2015 be the year Snapchat proves its worth?

The publicity-shy startup discretely disclosed a $500m funding round late on New Year's Eve.

by Jack Torrance
Last Updated: 27 May 2015

Like its users who treasure the secrecy of disappearing photos, Snapchat rarely courts the spotlight – and its latest funding round is no exception. Perhaps hoping the media would blinded by a drink-induced haze (although MT was of course tucked up in bed by the time the clock struck 12), it chose the last day of 2014 to tell the Securities Exchange Commission it had raised $485m (£314m) from 23 investors.

The round is thought to have valued the company at more than $10bn, according to TechCrunch, startling for a company that was founded just three years ago and has so far failed to turn its approximately 200 million monthly users into big bucks.

That's why it's in need of cash. Snapchat is thought to have a 'burn rate' (startup speak for negative cash flow) of £30m per year, and this is only likely to get bigger in the short-term as it invests in new features and ways to turn the app into a money making product.

How it can achieve this is, of course, the billion-dollar question and, now it has a bunch of extra investors breathing down its neck, Snapchat is under increasing pressure to come up with an answer. Despite some experimentation, the obvious choice of selling advertising space doesn't seem to have materialised as a key revenue stream, fuelling speculation of a variety of other options.

Consumer finance has looked like a strong contender as it launched money transfer service Snapcash last year, and it recently took on former Credit Suisse banker and IPO specialist Imran Khan as chief strategy officer. The recent Sony hacks also gave us an insight into the company's operations as it emerged Snapchat acquired a wearable technology company called Vergence Labs, and the QR code startup Scan.me.
 
Whatever founder Evan Spiegel's plan is for Snapchat, it's probably safe to say the investors who have put in so much money know a lot more about it than the public. But only time will tell if he can prove their valuations right.

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