Snapchat Has Raised $485 Million More From 23 Investors, At Valuation Of Up To $20B

Back in the day, we reported that messaging app Snapchat* was raising over $100 million in a round led by Kleiner Perkins. And then the WSJ reported that it was $20 million, which left us wondering why a growth round would be so small in terms of total principle. Well, it turns out it’s not.

Snapchat has raised a much bigger amount: Nearly $500 million in aggregate, according to an SEC filing that it slipped out as the working day for New Years Eve was drawing to a close. The filing notes that 23 investors took part, although it’s not clear from the SEC document who led the round.

Here is what happened, according to our sources: Snapchat originally set out to raise $40 million, but demand for the round skyrocketed, and it decided to shoot for an ambitious $900 million instead. When that didn’t work out, it dialled it back to $500 million. Rumor has it that Kleiner is leading this latest round, with GIC, Yahoo and maybe wildcards August Capital participating. Portions of that, such as the Yahoo part of the fundraise, closed some time ago. The SEC filing notes that the date of first sale was in April 2014.

We’ve also heard that the current post money valuation is $20 billion, although others have disputed this and said it’s closer to $10 billion.

The cash is much-needed. One source said that Snapchat has an over $30 million-per-year burn rate, and pays half of that to Google Apps Engine to host all its photos, though this number seems low to us. Another noted that at one point the company was paying $3 million each month in legal fees alone. Snapchat’s had its share of lawsuits.

Alibaba was the original lead on that round as Re/Code (nee AllThingsD) reported. According to a source, the Alibaba position was then punted to Yahoo, which put in $20 million of its own cash on hand post the Alibaba IPO. We’ve also heard that Yahoo has actually put in more than this but have been unable to corroborate that beyond the $20 million close.

The cause of the numerical ups and downs of Snapchat’s fundraising is the company’s unique spin on financing, which works on a “rolling” basis, from how one source describes it.

Snapchat is interesting in that they break the conventions of traditional fundraising, one source tells us. Traditionally an entrepreneur will set out to raise a round for a specified amount of money, and then you get interested investors on the same page based on an agreed valuation and then you close it. Spiegel does this somewhat differently. “He goes after individual investors at different valuations. It’s a rolling investment and a rolling close. In theory you could say he’s already done 40 rounds.” (40 is likely figurative rather than literal.)

What this means is that, if it’s true, then yes, Snapchat may have raised nearly $500 million in the last six months. Of that $500 million, it may be that only 75% of it is closed, and with portions at different valuations, some getting in pre-$10-billion, like Yahoo, and some above it and closer to $20 billion.

The logic for the high valuation is interesting, too, and points to some of the big hopes Snapchat and its investors have for the app. The last reported number of active monthly users of the ephemeral message app was 100 million back in August 2014, but things are moving fast. From what we understand the MAU number is now approaching 200 million users. The company in May 2014 reported 700 million photos sent per day on the app, with 500 million Snapchat Stories.

Among the company’s revenue-generating services are sponsored Our Stories, which launched in November. There have also been interesting appearances from companies like Amazon using the platform to send disappearing deals to users, and while Snapchat and Amazon may be talking, the e-commerce giant is not among the list of investors at the moment, says a source.

*Disclosure: Alexia’s SO’s VC firm is an investor in Snapchat.