Kik, the mobile messaging app company based in Waterloo, Canada, is assessing opportunities to advance its service through partnerships and strategic investment with established tech firms. Contrary to media reports, however, it is not shopping around for a sale.
Bloomberg today reported that Kik, which developed a mobile messaging app with over 200 million registered users, is “exploring a sale” and/or new financing after contracting in Qatalyst. That comes just weeks after Facebook turned its Messenger service into a platform, and against a backdrop of news that has raised the profile of messaging over the past year — including Facebook’s $19 billion acquisition of WhatsApp and rise of Snapchat, which was valued at $15 billion following a recent investment from Alibaba.
Reports that Kik is pursuing a sale make sense within that context — except that the company isn’t.
TechCrunch understands from a source within Kik that, while the company has hired Qatalyst, it did so to expand its network of contacts inside the tech industry with a view to future fundraising opportunities, partnerships and other benefits.
As our source put it: it can be hard to build a tech company all the way up in Canada, Qatalyst is the first bank which Kik has liked and it has already helped open doors.
Kik provided TechCrunch with a statement that explained that, after getting a lot of approaches, it is “now talking to pretty much every company to see what a partnership might look like…[but remains] absolutely committed to staying independent.”
That might sound like an oxymoron, but we understand that Kik is seeking strategic investments that can bring value to its platform, for example integrating another company or service into its chat messenger. Since it is talking to a range of companies, some potential partners might not be well suited for investments — perhaps due to their scale or demands — and an acquisition might sit better. In those circumstances, Kik is reluctant to do a deal but is having discussions because it is keen to scope out all opportunities available.
Stepping back for a second and looking at the company, an exit doesn’t make sense for Kik at this time either.
The platformization of Facebook Messenger validated the concept of mobile messaging that the company has worked on since 2009. Kik CEO Ted Livingston has spoken on numerous occasions about his belief that Kik can grow into a ‘The Next Internet’, or a U.S. version of hit Chinese chat app WeChat, while others in the industry are beginning to see the potential of messaging as a platform for services in the U.S., it is still early days and there is vast potential to grow.
Kik’s revenue generation is also still embryonic. It finally began monetizing late last year, when it introduced branded accounts and advertising, and it has plans to add a payments service this year and, in time, other types of commerce-related services.
Added to that, Kik doesn’t have a pressing need to exit. Bloomberg reports that it has two years of runaway left. It has kept expenditure modest — being in Canada has no doubt helped — and has raised a total of $70 million, including its most recent $38.3 million Series C round in November.
It’s clear from talking to Livingston over the past couple of years that his vision of where the messaging market is heading is coming alive now. If he and his team want an exit, it could be far more lucrative in a few years if Kik can execute on its plan.
Of course, WhatsApp’s founders are equally as evangelistic about messaging, yet they sold to Facebook and retained their independence too. So it can be done, though opportunities like Facebook are rare and the company has made its move in messaging already.