UPDATED 22:33 EDT / MARCH 03 2016

NEWS

Spendaholic Snapchat grabs an additional $175 million in funding, this time from Fidelity

Messaging app maker Snapchat, Inc. has raised an additional $175 million from Fidelity Investments in an extension of its Series F round from May 2015.

According to The Wall Street Journal the valuation remained at $16 billion, the exact same valuation used when Snapchat raised its last round of $650 million.

The Journal makes the point that the fact Snapchat has raised the new money on the same valuation as last time is representative of current state of the market where mature startups, in particular, are struggling to get up valuations on new rounds and one in five are actually raising money on down valuations (per a study by law firm Fenwick & West). However it should be noted that the new money isn’t a round in its own right, but instead a case of Snapchat selling further shares in the company that were set aside in the last round, hence the valuation would logically remain the same.

Snapchat itself though continues to have mixed fortunes; while the company remains extremely popular with millennials, with some 200 million users and some 77 percent of all College students using the service daily, it is still struggling to make money.

We don’t have recent figures out of Snapchat however for the period from April to December 2014 they burned through $128 million in capital while only making $3 million in revenue, not exactly a sustainable long-term business model.

Since that time they’ve made several attempts to make money, including advertiser sponsored stickers for selfies and building an API for advertisers, but ultimately their target market is never going to tolerate serious advertising, which begs the question how they’ll ever make money out of it all.

Spendaholic

The new funding naturally also begs the following question: why does Snapchat need even more money after raising $650 million nine months ago?

This is a company that, before this new funding, has raised a staggering $1.498 billion; that’s not million, that’s billion.

What are they spending so much money on?

It’s a chat service, they’re not building rockets to go to the moon (it should be noted that Space X has only raised a flat $1 billion to date). And while there are naturally hosting costs, as well as a constant need to improve the service, let alone find a sustainable business model, that’s an insane amount of money in every sense of the word.

You can only presume that Snapchat is a spendaholic, gleefully burning money while enjoying the last days of the second tech boom.

Including the new funding Snapchat has now raised $1.673 billion from investors including Tencent Holdings, SV Angel, Lightspeed Venture Partners, Benchmark, General Catalyst Partners, Institutional Venture Partners (IVP) and others.

Image credit: mikeporesky/Flickr/CC by 2.0

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