By Douglas MacMillan and Juro Osawa
Snapchat is in discussions to raise a new round of financing
from Alibaba Group Holding Ltd. in a deal that could value the
mobile-messaging startup at about $10 billion, according to people
familiar with the negotiations.
The talks may involve other investors and could fall apart
before a deal is reached, the person said. Bloomberg earlier
reported the possible investment from Alibaba.
Spokeswomen for Hangzhou, China-based Alibaba and Snapchat in
Los Angeles declined to comment.
An eleven-figure valuation for a startup with close to zero
revenue and an app that didn't exist four years ago would mark a
new high watermark in this era of investor optimism, as financiers
compete to buy shares of the hottest technology companies and drive
up valuations.
The discussions also highlight the growing allure of U.S. tech
startups to China's largest e-commerce giant. As Alibaba prepares
to hold an initial public offering later this year, it has made a
series of investments in young Silicon Valley companies such as
mobile video-call app TangoMe Inc. with an eye toward expanding
into the U.S. market.
Alibaba is also battling its homegrown rival, Tencent Holdings
Ltd., in fast-growing areas like mobile messaging as they compete
for China's more than 500 million smartphone users. Tencent, which
operates the popular WeChat smartphone chat application, is trying
to offer more e-commerce services to the messaging app's nearly 400
million monthly active users.
Alibaba, whose own messaging app, Laiwang, has far fewer users
than WeChat, has struck a number of deals with other Chinese
companies since last year to bolster its services for mobile users.
Among those deals, Alibaba bought a stake and later reinvested in
Sina's Twitter-like Weibo microblog business, and bought a stake in
mobile-mapping firm AutoNavi Holdings Ltd.
Snapchat makes no money from its mobile app, which sends visual
messages that vanish after a few seconds. But the increasing
popularity of the service with young smartphone users has sparked
interest in the business, evidenced by Facebook Inc.'s acquisition
offer for Snapchat of around $3 billion and an investment led by
Coatue Management LLC valuing the startup at more than $2 billion,
both last year. Facebook signed the largest deal in this space
earlier this year, agreeing to buy WhatsApp for $19 billion.
Write to Douglas MacMillan at douglas.macmillan@wsj.com and
Telis Demos at telis.demos@wsj.com
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