By Douglas MacMillan
A batch of leaked emails involving a Snapchat board member show
the startup's rapid rise to be the work of a secretive young
entrepreneur with a distaste for Silicon Valley and its
conventions.
Evan Spiegel, Snapchat's 24-year-old co-founder and chief
executive, has leveraged the service's growing appeal to gain
access to new business partners and wield growing influence over
investors desperate to buy shares of his company, according to the
private emails reviewed by The Wall Street Journal.
Mr. Spiegel, who rarely makes public appearances and asks
partners to sign lengthy nondisclosure agreements, had some of his
secrecy betrayed Tuesday, when a trove of 32,000 emails sent to and
from Michael Lynton, a Sony Corp. executive and Snapchat director,
were released by hackers who infiltrated the movie studio's
computers.
Mr. Spiegel addressed the email leaks in a letter to his staff
Wednesday that he posted to Twitter. "I am so sorry that our work
has been violated and exposed," he wrote. "It's not OK that people
steal our secrets and make public that which we desire to remain
private."
The emails contain correspondence between Mr. Spiegel and Mr.
Lynton, who has mentored the young entrepreneur and offered advice
on key decisions facing the Internet startup during its most rapid
period of growth. As a board member, he approved having Snapchat
issue shares at valuations of $1.5 billion in November 2013; $7
billion last May; and $10 billion for a round of funding that began
last June and has lasted several months, the emails show.
Snapchat achieved these valuations after a series of power plays
by Mr. Spiegel, some of which have perplexed and frustrated his
inner circle.
"He's been oscillating back and forth between appearing to want
to sell the business and wanting to go long twice a day," Mitch
Lasky, a partner at early Snapchat investor Benchmark and a member
of the startup's board, said in an October 2013 email to Mr.
Lynton.
"It's difficult to know how to help him as I don't know what he
wants to do," Mr. Lasky wrote.
Mr. Lasky was referring to Facebook Inc.'s offer to acquire
Snapchat for over $3 billion in a deal that would have netted Mr.
Spiegel a fortune and cemented his firm's place in the ranks of the
most successful exits in tech.
Instead, Mr. Spiegel turned the offer down, using it "as a
gambit to scare a higher number" out of potential investors, Mr.
Lasky said.
The move succeeded in getting people talking. "Turned down 3
[billion]. Are they insane?" author Malcolm Gladwell said in an
email to Mr. Lynton, his friend, who replied: "If you knew the real
number you would book us all a suite at" Bellevue.
But Mr. Spiegel's hard-nosed tactics did scare off a possible
investor. Asian tech giant Tencent Holdings Ltd. backed out of a
deal partly because Mr. Spiegel asked for a $4 billion valuation
and demanded that he and his co-founder, Bobby Murphy, be allowed
to sell $40 million of their shares in the transaction, according
to Mr. Lasky in an email in November 2013.
Mr. Lasky wrote that he was never told about the deal proposed
to Tencent, and that the Chinese firm "was offended by the terms,
and they didn't like the fact that I didn't know it was
happening."
Mr. Spiegel's secrecy is a common theme in the emails. Later in
November, Mr. Lasky wrote Mr. Lynton regarding the potential
fund-raising: "I am getting signals through the ether that the
financing conversations are going pear shaped again--Evan [Spiegel]
over-optimizing and not being fully forthcoming, shall we say, with
potential investors."
Mr. Spiegel's unusual fundraising tactics continued this year.
After the board approved a $26 million Series E round of funding
valuing Snapchat at $10 billion in June, the CEO met with investors
over several months, selling shares to venture-capital firms
including Kleiner Perkins Caufield & Byers and Yahoo Inc.
The round, expected to raise a total of $378 million, hasn't yet
closed. The company is currently in talks with Singapore investment
arm GIC, according to people familiar with the matter.
Even Snapchat insiders have trouble keeping track of which
investors Mr. Spiegel is bringing into the company at what
valuations. In an October email, Mr. Lynton asks the CEO if a
contact of his can still invest at the $10 billion valuation, to
which Mr. Spiegel replies, "Unless strategic I think probably
not."
Mr. Lynton, the well-connected boss of Sony's entertainment
business, has also become Mr. Spiegel's de facto representative in
a world of industry power players who are drawn to the upstart
technologist and eager to do business with him. He introduced Mr.
Spiegel to music producer L.A. Reid, Slate editor Jacob Weisberg
and Hearst CEO Steve Swartz and received glowing fan mail from
Twitter CEO Dick Costolo, who called Mr. Speigel "one of the best
product thinkers out there right now."
Not long after Mr. Spiegel spurned Facebook's offer, the social
network's operating chief, Sheryl Sandberg, wrote Mr. Lynton to
offer help filling out Snapchat's management bench. "A few really
good people are interested in working with Evan at Snapchat in a
role like mine," she wrote. "If he ever wants to hire anyone, let
me know and I can give him names."
The following month, Snapchat hired Emily White, its first
operating chief and one of Ms. Sandberg's protégés at Facebook.
Quipped Netflix CEO Reed Hastings in another email to Lynton: "So
that is why you gulped when I said Evan needs a Sheryl!"
Mr. Spiegel has made moves to build his messaging app into a
broader platform for media and entertainment. According to the
emails, the company has acquired three startups this year:
high-tech eyeglass maker Vergence Labs for up to $15 million;
video-chat service AddLive for $30 million; and QR-scanning app
Scan for up to $50 million.
In August, the company met with media executives and marketers
to discuss Snapchat Discover, a service that will display news and
ads within the app. A Sony ad executive wrote to Mr. Lynton after
reviewing the project in September. "It's really impressive, and
we're moving forward to close a deal to be one of the first
advertisers on the platform," he said.
Ben Fritz and Evelyn M. Rusli contributed to this article.
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