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News : Innovation Last Updated: Nov 15, 2013 - 8:27 AM


Two-year old Snapchat with no revenues spurns Facebook's $3bn bid
By Finfacts Team
Nov 14, 2013 - 5:31 AM

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Bobby Murphy and Evan Spiegel (front row), two of possibly 3 co-founders of Snapchat, celebrating its first birthday in Sept 2012.

In an echo of the dot-com bubble, Snapchat a two-year old smartphone app messaging service that is popular with teens and young people as they can send sex-related messages and photos that disappear within 10 seconds, has no revenues and no business model but it's reported to have rejected a $3bn cash bid from Facebook.

The Wall Street Journal says Evan Spiegel, a 23-year old co-founder, who is a Stanford University dropout, is holding out because he hopes his company can get an even higher valuation, said the people familiar with his decision. He thinks Snapchat's user numbers have more room to grow, and is encouraged by the high level of activity by current members, suggesting it isn't likely to fade soon, they said. This September, the company said its usage had nearly doubled, to 350m messages, or "snaps," per day, up from 200m in June.

User numbers are not disclosed.

Tencent, a Chinese Internet company, which owns WeChat, a key messaging service in China, is reported to be interested in investing $200m in Snapchat at a valuation of roughly $4bn.

WeChat is similar to WhatsApp with both voice and text messaging.

The New York Times says the service operated from a beachfront bungalow in Venice, California, until last month.

The Times says" "In the past, several startups found even greater success by passing up a billion dollars or more, including Facebook and Twitter...But Silicon Valley is littered with many more entrepreneurs whose big dreams went unfulfilled, people who were at the helm of the next big thing and lost momentum before they could cash out."

Facebook disclosed two weeks ago that it had lost some teen usage and it removed an age restriction on posting photos

We reported last week on fighting founders at Twitter and Snapchat is in a dispute similar to the Facebook one. See Twitter story link at bottom of page here.

Snapchat's co-founders Evan Spiegel and Bobby Murphy began working together at Stanford University, initially on a website for students called Future Freshman. Reggie Brown, another Stanford student, claimed to have suggested the idea for "a mobile device application allowing users to send pictures to others that then quickly disappear from the recipient's mobile device."

When there was a falling-out he claims to have discovered that what he had assumed was anew company, were in fact name changes of an existing company that had left Spiegel and Murphy as the only holders of equity.

TechCrunch reported last July that Spiegel and Murphy said in court documents that alleged co-founder Reggie Brown never had equity in the company.

In February, Brown filed a suit against Snapchat claiming that he has been robbed of his stake of the company. Since then, "we’ve heard from sources and court documents that Brown was heavily involved in the early stages of the company. Spiegel has even admitted that Brown came up with the idea for a disappearing-messages app.

Now, we’ve learned that, despite his significant involvement, Brown may not have had equity in Snapchat."

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