Snapchat’s youthful founders show no fear in race to IPO

SAN FRANCISCO: Snap Inc, the red-hot messaging company, is seen by many tech investors as the next Facebook or Google, but its youthful founders are pushing far more aggressively than its predecessors in moving from scrappy startup to public company.

At a time when it is fashionable in Silicon Valley to stay private as long as possible, Snap is planning an initial public offering valuing it at more than $20 billion just two years after it first began to generate revenue, even though it has plenty of cash and ample opportunity to raise more on the private markets.

It is expected to be the biggest US tech IPO since Facebook Inc’s 2012 debut. It is also defying convention by declining to bring in “adult supervision” to help 26-year-old co-founder and Chief Executive Officer Evan Spiegel and 28-year-old co-founder and Chief Technology Officer Bobby Murphy manage the company.

Imran Khan, a former Credit Suisse banker who played a big role in the Alibaba Group Holdings Ltd IPO in 2014, is emerging as a key figure in his role as chief strategy officer.

Some investors remain concerned, however, that the combination of an inexperienced management team and a sky-high valuation could be problematic. “It is a very clearly inexperienced team leading a company that’s asking for two things: a huge valuation and a very aggressive multiple,” said Max Wolff, a market strategist at 55 Capital.

“Once you start asking public investors for 30x earnings, the tolerance for mistake, misadventure and learning on the job goes down.” Questions about the management team have lingered after a string of senior executives left following short stints with the company.

High-profile departures include Emily White, who joined as chief operating officer from Instagram at the start of 2014 and quit after just more than a year, according to her LinkedIn profile.

Mike Randall, who joined Snap from Facebook, left last year after less than a year as head of business and marketing.

A spokesman for Snap declined to comment.

Spiegel, an enigmatic figure who choose to locate the company in the Southern California beach town of Venice rather than Silicon Valley, has not followed the example of Facebook founder Mark Zuckerberg, who partnered early on with Sheryl Sandberg, a former Treasury Department official and Google executive.

Snap, valued at about $18 billion, has raised roughly $2.5 billion from investors including mutual fund Fidelity Investments, Sequoia Capital, T. Rowe Price and Alibaba.

It raised $1.81 billion as recently as May, according to regulatory filings. The windfall of cash just six months ago, however, did not slow Snap’s IPO talks, which have been ongoing for at least a year, according to sources familiar with the matter.

An IPO early next year may help Snap capture pent-up investor demand after a prolonged IPO drought, while also getting out in front of other hotly anticipated debuts from Uber Technologies Inc and Airbnb.

Published in The Express Tribune, November 21^st, 2016.

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