The little private app that erases your chats and snaps just became public. And for many newly made millionaires, it’s been a very friendly little ghost.
Snapchat, the app that teenagers opted to use once they discovered that Mom and even Grandma could comment on their Facebook pages, has made a lot of parents happy this week – at least those parents who invested in this new Unicorn start-up.
For example, St. Francis High School, a private high school in Mountain View, California, just cashed in millions of dollars as early investors in Snap. The school’s administration invested only $15,000 in a seed round five years ago, after two students told their dad about how much they loved the app. The school earned $24 million after Snap’s IPO. And that dad’s company, Lightspeed, invested $485,000 in Snap’s seed round as well. Lightspeed sold enough shares to earn $78 million, and it still owns $81 million in shares.
Who knew that a little privacy going public could be so profitable? Especially with an offering that doesn’t give stockholders any voting rights.
According to MarketWatch, shares of Snap, the parent company of Snapchat, closed at $24 on March 2, 2017 – up 44 percent from its opening price of $17 per share. The company’s latest valuation was $17.8 billion, and it was hoping to raise $3.4 billion the IPO. With a closing share price of $24, the public market capitalization reached $28 billion!
That’s not bad for a company struggling to make a profit. The company even stated that it “may never achieve or maintain profitability,” a comment didn’t seem to concern investors on Wall Street.
Marketwatch says while Snap has reported growing revenues, it is also reporting growing losses. The company earned $404.5 million in 2016, up from $58.7 million in 2015. But net losses also grew to $514.6 million in 2016, up from $372.9 million in 2015.
How does a free app make money? Like others – from advertising. In fact, 98 percent of Snap’s revenue in 2016 came from advertising.
Perhaps investors see potential for more advertising, given that Snap reportedly had 158 million active users ever day at the end 2016. And those users are very active, averaging 2.5 billion “snaps” every day.
Most of those users are 18- to 34-year-olds – the coveted demographic known as Millennials – who will be driving the economy for decades to come. In fact, users younger than 25 visit the app more than 20 times a day. My 17-year-old blows that that number away. She uses it in lieu of texting, email and Facebook.
The main risk to Snap investors is that these youngsters are fickle and could easily move to another app that they decide they like better. My own two Millennial daughters have started to make a move back to Facebook now that they are older and have less to hide from me. 🙂 In fact, they are learning the power of marketing and being more public about what they’re doing. Krista raised all the money she needed for an Operation Smile fundraiser through a post on Facebook, something that wouldn’t likely have happened on Snapchat.
What does all this have to do with real estate investing? A couple of things:
Snap’s headquarters is in Silicon Beach, the Venice/Santa Monica area of Southern California. Today there are a bunch of new, young millionaires who likely will be looking for property soon. If you have the wherewithall to buy property in Silicon Beach, there’s a good chance values there will continue to increase with all that new money. We have a list of really good agents in that area with exclusive listings. Contact kathy@realwealthnetwork if you’re interested.
I’m personally looking for property in the area since I’m going to be in Santa Monica quite often now. Our new high tech startup is located in Silicon Beach – right on Ocean Avenue in Santa Monica. I haven’t been able to talk much about this start-up because I’ve signed an NDA. But I can tell you about it if YOU sign an NDA, which you can do by visiting www.RealWealthCrowd.com.
We are still in the seed funding round, but it is filling up quickly – just from our VIP investors. VIP means that those who have invested in our past projects get first priority.
The target for this tech start-up is Millennials and addresses their challenges with affordability housing and mobility. It’s tough for them to settle down when their job location is uncertain. This platform will provide a win-win for investors and renters. Once you hear about it, you’ll wonder how it hasn’t been done yet! Find out more at www.RealWealthCrowd.com.
About the Author
Kathy Fettke is the founder and co-CEO of Real Wealth Network, a passive real estate investing club with more than 24,000 members. She’s also the author of “Retire Rich with Rentals” and host of “The Real Wealth Show,” a featured podcast on iTunes with listeners in 27 different countries. Kathy is passionate about understanding real estate cycles so she and her members can invest in the best markets and best deals available today. She is frequently invited to share her expertise on CNN, CNBC, Fox News, NPR, CBS MarketWatch and in the Wall Street Journal. Kathy received her BA in Broadcast Communications from San Francisco State University and worked in the newsrooms of CNN, FOX, CTV and ABC-7. She’s past-president of American Women in Radio & Television. Kathy loves the freedom that real estate investing can bring. She lives in Malibu, California, with her husband and two daughters and enjoys traveling, hiking, rock climbing, skiing, figure skating and surfing. Contact her at kathy@realwealthnetwork.com.
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