Snapchat Said in Funding Talks With Alibaba at $10b Value

Snapchat Inc., the company that makes a mobile application for disappearing photo messages, is in talks with investors including Alibaba Group Holding Ltd. for a round of financing that may value the company at $10 billion, people with knowledge of the situation said.

The talks are ongoing and the terms of the funding may change, said one of the people, who asked not to be identified because the talks are private.

If the funding is completed, Snapchat would join a small group of technology startups that are valued in the eleven-digit range. Amid a Silicon Valley financing boom, companies including house-sharing app Airbnb Inc. and file-sharing company Dropbox Inc. have raised money at $10 billion valuations. In June, car-booking app Uber Technolgies Inc. raised $1.2 billion at a record-breaking valuation of $17 billion.

Jim Wilkinson, a spokesman for Alibaba, declined to comment, as did Mary Ritti, a spokeswoman for Venice, California-based Snapchat.

Snapchat’s popularity has continued to grow, with people sending more than 700 million disappearing “snaps” a day and more than 500 million stories viewed daily, the company has said. It now competes with Facebook Inc., which tried to buy Snapchat for $3 billion last year and started its own product to send ephemeral photos and videos after being rebuffed.

Snapchat said in May it was adding an option for users to chat with text, joining an increasingly crowded mobile-messaging market that also attracted Facebook. The social network agreed to pay about $19 billion for WhatsApp Inc. in February.

U.S. Forays

Alibaba, China’s biggest e-commerce company, is building a presence in the U.S. as it prepares to go public with a listing on the New York Stock Exchange this year, in what could be the biggest IPO in U.S. history.

Last year, Alibaba started a U.S.-based fund to invest in e-commerce and emerging technologies, led by Michael Zeisser, who previously headed Liberty Media Corp.’s Internet strategy.

In April, the Hangzhou-based company led a $250 million financing round of ride-sharing app Lyft Inc. In October, it led a $206 million investment in ShopRunner, a subscription-based shipping service for U.S. retailers, as well as a $50 million investment in Quixey Inc., a search engine for mobile apps, and messaging app TangoMe Inc.

Snapchat’s Roots

Snapchat, founded in 2011 in a fraternity house by Evan Spiegel, provides tools that let users easily draw on photos, to put a mustache on a selfie, for example. The images are deleted seconds after they are accessed. The Los Angeles-based company has already raised more than $100 million of financing from investors including Lightspeed Venture Partners, Benchmark, Institutional Venture Partners, General Catalyst Partners and SV Angel.

Chief Executive Officer Spiegel recently had to apologize for profanity-laced e-mails he sent when he organized Stanford University fraternity parties for Kappa Sigma in 2009 and 2010. He also had to apologize in January for a data breach.

While the company has plenty of users, Snapchat is still building its business. Spiegel has recruited executives from Facebook and Google Inc. to join Snapchat.

“It would be great for a Los Angeles-based tech company to really build a meaningful business and Snapchat continues to prove that they’re willing to and have the technical ability to do it,” said Dana Settle, founding partner of venture capital firm Greycroft in Los Angeles. “Valuation aside, they’re building the right team to create a great business and maintain independence.”

The number of technology startups in the Los Angeles area has increased in recent years. Facebook recently completed the $2 billion purchase of virtual-reality goggles maker Oculus VR Inc., which is based in Irvine, California, while Walt Disney Co. is buying Culver City, California-based Maker Studios for almost $1 billion.