2 Theories About Why Snapchat's Valuation Is $2 Billion Less Than Everyone Thought It Would Be

A lot of tech publications predicted Snapchat's latest round of financing would be at a $3-4 billion valuation.

Instead, the company raised $50 million at a $2 billion valuation.

Why is the valuation so much lower than everyone expected?

Fortune's Dan Primack as two source-driven theories.

1. Snapchat kept a lower valuation to attract talent.

2. Snapchat screwed up.

The first situation is likely what happened. Most people would rather join a hot startup at a lower valuation than a higher valuation.

"Take a lower valuation, albeit still significantly higher than the $800 million Snapchat received for its $60 million Series B round just five months ago," Primack writes. "Then you raise fewer actual dollars, to satisfy dilution concerns."

The other theory is that Snapchat lost a $4 billion Tencent term-sheet at the last minute. Primack feels this is the less likely scenario given that Snapchat could have sold to Facebook or Google at a valuation almost as high.

"Perhaps…Snapchat put its tail between its legs and went to Coatue - which had wanted in on its Series B round, but lost out - at a much more amenable price," he writes. And perhaps it had already burned through lots of that prior round, and had to get new money in the door very quickly."