Snapchat Is Worth $800 Million Because Facebook Has Basically Turned Into LinkedIn, Says VC Bill Gurley


Snapchat's $800 million valuation, despite $0 in revenue, stuns many people.


Bill Gurley, a VC at Benchmark, and an early-stage investor in Snapchat explained why he thinks the company deserves its valuation.

In his opinion there's two parts to it.

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Part one has to do with the investing environment. When social networks explode, they tend to inflate in value, so $800 million today isn't much compared to what it could be in in the future. Plus, late stage investors are a bit nuts right now.

Part two is about the fundamental belief in Snapchat as a company. It's growing like crazy because it provides a private forum for people to goof off. Facebook used to be that platform, but it's matured.


He says Facebook has turned into LinkedIn. By that, he means you can't goof off on Facebook because everyone sees it. LinkedIn is seen as a professional social network that must be kept neat and organized. Facebook, similarly, needs to be kept tidy since everyone sees it.

Here's his full explanation, plus video:

"The thing that I would say that has become fundamentally true in the venture world is that these social network type plays have taken off and generated immense viewership very quickly, it has typically been associated with a higher probability of a higher price at a later stage outcome and that's happened over and over and over again. You combine that with what I would say with what I would say is one of the loosest and most active late stage finance environments and that's the answer to you equation.

"We have some fundamental beliefs about why Snapchat's working. A lot of younger people feel like Facebook's — what we heard from younger people is that Facebook is LinkedIn to them. And what they mean by that is the permanence of it and who can see it — their mother and teacher and their neighbor, and they just wanted a place to communicate that didn't have that element that lack of privacy. It's one of the fastest growing companies we've seen or been involved in."

Snapchat talk starts at 1:30: