Snapchat - defying financial gravity

Evan Speigel, a product design major and Reggie Brown were both Stanford University students when they developed an application for a product development unit they were studying.

According to the Shapchat blog, Bobby Murphy who was studying mathematical and computational science at Stanford was brought in to write the source code for the application.

Their first project, Future Freshman failed to gain traction; however, they found they worked well together. The next project presented to the class, the mobile app that shares photographs then disappears in a matter of seconds received a less than positive response from class members.

They felt not only would people not use the app, the only ones that do would use it for sexting; as it happens, it is pretty close to the mark. A concern is the major user demographic is below the age of 16; Snapchat Inc does not condone the use of the app for pornographic use.

Speigel stated in the company blog that stories of job hunters undertaking emergency de-tagging of Facebook photographs before job interviews provided the inspiration for the development along with editing blemishes out of photographs to be uploaded to the internet.

Instead of photoshopping photographs on a personal computer, photographs taken with smartphones can be immediately edited and uploaded on Android and iOS devices. I love studying entrepreneurial ventures knowing full well that I will not be investing my own funds in such a start-up after losing plenty of money in my own eCommerce start-up.

It is of some concern that Snapchat Inc does not have a revenue stream, yet funding of $13.5 million from Benchmark Capital was confirmed in February 2013 valuing the company at $60 to $70 million.

Facebook Inc then made an offer of $3 billion that was rejected by Speigel with Google Inc making an offer of $4 billion to acquire the business, a further $50 million was required in venture capital, one supposes to keep the business solvent.

In a move resembling the Facebook fallout; co-founder Reggie Brown, sidelined from company ownership over a yet undisclosed dispute filed a lawsuit for loss of earning potential.

Further significant issues include photographs don't actually disappear and can be saved and/or retrieved, the collection of personal data and then the security of the data collected.

I don't use the app, I am however at a loss to how a business requiring significant venture capital with no revenue firstly receives acquisition offers of up to $4 billion and secondly has the audacity to decline acquisition offers by the leading tech companies in the sector.