Chi-Hua Chien helped build one in every of the best bets in working capital of this century: whereas associate degree associate at Accel Partners in 2005, he pointed the firm to a trifle company referred to as "The Facebook."
As Chien explained it to CNBC, he was sitting within the basement of the Stanford graduate school with Seth Sternberg, WHO told him he was quitting the graduate school to hitch a trifle six-person startup. At the time, the forerunner to Facebook was solely offered to varsity students, that gave Chien a footing. "I was one in every of the few active VCs WHO additionally had a regular .edu address I might use."
He went back to the partners at Accel, WHO studied the corporate -- many of them piggybacking off Chien's Facebook account -- and 5 months later Accel and Peter Thiel place $12.5 million in at a valuation of $87.5 million. Yes, million with associate degree "m."
By the time Facebook went public in might 3012, its stake was price over $10 billion.
Could history repeat itself with Snap?
Chien teamed up along with his business partner Eric Kim at Goodwater Capital, associate degree early stage VC targeted on client startups based last year, to research however Snap may be price its initial offering valuation of $24 billion. (Chien and Goodwater aren't investors in Snap and do not commit to commit the initial offering.)
It's a wealthy valuation for a corporation that lost $515 million on $404 million in revenue in 2016, however Chien says that is not however early investors can believe it.
"Look at 2024 to 2027, once the corporate is generating important EBITDA and income," he said, inform to Goodwater's best-case projections of $7.3 billion in EBITDA on $14.8 billion in revenue by 2027.
"What you'd ought to believe is that Snap has engineered a really substantial invulnerable position as a mobile media company among millennials. that is a generation that does not watch linear TV, does not hear the radio, however uses Netflix and Spotify."
He continues, "Advertisers say look, I cannot get these folks anyplace else, i would like to shop for somewhere. i can not let the business die with folks over thirty. that is an enormous bet."
Chien believes that Snap will solely get to $15 billion a year by grabbing cash from current TV advertising budgets, that presently quantity to $70 billion a year.
"Facebook, Google, and Twitter all wish to faucet in," he said. "My guess is that Snapchat has the within track as a video-first mobile platform. The consumption model is curated Stories conferred to the user."
Today, most of the net advertising growth goes to 2 companies: Google and Facebook.
Google especially looks like a tricky contender, given however dominant YouTube is on video -- Google aforesaid on Tuesday that users area unit observance over one billion hours of YouTube videos per day, scrutiny favourably against daily TV consumption within the U.S., which is 1.25 billion hours every day.
But Chien argues that Google and Facebook do not get plenty of the questionable "brand" advertising budget that is still totally on TV. "Snap goes straight up for that," he said. "Major high-quality broadcast-quality content. Not user-generated content."
Chien isn't predicting whether or not Snap can succeed or not, and he acknowledged many huge risks: 1st, the corporate has had some challenges with turnover in ad sales, and complete advertising is extremely abundant a relationship-based business. "They area unit at the dimensions currently wherever advertisers cannot ignore them, however not wherever advertisers have to be compelled to fully find out the way to rush for the door."
Second, Snap faces stiff competition from imitators like Facebook's Instagram Stories within the U.S. and Snow in Asia. That, combined with restricted interest from the over-30 crowd within the U.S., might build it onerous for Snap to stay increasing its user base.
