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Snapchat co-founder Evan Spiegel rejected a $3 billion offer from Facebook in 2013, a risky and controversial move considering his then two-year-old start-up had yet to generate a penny in revenue.
It's safe to say he made the right call.
With the social-media start-up — now called Snap — reportedly headed for an IPO valuing the business at $25 billion or more, Spiegel and his co-founder Bobby Murphy each own a stake valued at roughly $4 billion based on that price, according to sources familiar with the matter.
The founders, who met at Stanford University, are Snap's largest shareholders, each controlling 15 to 20 percent of the Los Angeles-based company, said the sources, who asked not to be named because ownership breakdown is confidential.
The biggest institutional shareholder is Benchmark, which led a $13.5 million investment in 2013 at a $70 million valuation. The Silicon Valley venture firm now owns a stake of about 12 percent, the sources said, equaling around $3 billion.
"We believe that Snapchat can become one of the most important mobile companies in the world," Benchmark's Mitch Lasky wrote in a blog post at the time of the deal.
Lightspeed Venture Partners owns about 8 percent of Snap and Institutional Venture Partners controls around 5 percent, the sources said.
Representatives from Snap, Benchmark, Lightspeed and IVP declined to comment.
Snap is looking to debut as early as March, The Wall Street Journal reported last week, citing sources familiar with the company's plans. At $25 billion, as the Journal reported, Snap would be more than twice as valuable as Twitter and worth $3 billion more than the price Facebook paid for WhatsApp in 2014.
While IPOs for fast-growing Internet companies were once commonplace, they've fallen out of favor in the last two years, with companies like Uber, Airbnb and Lyft preferring to tap the private markets for increasingly large financing rounds.
Twitter's struggles on the public market have also deterred money-losing consumer companies from hitting the exchanges and facing the constant scrutiny of analysts and money managers. Twitter is trading 31 percent below its 2013 IPO price as potential acquirers consider whether to make a bid.
There's no guarantee that Snap follows through with a share sale in the first quarter. But the company has plenty of incentives to head in that direction, and not just because the founders and investors can realize billions in profits.
Unlike the sharing economy companies Uber and Airbnb, which are battling slow-growth offline businesses, Snap is trying to grab market share from some of the most valuable franchises in the world, namely Facebook and Alphabet. Having public market currency makes it easier to acquire other emerging tech businesses using stock.
An IPO would also line Snap's coffers with potentially billions of dollars as it hires engineers and builds up its ad sales business. Snapchat's 58 million-plus youthful users in the U.S. provide a highly desirable audience for brands that are looking to expand their audiences.
More than two-thirds of Snap's estimated $367 million in 2016 revenue will come from video ads, according to eMarketer. As advertisers push more dollars from traditional media onto the web and mobile devices, there aren't many places to reach targeted audiences with video clips.
Snap claims to touch 41 percent of 18- to 34-year-olds in the U.S. on a daily basis.
"In the mobile marketplaces there's been a shortage of video inventory and there's money that's ready to be spent," said Cathy Boyle, an analyst at eMarketer in New York. "Brands are looking for that really immersive ad unit."
Film studios, video games and shoe makers have developed sponsored content for Snapchat that viewers see as they're scrolling around for news or entertainment. Snap also has ad units called sponsored lenses so marketers can let users customize their images with goofy branded animations. And businesses can use sponsored geofilters to promote an event with artwork or photos.
Back when Facebook was pursuing Snapchat, the product was still mostly in its original form — an app letting users share selfies that disappeared in a matter of seconds.
Spiegel, now 26, has since set his sites on building a media giant.
EMarketer predicts Snap's revenue will surge almost fivefold by 2018 to $1.76 billion. That would still only account for 1 percent of the $184.9 billion worldwide digital ad market, trailing 12 other companies.
Snap's closest competitor is Instagram, the Facebook-owned photo-sharing site that launched a Snapchat rival in August. In terms of batting more broadly for consumers' attention and spending from advertisers, Snapchat is vying with Facebook's core site as well as Twitter and Google's YouTube.
By going public soon, Snap can let a wider swath of institutional investors in the door while it's still in hyper-growth mode.
The company can also use the cash to bolster its infrastructure on Google's cloud and roll out a new hardware product called Spectacles, which are sunglasses that record short videos.
There's no doubt that Snap's investors want to see some cash returns. Only six venture-backed U.S. tech companies have gone public in 2016, leaving many venture firms with big paper gains but few actual dollars to return to their limited partners.
No consumer internet company in the U.S. has gone public since dating site Match Group debuted in late 2015.
Benchmark is one of the biggest Uber backers, an investment that will eventually produce a massive windfall, but only when CEO Travis Kalanick decides the time is right.
Meanwhile, Snap is poised to deliver Benchmark one of the top venture returns of all time. At the expected IPO valuation, Benchmark's initial investment from 2013 will be worth more than 300 times its original value.
Lightspeed participated in an even earlier seed round and then followed on in future rounds. IVP led the second big financing, a $60 million funding round in 2013 at an $800 million valuation.
In total, Snap has raised $2.66 billion in equity financing, including $1.8 billion in May, according to Pitchbook. And it reeled in some additional debt from Morgan Stanley last month.
That deal positioned Morgan Stanley favorably to be the lead banker in the IPO, but no decision has been finalized, sources said. A Morgan Stanley spokesperson declined to comment.