Snapchat’s $3 Billion Blunder



OK, I get it – Snapchat is popular. Apparently people loving sending others self- aggrandizing pictures of themselves. It’s hard to doubt the success of an app that caters to the generation of trendy, short attention span 20 somethings.

It also turns out that Snapchat is a convenient platform for pornography, too.

But the problem is, Snapchat has become the technological equivalent of Pogs and Furbys. Two things will inevitably happen: the fad dies a slow death like the mullet, or is replaced by an even trendier distraction.

It’s no secret that Snapchat has yet to make a single penny and Evan Spiegel seems content with that fact. Kevin Rose, however, would not be.

He is one of the co-founders of Digg, you know, the once popular news aggregator that was going to be sold for $200 million to Google? Although the cause of that broken deal was due to a lack of alignment and overall fit, it really makes you wonder why these startup execs would screw up seemingly normal and lucrative deals.

The long-term success of a startup is not driven by its popularity, but by its staying power and profitability. The other key ingredient is its value to the world: does this product or service improve someone’s life in a meaningful way? Snapchat has none of the above.

And this is exactly why they should have taken the deal.

Think about it: the $3 billion offer is concrete and real. It’s a check that Zuckerberg and company can easily write and deliver to you. Your chances of success stands at 100%.

But your chances of rejecting the offering and hoping to see a bigger one down the road? 50/50. Maybe even less than that, given the nature of the product.

There is one thing I have learned in the Valley: greed is good. But greed and cockiness mixed together?

What Evan Spiegel should have done was to pull off a Gollum: accept this “precious” offer, then run off giggling uncontrollably, knowing that he pulled off the biggest tech startup heist of all time.

Instead, Spiegel and his investors are playing a dangerous game of “I’m too good for all of you.” I’ve seen cockiness before in Silicon Valley, but not at the cost of $3 billion – an amount that exists only in the wet dreams of most startup founders.

And like the pretty girl who is courted by many men hoping to take her to the prom, if she rejects every would-be suitor, then she will end up going to the dance alone. I can give Evan Spiegel 3 billion reasons why he should go to the dance with Zuckerberg.

 Reprinted by permission.

About the author: Jay Deng

Jay Deng is an angel investor and venture capitalist. He invested in two companies whose exits topped $800 million. He is also the CEO and founder of Diva For Less.

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