The week’s big tech finance news is that Snapchat is in talks to raise upwards of $500 million in new funding at a valuation that could top $19 billion. Or at least that it is receiving inbound interest to that effect from prospective investors, but has not yet decided whether or not to get the lawyers involved:
My initial reaction to the news wasn’t to shake my head in wonder, nor to ponder which mutual funds will stray even further from their formal investment strategies. Instead, it was to gloat.
When Snapchat spurned Facebook’s (FB) $3 billion takeover offer in late 2013, I defended the company and CEO Evan Speigel from those who questioned their sanity:
Snapchat and its investors seem to believe that this company is the next generation of social networking — not an add-on to the dominant incumbent. Snapchat is about immediate/disposable communication, not permanent record-keeping.
Yes, some of that means sexting. But think about all of the conversations you had as a teenager that you wouldn’t have voluntarily put out for public consumption (not only for your parents, but even for many of your friends). And, for millennials, a lot of that communication comes via photo, rather than via voice (or even text — save, perhaps, for a quick caption).
In other words, Snapchat is providing its users exactly what existing services like Facebook and Twitter and Tumble are not. Not surprisingly, some people close to the company say that Snapchat’s depth of engagement is off the charts. Sure the core technology itself is fairly simple. So is Twitter’s (TWTR) — a company that also wasn’t monetizing 2.5 years into its existence.
Today, it looks like Mark Zuckerberg was trying to get a bargain on Snapchat, much like he got by buying Instagram for only $1 billion in 2012. And Snapchat had more faith in itself than did many of the pundits (save for those like yours truly).
On the other hand…
Just over one year after the Facebook offer, Snapchat faced a large data breach related to its Find Friends feature, whereby black hats could match a batch of random phone numbers to Snapchat users.
Its response was explanatory, but without any apparent remorse (even though Snapchat had been previously warned about the security vulnerability). To me, the glaring lack of apology reflected very poorly on Snapchat’s CEO. So I wrote the following:
If Evan Spiegel is disinclined to apologize, or doesn’t feel he should, then perhaps he really isn’t up for the job. Whenever a 20-something CEO is replaced in Silicon Valley, people often say that he has been replaced by an “adult.” It’s usually both paternalistic and patronizing, but perhaps appropriate when the 20-something is not mature enough to say “I’m sorry.”
In hindsight, the idea of Snapchat canning Evan Spiegel was even more sophomoric than the idea that it should have taken Facebook’s money and run (it’s too bad that blog posts can’t just disappear like snaps).
For starters, Snapchat’s rapid and sustained user growth — which also sparked its valuation growth — did not happen with a leadership vacuum at the top. Speigel gets credit. Second, the company has continued to innovate via features like Stories and Discover – and also begun to feature advertising (i.e., generate revenue).
Lastly, Spiegel was a victim of the Sony email hack, based on the fact that Sony Entertainment CEO Michael Lynton sits on the Snapchat board of directors. And unlike many other execs who had their private conversations made public, Spiegel came out looking like a mature and reasoned professional who wasn’t prone to rash decisions. Or, as Lynton wrote to another one of Snapchat’s board members, “I couldn’t have written this at 23. Very impressive.”
So I’ve been right, and I’ve been wrong. That makes my next post about Snapchat — likely about that $19 billion valuation, should it come to pass — the tiebreaker on whether or not I know what I’m talking about.
Sign up for Term Sheet, Dan’s email newsletter on deals and deal-makers.