15:07 PM

Blowing Bubbles: SnapChat's Ephemeral $3.6bn Valuation?

SnapChat is an "ephemeral" photo and video site that is currently widely popular by users and also very popular with investors. 

Kara Swisher reports on a rumor of a deal that could value SnapChat at $3.5 billion compared with $800m just a few months ago:

Snapchat has been in talks for another funding that values it at up to $3.6 billion, according to sources close to the situation. Sources also added that the funding itself would be in the hundreds of millions of dollars and that the lead investor might be a strategic party from Asia. Such a deal could still fall apart, of course...

Snapchat Is Mulling Another Huge Round at a $3.5 Billion Valuation - Kara Swisher and Mike Isaac - Media - AllThingsD

Foremski's Take: For SnapChat's valuation to almost quadruple in such a very short time  eflects some insider information shared with prospective investors about traffic and monetization plans (o current monetization) that must be truly extraordinary.

Or, the VC investors found a chump.

Ms. Swisher speculates that the investor is China's "Internet giant Tencent, which makes money from in-app transactions."

The massive jump in valuation might signal a new period of irrational exuberance by investors in Silicon Valley startups and define yet another bubble. It could result in crazy valuations for other startups as investors pile into deals.

Given the performance of past boom and bust cycles, this period of exuberance could last for at least another two years.