Snapchat Venture Capital Investment Memo

Tl;dr: Lightspeed invested $485k in Snapchat at the seed in 2000 ($15k for a school that sourced the deal). They shared their investment memorandum in Fed 2021 on a podcast (well a page anyway). Read to understand how a venture capital investor thinks about investing in a company and how they communicate it to their partners and potentially their limited partners.

About the VC investment memo

I found this on Harry Stebbings podcast as I literally trawled every post in Google to aggregate these memos for you. You can listen to the podcast about the Snapchat investment here. If you’re interested in listening to a smart VC justify the deal, it’s worth a listen. Skip the first 3mins and 40 seconds though.

Now I don’t want to be specific… But I talked to ‘someone’. The person said Lightspeed had over a billion under management. Liked Evan so just chucked $500k at it to be supportive. I don’t want to comment more, but yeah app for dick picks.

The investment memo is super simple. I would believe that this was genuinely the whole thing because $500ish’K isn’t a big deal. So when you have a lot of expensive people in a room going through deals, for a small check it’s like sure, why not, just don’t make me read too much. Eh, maybe I’m jaded, maybe I’m not enough. You decide.

About Snapchat

Snap is a privately owned multinational camera company focusing on multinational technology and social media.

Snap is behind Snapchat, a photo messaging app that allows users to take photos, record videos, add text and drawings, and send them to recipients. In 2016, it released Spectacles, video-sharing sunglasses that free the Snapchat app from smartphone cameras.

Lol. I honestly can’t get over the fact they call themselves a camera company. Grade A BS.

About VC

Lightspeed Venture Partners is a venture capital firm that engages in consumer, enterprise, technology, and cleantech markets. It focuses on seed, early-stage, later stage, expansion stage, start-up, growth companies, and incubation and specializes in debt financing for start-up and growth companies.

Lightspeed Venture Partners invests in various sectors that include enterprise, consumer, big data, bitcoin, enterprise technology, cleantech, mobile, internet, financial technology, cloud solutions, e-commerce, storage, media, networking, energy, and software, software-as-a-service, information technology, biotechnology, and social. It mainly invests in countries such as the United States, Europe, Israel, China, and India.

The firm was founded in 2000 and is based in Menlo Park, California with additional offices in Beijing, China; Shanghai, China; New Delhi, India; and Herzelia Pituach, Israel

Usual caveats

No investment memo made voluntarily public will ever be 100% as it was. The pressure is just too high for VCs to look smarter, and not make founders uncomfortable, etc. I highly praise the VCs that share their thought leadership so we can all learn.

If you’re learning to make a VC investment memo, don’t assume the memos are what you exactly need to do. Information will be redacted. Assume anything “delicate” or sensitive is not in the memos.

The only memo that is 1 to 1 is the Youtube memo because it was in a lawsuit.

Venture Capital Investment Memo

Snapchat Seed Memo

Lightspeed Venture Partners

Team: JL/BE

Date: 4/4/2012

BUSINESS DESCRIPTION & TEAM

Snapchat is a seed stage mobile photosharing/communications company based in Palo Alto. The company builds an iPhone app that allows users to send annotated photos to each other. The photos are visible to the recipient for only a short period (3-10 seconds is typical) before being deleted. Although it cannot prevent screenshots being taken, it alerts the sender if a screenshot is taken. The app is very clean and easy to use and optimized for speed to send a picture.

The company is showing very high engagement and retention relative to other mobile apps that we have seen. The company has 90k daily active users off of a base of around 180k installs, with retention rates over 50% after 90 days. This compares to sub 10% retention for most apps, including other photo sharing and social networking apps. Usage is also very high; 30m snaps have been sent in the last 3 months, with a median of 6 sessions per day and 18 sessions a week, relative to 1.7 sessions per day and <5 sessions a week for other photography apps.

The app has shown steep growth since January, but absolute usage numbers are still low. Usage is primarily among high school and college students, skewing quite female (75%), and is currently concentrated in certain geographies, suggesting that growth is coming from word of mouth. Core use case seems to be flirting/friendship/keeping in touch with close friends. The ephemeral nature of the photography has encouraged people to send silly or mundane photos that they would not want as part of a permanent record. Examples of photos can be found here http://statigr.am/tag/snapchat

Evan Spiegel is one founder; he is a senior at Stanford at the D school. The other is Bobby Murphy who graduated Stanford with a BSc in CS in 2010 and is currently a developer at Revel Systems. Bobby will work full time on Snapchat post funding, and Evan will become full time post graduation.

The deal team is enthusiastic about the high usage and retention for a photo sharing app. The app may have backed into the Path use case for sharing with close friends. We recommend making this seed investment to watch for continued user growth which could create a popular social mobile app company.

Lightspeed has the opportunity to lead a $500k convertible note financing with a cap of $4.25M. Lightspeed will do $485k of the round, with $15k allocated to the investment fund of a local school, which sourced the opportunity for Lightspeed.

SEED FINANCING OBJECTIVE

Growth to 1m Daily Active Users. Launch an Android product. Potentially launch video.

HIGHLIGHTS & RISKS
Highlights	Risks
·   Terrific retention and usage rates ·   Strong growth driven by organic virality ·   Mobile photo sharing is a hot space	·   User traction still low on an absolute basis

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