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Which Indie Startup Could Go Public Next?

  +Follow December 30, 2013 8:30AM
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On Oct. 30, Equities.com’s Michael Teague wrote an article concerning online clipboard/collage service Pinterest’s reported valuation of nearly $3.8 billion, asking how a company that “yet to generate one cent of revenue have the temerity to ask for, and receive, so much money?”

The short answer is: “it’s a red-hot tech property.” Tech has a history of making massive speculative bets. While that might, on the surface, seem reckless and counterintuitive, keep in mind that Peter Thiel bought 10.2 percent of Facebook Inc (FB) for $500,000 before that company had made one thin dime. That investment would go on to be worth in excess of $1 billion.

Then again, there's the Friendsters of the world. Once the hottest property in social media, between 2003 and 2006 Friendster lost 95 percent of its market valuation.

We thought it would be worth looking into some other hot tech properties, and whether their fate is to become the next Facebook, get gobbled up by Facebook – or become nothing at all.

Snapchat

Valuation: $3.5-$4 billion

Snapchat is unique in the world of social media, in that it takes the ephemeral nature of social media and amps it up to the extreme. In Snapchat, users take videos that after being viewed by the recipient disappear forever. How’s that for a fleeting social media experience?

Aside from Pinterest, Snapchat is probably the most ballyhooed  indie startup, with a user base of some 26 million and a novel platform. That valuation doesn’t come without serious questions, however.  Unlike Pinterest, Snapchat doesn’t have revenue. Of course, that’s not always a problem. But justifying their high price tag is a little tricky.

Snapchat, for what it’s worth, are pretty high on themselves. They rejected a buyout offer from Facebook. Then again, Facebook got the more popular Instagram for $1 billion, eventually ratcheted down to $715 million, which is an absolute steal.

Whether Snapchat was wise to hold out or missed their opportunity will become apparent soon. But regardless, at the moment they are probably the hottest property in tech.

WhatsApp

Valuation: $1 billion

Google Inc. (GOOG) was reportedly in talks to buy this company several motnhs ago for $1 billion, and nothing ever came of it. It makes sense, as Google tends to hold high interest in highly technical apps and services whose “wow” factor is high. Google’s traffic navigator Waze, which combines the utility of a traffic avoidance app with a social media company is a prime example.

Whatsapp is attractive because it allows users in different countries to instant message without the standard astronomical fees associated with international communication. And it’s monetization is apparent: after one free year, the service costs a buck a year.

With $350 million active users, that’s a lot of dough. Apart formt he other hot tech properties mentioned here, Whatsapp’s valuation makes the most sense, as it is born of verifiable revenue and not speculation.

Keek

Valuation: $600-$900 million

Keek combines YouTube, Vine, and Facebook into a sort of mish-mash social media platform wherein users upload video status updates called “keeks.”  What keek has going for it more than other hot startups, and especially the Social Media Establishment –Twitter, Facebook, and LinkedIn (LNKD) is massive popularity with young people.

85 percent of Keek’s users are between 13 and 25, a demographic especially coveted by advertisers. The video-sharing feature is tailor made for monetization, and is already perfectly primed for mobile.

FourSquare

Valuation: Approximately $600 million

FourSquare is pretty basic, in that it allows users to “check in” wherever they are, and connect with other users who frequent certain locations. FourSquare is the more established of the big startups, and in the fast-paced world of tech might have already passed its prime, with FourSquare’s Vice President acknowledging back in November 2012 that their growth was slowing and revenue had cooled.

However, FourSquare’s intrinsic tie to commerce makes it incredibly attractive to a buyer from outside the tech sphere, possibly even a credit card company. FourSquare has already started partnering with companies to offer deals to frequent customers, and their future might lie in the arena of using voluntarily submitted  user information, and completing the transfer from a social media company to a marketing research one.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

None.


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