Alibaba Group Holding Ltd.BABA intends to invest $200 million in Los-Angeles based Snapchat Inc., a mobile application for sending disappearing photos.
According to Bloomberg, the investment gives the company a valuation of $15 billion.
This valuation is an enormous increase for Snapchat. In 2013, Facebook FB offered only $3 billion.
Snapchat needs capital to extend its core service. It started carrying videos and articles from mainstream media outlets like ESPN in January.
It is still unclear what value the startup would bring to Alibaba. Lately, it has made it a priority to develop mobile services. Silicon Valley insiders are of the opinion that Alibaba’s U.S. deals are very important to its stratagem of becoming the world's leading e-tailer.
Earlier, it invested in U.S. startups like rides-on-demand service Lyft and messaging app Tango. Led by Michael Zeisser, Alibaba has gradually increased its portfolio of American investments.
Interestingly, its Chinese rival Tencent TCEHY, also owns a stake in Snapchat.
Neither company has officially disclosed the investment yet.
Startups with Multibillion-dollar Valuations
Investors have been lining up to finance startups multibillion-dollar valuations. Snapchat falls in this category.
According to CB Insights, Snapchat ranks third among such high profile startups. Uber Technologies Inc. and Chinese smartphone maker Xiaomi Corp. take the first two spots.
Last year, venture capitalists invested a whopping $48.3 billion into U.S. companies, according to data from the National Venture Capital Association and PricewaterhouseCoopers.
Alibaba has a Zacks Rank #3 (Hold).
Investors can also consider Autobytel Inc. ABTL as it sports a Zacks Rank #1 (Strong Buy).
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