What Does the Snapchat IPO Mean for Hollywood?

Snapchat parent company Snap Inc. celebrated a successful IPO last week, with the price of its shares closing 44% above their opening price March 1. That’s good news for investors and employees. But what does the IPO mean for Hollywood, and for media in general? It’s a bit of a mixed bag.

Hollywood missed out on investing. Before going public, Venice, Calif.-based Snap raised $2.65 billion over nine rounds of funding. The company’s pre-IPO institutional investors were largely traditional Silicon Valley venture capital funds like Benchmark and Kleiner Perkins Caufield & Byers, as well as big international players like Tencent and Alibaba. Yahoo also played a minor role in one round, reportedly chipping in $20 million. But big media funds like Comcast Ventures were completely missing in action, and thus lost a huge opportunity to get in on the ground floor. NBC Universal didn’t want to have Snap completely slip through its fingers and invested $500 million at IPO pricing, for roughly 4.4%. A year or two ago, that same amount would have gotten the company a much larger stake.

Rising tides can lift more boats. Snap’s early team members are benefiting big from the IPO. Founders Evan Spiegel and Bobby Murphy alone are estimated to each own $5.2 billion in shares, based on the March 1 closing price. Each of them cashed out a reported $272 million worth of shares that day. Snap chairman Michael Lynton,
the outgoing CEO of Sony Pictures Entertainment, sold about $933,000 worth of stock March 2 and now owns 2.96 million shares, worth more than $80 million.

A number of other employees are thought to be millionaires as well, and Snap will likely continue to use stock options to retain and reward talent. All of this is to say that there’s now a whole lot of money floating around in Venice — and some of that will inevitably find its way into new startups. Silicon Valley success stories have long led to new success stories; Tesla wouldn’t have been possible without PayPal, and some of Google’s early employees include Instagram founder Kevin Systrom and early Twitter investor Chris Sacca.

Given the proximity to Hollywood, it’s almost inevitable that some of those Snap millions end up being reinvested in content startups. Be it virtual reality or short-form video, Southern California’s tech scene is already more aligned with content production than Silicon Valley is, and this new money infusion will only kick-start this trend.

More money, more deals. However, Hollywood doesn’t have to wait for employees to cash out in order to participate in the IPO cash infusion. A big part of Snap’s rationale for its IPO was to raise money, to the tune of $3.4 billion last week alone. The company is seeing increased competition from Instagram and Facebook; the latter has proved that it is willing to spend significant amounts to get media companies to use its platforms. This will undoubtedly lead to Snap opening up its wallets as well in a bid for professional content. And having more buyers is always good news for Hollywood.

Todd Spangler contributed to this report. 

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