Snapchat's Communication Revelation

Justin Coldback's investment in Snapchat: How reframing the product led to a major insight

Shaan Puri shares a story about investor Justin Coldback's early investment in Snapchat:

"I was talking to Justin about his big win investments. He told this great story about meeting Evan Spiegel. Justin said, 'I will just never forget meeting Evan. I walked out of that meeting being like this guy is one of them - one of the people that's gonna build this legendary company.'

At the time, Evan was still a student at Stanford. Snapchat was really small, maybe like 50,000 users, wasn't growing fast. Everybody on the outside viewed it as this silly little thing, this toy. People thought, 'It's disappearing photos, must be for inappropriate pictures.'

Justin met with Evan who explained, 'People think Snapchat is about photos, and when they hear photos they think about Facebook and Instagram - permanent, public photos for your memories. But actually, we use photos for communication, it's back and forth.'

Justin asked, 'So it's like messaging?' Evan confirmed, 'Yeah, it's messaging.'

Justin went home and did some research. He thought everybody had been comparing Snapchat to Instagram and Facebook, and because of that, the metrics didn't look as good. But he wondered how it would compare to iMessage or WhatsApp.

He hustled and got in touch with somebody at Apple and asked, 'If somebody sends an iMessage, what percentage of them send an iMessage every day for the next seven days?' They ran the query for him. He asked somebody at WhatsApp the same question. Then he got in touch with somebody from Instagram and asked, 'If you post a photo, what are the odds you post a photo in the next seven days?' They said it was super low. He asked about even just using the app, and they said it was a reasonable, healthy number.

He went back to Snapchat, asked them their numbers, and realized, 'This is communication.' Nobody else was really that eager to invest, but Justin was like, 'I gotta go all in on this thing.' And sure enough, he did."