The parents of pupils at Saint Francis high school have recently received an unusual letter telling them the school had earned at least $24m from a $15,000 investment in messaging app Snapchat.
The school head explained that 5 years ago one of the parents, a venture capital investor, had convinced the school to invest in the messaging service based on disappearing photos. The man decided to make such investment after he saw his children becoming obsessed with Snapchat. That parent, Barry Eggers, learned the extent of Snapchat’s popularity and conducted some due diligence with the company – he even tracked down the Snapchat’s founder who was working from a Stanford University dorm room at the time. As a result, Barry decided to invest in the promising company and invited the school to join him.
The investor shared his memories how one day he came home from work and found his daughter and her friends in his kitchen – all glued to their phones, using Snapchat. According to the girls, the app was the most popular at school, along with Angry Birds. When Eggers asked his son, the latter confirmed that Snapchat was popular among boys too.
This is how Eggers’ company became the first investor in Snapchat after contacting its founder. His company invested $500,000, but split the deal to allow the Saint Francis school to put in $15,000. Those $15,000 delivered about 2.1m Snapchat shares, about 2/3 of which has just been sold for $17 each as part of the Snapchat’s public float, amounting to $24m in profit for the school. Since the price of Snapchat’s shares grew over the past days, the school’s remaining shares are still worth a further $18.5m. The school announced that the proceeds from the share sale would be used to fund its work “towards realizing the bold vision and goals”, including expanding financial aid for poorer students (the school’s fees are currently over $17,000 per year).
By the way, this is not the first time that school has received a profit from its investment. Two decades ago, it made a $2.1m return on a $25,000 investment in a telecom company which is now part of Tellabs. In the meantime, Snapchat flotation valued the stakes held by the company founders at more than $4bn each. The stake of the parent’s company (which increased as Snapchat grew) now amounts to more than $1.6bn.
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