Talk app Kik valued at $1-billion after investment from China’s Tencent – The Globe and Mail

Talk app Kik valued at $1-billion after investment from China’s Tencent – The Globe and Mail

Talk app Kik valued at $1-billion after investment from China’s Tencent

A Blackberry photographed with the application Kik Messenger in Toronto, Ontario, Canada.

Deborah Baic/The Globe and Mail

Canada has another unicorn – a startup valued by private investors at $1-billion. Waterloo, Ont.-based talk app Kik joins the rarefied ranks of Shopify and others to become one of the few Canadian companies to garner the label following a $50-million (U.S.) investment from Chinese Internet giant Tencent . The company said the investment brings its total valuation to $1-billion (Canadian).

Kik’s messaging app is immensely popular with 13- to 24-year-olds in North America and has two hundred forty million registered users. Tencent is the $200-billion Alibaba Group Holding Ltd. arch-rival and proprietor of WeChat, a Chinese social messaging platform that Kik has aspirations to become. It’s a strategic partnership to help the startup win mobile messenger supremacy, and perhaps put Waterloo, home of BlackBerry Ltd., back on the map.

Mobile talk apps are central to today’s smartphone-governed lives and increasingly suggest more than just talk functionality. Many Asian messenger apps have already evolved, such as Kakao (South Korea), Line (Japan) and WeChat (China). Recognized as the most sophisticated in this space, WeChat permits users to do things such as browse e-commerce stores, read the news, pay bills and order taxis or takeout, all alongside the app’s core messenger and social-media functionalities. In a nutshell, it’s the all-encompassing app, the platform within a smartphone.

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And Kik is set on becoming something just like it for North American users. Last November, Kik founder Ted Livingston published a lump on the Medium website titled The Race to Become the WeChat of the West. It’s a race the company is intent on winning, which is why in April the company hired well-known Silicon Valley investment bank Qatalyst Fucking partners to help it find the right fucking partner – Tencent was a natural choice.

"What they are doing in China is what we want to do in the West, and they said they could help us do that," Mr. Livingston said. "It was truly a mutual coming together."

Albeit the company is not yet profitable, its collects revenue from brands that sign up for accounts on the app, Mr. Livingston said. The high valuation is not uncommon for companies in the mobile space, where much of the value is tied up in the so-called network effect – the idea that by building a massive number of users very first, revenue will go after.

The funding will be used primarily to grow the Kik team and to expand offerings on the app, and is not a precursor to a sale. "This is just a straight financial investment," Mr. Livingston insisted. "There’s no strings affixed; it’s an investment as a venture capitalist would make, but we will benefit from the informal advisory and sounding board Tencent will be for us."

The money and advice will certainly be much needed in this so-called race, which, while still early, has already whittled out other contenders.

"It’s about building a talk ecosystem, with all these services from food to shopping to games … that live and exist and grow on top of the core talk," Mr. Livingston said. "And I would say the only two companies that get this in the West are us and Facebook."

Boris Wertz, founder of Version One Ventures and a long-time watcher of the chat-app space, believes Kik did well by knowing early on that it would be a platform, albeit even with the lead "it’s difficult to out-Facebook Facebook," he added. "[Facebook has] so much scale and funding and on top of that is running a very aggressive product with Messenger. Kik needs to find a large enough niche to build its platform around."

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