Kik, an Ontario-based startup with a messaging app of the same name, has just received a $50 million investment from Tencent, the biggest social media and online entertainment company in China.
The latest investment now puts Kik, which faces a lot of competition in the likes of Facebook's Messenger and WhatsApp as well as Snapchat, at a valuation of $1 billion, effectively making the startup the newest member of Silicon Valley's so-called unicorn club, a group of privately owned companies valued at a billion or more.
In a blog post shared over Medium, Kik CEO Ted Livingston says the startup shares its vision with only five other companies in the world, and that includes Facebook, Line, Snapchat, Telegram and Tencent. Ultimately, after hiring analysts at investment bank Qatalyst Partners to evaluate which partnership will provide the biggest benefit to the company, Livingston says he went with Tencent.
"As the maker of QQ and WeChat, it was clearly they [Tencent] understood chat deeply, making them a great sounding board," Livingston says. "They had significant success and resources, allowing them to have the patience required for Kik to pursue a long-term vision for a chat-based system. And with so much of their focus on winning China, they would support Kik running independently to win the U.S."
Tencent's chat apps are more than just a platform for sending messages to other people. As Livingston notes, the apps have evolved into larger ecosystems offering additional services that allow users to do a lot more than just send texts, images and stickers to other people. For instance, WeChat can "chat" with Internet-connected vending machines by simply scanning them with the app. The user then selects his drink of choice and pays electronically via WeChat.
"There's nothing new to download, nothing new to learn, and nothing new to remember. Just scan, then chat," Livingston says. "The chat app became a magic wand that empowered you to seamlessly interact with the world around you. That has always been our vision, but Tencent had already made it real."
Livingston founded Kik in 2009. Since then, the company had gone on to raise almost $40 million in funding rounds including Valiant Capital Partners and Millennium Technology. The app's user base is composed mostly of teenagers, with around 40 percent of all teenagers using the app, according to Kik. These users spend around 35 minutes per session on the app, more than the number of minutes users spend on Messenger and Snapchat, Kik says.