Kleiner Perkins Caufield & Byers has agreed to invest in the fast-growing ephemeral message service Snapchat Inc. at a valuation of close to $10 billion, people with knowledge of the matter said.
Snapchat, which has talked to several potential investors in recent months, is in the process of raising a large investment round that would make it one of the world's most valuable private tech startups despite virtually no revenue.
Kleiner, one of Silicon Valley's best-known venture-capital firms, committed to invest up to $20 million in May, one of the knowledgeable people said.
At least one strategic investor has also committed to invest in the round, which isn't yet closed, two of the people said.
A spokeswoman for Kleiner declined to comment.
A Snapchat spokeswoman said: "The valuation of our business and our capital requirements are the least exciting aspects of supporting the Snapchat community. We have no further comment at this time."
Such a deal would give Kleiner a stake of well under 1% in Snapchat. But an investment in a red-hot startup could bolster its relevance in the competitive world of venture capital.
The venerable firm is known for having invested early in such household tech brands as Google Inc. GOOGL -0.41% and Amazon.com Inc., AMZN +2.34% but in recent years it has been criticized for missing the wave of social media and messaging apps and making too many ill-fated green technology bets.
The Journal and Dow Jones VentureSource are tracking companies that are valued at $1 billion or more by venture-capital firms.
Kleiner invested in Facebook Inc. FB +0.05% and Twitter Inc. TWTR +4.49% but those companies were already generating significant revenue and were closer to initial public offerings than Snapchat.
Late last year, the firm reorganized its early stage investing practice, cutting that investment committee in half to five partners. The shake-up was widely seen as a sign that Kleiner high-profile partner, John Doerr, was eager to revamp the partnership.
Kleiner joined a long list of investors participating in a large and highly competitive funding of Uber Technologies Inc. recently. Kleiner contributed $100 million to the round, which valued the ride-hailing app at $18.2 billion.
Snapchat's valuation, at about $2 billion just one year ago, has soared even though the startup lacks a clear business model. Investors see potential to make money from the millions of teenagers and college students on the three-year-old app, a group that is coveted by advertisers and increasingly difficult to reach through traditional media like television and magazines.
New capital could help Snapchat gear up for its first foray into advertising, expected later this year. The company has held talks with media companies and marketers in recent weeks about a new content service called Snapchat Discovery, a person familiar with the matter told The Wall Street Journal earlier this month. The service that would let users read daily editions of publications, video clips and ads by holding down a finger on the screen, like they do with photos and other messages on the app, before disappearing.
Evan Spiegel, the company's 24-year-old co-founder and chief executive, has enticed investors by sharing more details about the company's plans for revenue in recent months, according to a person familiar with the matter.
But he has also earned a reputation for secrecy among investors by only sharing metrics about the business with some investors when they visit him in person at the company's headquarters at Venice Beach in Los Angeles.
Mr. Spiegel also closely guards the company's "cap table," a document that lists all shareholders, this person said.
More than 100 million people now use Snapchat every month, with roughly two-thirds of those users logging on to the service daily, according to a person who has been briefed on the company's internal metrics. By comparison, WhatsApp, a messaging app acquired by Facebook this year for $19 billion, said this week it has more than 600 million monthly active users. Twitter, with a market capitalization of about $29 billion, has 271 million monthly users.
Snapchat has accumulated more than $160 million in funding from several financial firms including Benchmark, Institutional Venture Partners, Lightspeed Venture Partners, Coatue Management and Chinese e-commerce company Tencent Holdings Ltd. TCEHY +0.06% Last year, Snapchat spurned an acquisition offer of about $3 billion by Facebook.
Alibaba Group Holding Ltd., a rival to Tencent, recently considered and passed on an investment in Snapchat at a valuation of more than $10 billion, people familiar with the matter said earlier this month.
