Discord IPO: Everything to know about Discord

What do we know about the Discord IPO?

The date for the Discord IPO has not yet been announced, but it looks likely that a listing on either the NYSE or Nasdaq could happen in H2 2022 or early 2023. The valuation of the company post listing is hard to ascertain, but it could be well north of its most recent $15 billion valuation.

 In March 2022, Discord also started interviewing banks for the possibility of a direct listing, an alternative to a traditional IPO that allows companies to sell existing shares, rather than issue new ones. Companies that choose a direct listing often aren't focused on raising capital, but on providing existing shareholders with a means of selling to the public. 

Recently, Discord has added former Netflix executive Leslie Kilgore and Block (formerly Square) CFO Amirta Ahuja to its board. Both have experience in public companies, which investors are taking as a sign of an impending listing.

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How to trade Discord

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How much is Discord worth?

Discord is worth some $15 billion as of its latest fundraising round in September 2021, in which it raised $500 million. Prior to this mark, December 2020 saw the company achieve a valuation of around $7 billion following a Series H round of $100 million.

What is Discord?

Discord is a San Francisco-based software company that offers app-based services focused on instant messaging, video calls and text chat, primarily for the gamer market.

The company was started in 2013 by programmer Jason Citron, who had previously sold his gaming platform OpenFeint for $104 million in 2011. After putting some of the proceeds towards starting game development studio Hammer & Chisel with fellow coder Stanislav Vishnevsky, Citron became frustrated with the challenge of interacting with other gamers using existing VOIP communication software.

In response to the problem, Citron developed a chat service focused on ease of use and functionality with minimal impact on gaming performance. While several millions in initial funding were raised for the existing studio, waning prospects for the project meant the focus switched to Discord, for which Citron secured $20 million in 2016.

By this point, Discord had 2.9 million users, building to 45 million by 2017, when the company secured a subsequent fundraising round of $50 million led by Index Ventures. By the time of the next round of $150 million at the end of 2018, the company had 200 million active users.

Between 2020 and September 2021, the company would raise an additional $700 million, bringing total funding to more than $982 million, with more than 450 employees and revenues of $130 million in 2020, up from $45 million the prior year.

Who are Discord’s competitors?

Discord’s competitors include communication services such as Slack, which uses a paid subscription service in a similar way to Discord to subsidise its free product. However, the markets for each product have so far been somewhat different, with Discord carving its niche in the gamer community and Slack attracting business clients.

Also in the space are general communication tools such as Skype and Microsoft Teams, although the latter two reach a broader market than the gamer and business community. Operators like Skype offer the benefit of being able to call all phone numbers, while Discord only allows communication between users of its service.

Other players in the market include Chanty, Flock and Wire, offering a variety of collaboration tools for assorted audiences.

How does Discord make money?

Discord makes money primarily through its subscription packages, which supplement its free core product. The paid offering, entitled Nitro, is priced at $9.99 a month and enables users to access enhanced features such as global emoji use, improved streaming capabilities, screen sharing, increased upload limits, and more. Discord also provides a cheaper package, Nitro Classic, that offers a more limited selection of these perks for $4.99 a month.

The company also makes money through features available for purchase outside of the subscription agreement, sells merchandise, and has revenue potential from games sold through the platform.

Traders and investors interested in the company’s mooted IPO will be keen to understand how the company plans to diversify its revenue streams. For example, Discord will potentially be looking to help influencers that use the service to monetise their own offerings, taking a cut from the proceeds.

The company is also reportedly interested in listing public events and developing its own games inhouse, presumably using the expertise put in place for Hammer & Chisel.

What is Discord's business strategy?

Discord’s business strategy is focused on providing a freemium model supplemented by subscriptions offering additional features, as mentioned. The platform is divided into component invite-only interest groups, which themselves comprise various channels for communication.

A challenge for Citron and the company has been to improve ease of use and broaden the appeal of the service beyond the hardcore gaming audience. This led to a revision of marketing materials in an attempt to attract a more diverse userbase. However, the company will need to strike a balance and ensure this shift doesn’t alienate its original audience.

Discord has made a handful of strategic acquisitions, two of which in 2021. Augmented reality start-up Ubiquity 6 was bought in an attempt to integrate multiplayer technology features within Discord. Meanwhile, Sentropy was acquired for its AI-powered capacity to detect and remove online harassment and hate – a sign that Discord is making a serious attempt at cracking down on malicious content. 

Indeed, moving forward, the company will have to continue to be vigilant in regards to the spreading of malicious links on the platform. Separately, it will need to contend with tech giants implementing Discord’s features for their own platforms as the service becomes more visible in the market.

Is Discord profitable?

At the moment, there is no evidence to suggest that Discord is profitable. Market speculators will be keen to find out if any additional revenue streams will be fruitful enough to yield a meaningful margin as the company scales its userbase and expands its features.

Who owns Discord?

The ownership of Discord is split between a range of individuals, such as the founders Citron and Vishnevskiy, along with a series of investment institutions that have acquired stakes along the way, including Greenoaks Capital, Index Ventures and Spark Capital.

Key personnel of Discord

Jason Citron – Co-founder, Chief Executive Officer

Stanislav Vishnevskiy – Co-founder, Chief Technology Officer

Mak Azadi – Chief Operations Officer

Heather Sullivan – Chief Procurement Officer

Tesa Aragones – Chief Marketing Officer