Is 2023 The Year For A $15 Billion Valuation Discord IPO?

About 1200 companies are on CB Insights’ widely used list of unicorns — private firms with valuations of $1 billion or more.

As a company’s valuation reaches those heights, there’s often speculation about an initial public offering (IPO). One of the most anticipated possible IPOs for 2023 is the social messaging platform Discord, which has a valuation of $15 billion.

In late 2021, Discord raised $500 million. Dragoneer Investment Group, a U.S. investment fund focused on both public- and private-sector technology investments. The investment came after the platform attracted large numbers of users and expanded beyond video gamers to appeal to a broader audience. 

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The Discord Story

The company takes its name from the founders’ wish to address the “discord in the gaming community” and because they noted it was easy to say and spell. Founders Jason Citron and Stanislav Vishnevskiy created the Discord platform in 2015 to help gamers discuss tactics and chat while playing games like League of Legends or Final Fantasy XIV. Citron previously launched and sold OpenFeint, a social-based mobile gaming platform.

The duo worked to create a simpler chat service with a smooth user interface (UI) that would complement the game-play experience by allowing gamers to talk with each other. During the COVID-19 lockdowns, Discord’s use rose sharply, with new users outside of gaming leveraging the platform to communicate with friends. During this time the company broadened its focus with a new tagline, marketing itself as Your Place to Talk and Hang Out. It still caters to the needs of gamers but also capitalized on a considerable user base looking for a streamlined communication platform. 

The company’s COVID-era growth prompted several companies to propose purchase offers. In the spring of 2021, Microsoft Corp. reportedly offered to buy the platform for $10 billion, an offer Discord’s management turned down. Other big tech companies have also made offers for Discord. 

A Different Approach To Social Media

Discord offers various servers structured with different channels. Each channel has its own topic that allows members to chat and collaborate. Users can create their own communities with moderator powers, member access controls and private channels. Within all of these features, users can communicate through both text and speech for free. 

Discord stands out from other social media platforms:

• It enables real-time, person-to-person interaction so someone can speak with their fans.
• Discord’s core value is it fosters conversations and encourages chatting.
• It does not feature news feeds or other similar features that are integral to other social media platforms’ functionality.
• It offers free text and speech-based communication without some of the tier restrictions imposed by other platforms. It also offers video chats.
• A group of gamers can talk to one another at once in a way that replicates a group gathering instead of just a one-to-one call.

How Does Discord Make Money? 

The IPO prospects for Discord depend on several factors, including the company’s ability to show it can make money. Its current revenue streams include a paid subscription service that is an upgrade over the free product and commissions it earns for games sold through the platform. Investors will want to see how the company might add revenue streams in the future without disrupting the user experience that’s made the platform so popular. 

The stock market volatility of 2022 and into 2023 and the downturns for many technology firms creates uncertainty for later 2023 IPOs. Other potential big-name offerings for 2023 include Chime Financial Inc., Stripe, Instacart and Reddit, among others. Discord’s management will need to weigh multiple factors, including its growth rate and current market sentiment before proceeding with a 2023 IPO. 

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