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Snapchat, a Los Angeles-based startup that makes a mobile application for sending disappearing photo messages, is part of an elite group of technology startups that are now commanding valuations in the eleven-digit rangePatrick T. Fallon/Bloomberg

Yahoo! Inc. is close to investing in Snapchat Inc. in a funding round that values the startup at $10-billion (U.S.), according to a person with knowledge of the situation.

Yahoo is the lead investor in the financing and set the terms of the round, said the person, who asked not to be identified because the information is private. Venture capital firm Kleiner Perkins Caufield & Byers has also invested in the round, people with knowledge of the matter have said.

Snapchat, a Los Angeles-based startup that makes a mobile application for sending disappearing photo messages, is part of an elite group of technology startups that are now commanding valuations in the eleven-digit range, amid a financing boom in Silicon Valley. Other closely held companies that are valued at $10-billion or more include house-sharing app Airbnb Inc. and file-sharing company Dropbox Inc. In June, car-booking app Uber Technologies Inc. raised $1.2-billion at a valuation of $17-billion.

Sarah Meron, a spokeswoman for Yahoo, and Mary Ritti, a spokeswoman for Snapchat, didn't immediately respond to requests for comment. Christina Lee, a spokeswoman for Kleiner Perkins, declined to comment. The Wall Street Journal earlier reported Yahoo was nearing an investment in Snapchat.

Mayer's Dealmaking

Yahoo has been on an acquisition and investment tear under Chief Executive Officer Marissa Mayer, who is trying to turn around the Sunnyvale, California-based Web portal.

Last month, the company reaped more than $9-billion before taxes by selling part of its stake in Chinese e-commerce company Alibaba Group Holding Ltd. at its initial public offering. The company had said in July it would return at least half of the cash to shareholders, while not laying out any plans for the balance of the proceeds.

Since the sale of the Alibaba stake, Yahoo has been under increasing pressure from investors to reveal how it plans to shore up its core online advertising business. Activist investor Starboard Value LP recently pushed Yahoo to stop making acquisitions and to consider breaking itself up or combining with AOL Inc.

Snapchat users send more than 700 million disappearing "snaps" a day and more than 500 million stories viewed daily, the company has said. It competes with Facebook Inc., which tried to buy Snapchat for $3-billion last year and started its own product to send ephemeral photos and videos after being rebuffed.

Snapchat, led by CEO Evan Spiegel, said in May it was adding an option for users to chat with text, joining an increasingly crowded mobile-messaging market that also attracted Facebook. The social network agreed to pay about $19-billion for messaging app WhatsApp Inc. in February.

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