Serial entrepreneur voted one of the top 100 Asian Stars in UK Tech with domain expertise in messaging.
First thing first, this purely depends on where you guys are based. If you're based in Silicon Valley you could potentially raise more money at a better valuation. My experience however is raising money in Europe, specifically in the UK and Portugal, and although I have raised from angels across the world from places like China, Singapore, US, and the Middle East, I will speak to the mentality of European investors.
At the stage you are at right now, I would suggest going for a 100,000 GBP round. Whatever amount you decide on, DO NOT CHANGE IT. Throughout the entire fundraising of this round (whether it is one week or two months) make sure not to change the asking amount. So be very picky with this number.
Second, set a minimum investment amount from each investor. Since you are dealing with a seed stage round, I would suggest to go with around 10k GBP (so max you end up with 10 investors with minimum amounts). If you feel that is too high then drop it to 5k, but then also bring your asking amount down to 50k.
Valuation range for your stage and startup (in Europe only) would be less than 1 million GBP (around 500k to 800k). If you're lucky and have a ton of interest from investors and can create competition among them, you could potentially get up to 1.5 million GBP. This means that if you're raising 100k GBP as a seed round, you'd be giving up between 10% to 25% depending on your valuation.
I would recommend not giving up more than 25% in a seed round, and know from experience that unless you're lucky or dealing with investors who don't know what they're doing, you will need to give up more than 10%.
I'm happy to speak in more detail about this if you feel it would be helpful.
I've been in the picture messaging space for a while now with my apps Lutebox (voted one of London's top ten most loved apps) and now Click Messenger. I've written a few articles about the space including a recent post about the Future of Mobile Messaging.
Snapchat started out as an app called Picaboo, which pretty much did what it does now (prior to the latest update with chat and video calling). They quickly rebranded but saw a little uptake in user numbers and had quite low downloads for several months. Then around Christmas 2011 one of the founders' mom had told her friend about the app, who told her kid and her kid basically then spread the word throughout their high school in L.A. That was what really blew up their download numbers as it spread across teenagers at local high schools.
As far as I know they didn't advertise in the early days, relied solely on word of mouth. Also it is assumed that they have a solid user base. Comparatively speaking, their user base may be in the low tens of millions, which may a great base of users, but nowhere even close to being as big as Facebook or Twitter.
I'd be happy to speak about this in more detail or about the picture messaging landscape and what I believe to be the future of mobile messaging.