Instagram – An Online Idea For $1 Billion

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In 2012, there was an announcement form Facebook – they were buying Instagram for the price of $1 billion. A company started just a few years ago by two young entrepreneurs, has brought them to the world of super riches. A company that had no revenue, only 13 employees and completely no profits by the time of the deal… Who would be so insane to pay a billion for such a business?!? Well, actually Instagram had one thing that was far more valuablepotential. And this is what the managers of the biggest social network spotted there. Here is how all this happened…

Everything began when Kevin Systrom and Michel Krieger, who were working on a project bringing mobile location check-in game-play to mobile browsers  called Burbn., decided to focus it on mobile photography. They started searching for some funding to further develop the idea. On the 5th of September, 2010, Kevin managed to arrange $500 000 from two venture capital companies – Andreessen Horowitz and Baseline Ventures, which actually put the start of Instagram.

Instagram Logo, source: commons.wikimedia.org

Instagram Logo, source: commons.wikimedia.org

In October, 2010, the first version of the Instagram mobile application was released on the App Store. Initially it had only 80 registered users. Since then, the young company hasn’t stopped growing. Just two months later, in December the same year, the number of registered users reached 1 million. Another two months later, the number of users doubled and they were sharing around 300 000 pictures daily. By February 2011 there were plenty of investors, who wanted to put their cash in this exploding business. Instagram got a second round of funding, rising $7 million from various investors like Jack Dorsey (one fo the founders of Twitter), Benchmark Capital, Adam D’Angelo and others. The fresh money gave another boost of the growth of the business. By July 2011, the registered users tripled and reached 6 million.

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By August 2011, Facebook had already spotted Instagram and they tried to buy the booming start up, but unsuccessfully. The social kings then announced, that they were developing a system of photo filters, hoping to grasp a piece of the booming market of Instagram, unsuccessfully, too…

In January 2012, Instagram already had 15 million users from  all around the world. Three moths later, in April 2012, the company released its android application and published it for free download on Google Play. In that same months, the popular venture company – Sequoia Capital bought a share of the business for $50 million. That share should have been 105, because it valued the company at $500 million.