Before acquired by Facebook, Instagram was working for almost a year and a half without a single cent in revenue. When the acquisition of Instagram happened, it made a huge boom worldwide, a new internet sensation that seemed to happen overnight!
Kevin Systrom, graduate from Stanford University founded Instagram when he was 28-year-old. Before that, he was working as a product manager for Nextstop.com, a start-up that was supposed to be acquired by Facebook.
In all of his free time, he was trying to learn to code since he had no computer-science training. In late 2009 Systrom had developed few concepts, but one that got his whole attention was an iPhone app that merged the elements of Mafia Wars and Foursquare.
This new idea was called Burbn. App had it all, check-in option, making future plans, hanging with friends and posting photos, but it was too complicated to use and most importantly, there was no money involved, no open space for revenue. But that was about to change with a stroke of luck Systrom had at a cocktail party in early 2010.
There were two people from Andreessen Horowitz and Baseline Ventures, Systrom showed them the prototype so they decided to discuss it further. They decided to assist him with $500k, so he left, his regular job and decided to give Burbn a shot as a company.
Team is what he needed
With necessary funds, he started looking for a team. The first person to join the team was 25-year-old Brazilian, Mike Krieger, who was eventually the co-founder. They worked great as a team and wanted to focus on being really good, the best at one thing. But they weren’t really happy Burbn.
It was messy, with so many features, but only one feature of the app was really popular, and that was adding photos. So what they decided to do was extremely risky, but they wanted to rewrite Burbn from the scrap, rewrite it into a totally new app. So now that they had an idea, name giving was in order, so they decided to call it Instagram, a mash-up word of Instant, as in instant camera and telegram.
For nearly two months they were working on it day and night, tearing apart Burbn and perfecting the Instagram. So after that, the testing phase came, and first people to try it were their friends, they were the beta testers, so the bugs were found and fixed immediately. They were in a rush, they wanted a perfect product, but they also wanted it fast.
The moment Systrom was waiting for over a year came after eight weeks of hard work. On October 6th, Instagram was live. They thought they will get some response and downloads after 6 hours when people start to notice the new app. But surprisingly, downloads started minutes after it was alive, and it was international.
As hours passed they thought they were doing the counting wrong since they had 10 000 users within hours. Until December, the app had more than one million users.Not much time passed when investors started taking interest in it.
In 2011, February, a $7 million investment was made by a group of investors. At that moment the company was valued at $20 million. It was great for a company that was launched just five months ago. By this time the growth was enormous and never slowed down. They had about 1.75 million members who uploaded around 300,000 photos daily.
But even as the company grew, they have kept the same number of employees, fewer than ten of them. One thing remarkable about Instagram, besides its huge acquisition, was the fact that so little it has changed with time. Some features were added but that was it, it essentially stayed the same.
The company has hesitated to add premium accounts for making a revenue. Instead of that, they have decided to focus on the essence of the product and the needs of the private Instagram community. Even before that, in an interview with Robert Scoble, Systrom has stated that his devotion goes to the core product.
Systrom said to Robert “In the long-run, we’ll make or break this company based on focus”, and on the question how they will make revenue he responded that he is absolutely certain that they will not be one of those start-ups that are not making money in few years, just sitting there.
He was in it for the money like everybody is, but he didn’t want talk about it since they were only 8 weeks old as a company. That was a time to grow better, become stable. But he was somehow aware of the success Instagram was about to make so his visions were big, future of the company in his eyes was bright.
He didn’t want Instagram to be another picture sharing app, he wanted it to make a huge leap, boom on the internet. In years 2011 and 2012 not much has changed inside the company. They were just looking for a few designers and engineers, wanted to keep the team small.
As 2012 started, the company was huge, it had over 15 million users. By March of that same year, that number was almost doubled. Rumors were floating around that the company was planning on raising $50 million at a $500 million valuation. In the beginning of the April, those rumors were confirmed when Greylock Partners, Benchmark Capital, Sequoia Capital, Thrive Capital, and Baseline Ventures took Series B round of financing.
Those investors enjoyed a 100% return on their investment after only four days. Facebook has acquired Instagram at a price of $1 billion, and the acquisition was compared with Google’s purchase of Youtube at $1.65 billion in 2016.
Systrom stated that when Mike and he started the company, their aim was to improve and change the quality of communication, possibilities to share. Today, Systrom who is valued at $400 million said that they had an amazing time watching Instagram grow into energetic, dynamic community made of people from all the corners of the world.