Earlier quoted context omitted.
wait - you think this is actually true?
Is your question about the acquisition itself or that service will be continued?
"the product is valued enough to not be summarily taken out back and shot"
Facebook acquires Instagram
161–170 of 394 posts
Re: Facebook acquires Instagram
#162Some quick back-of-the-envelope math for how much the co-founders walked away with. Assuming the first round of $500K was @ $2.5M valuation, giving those investors 20%. So the founders are left with 80%. Further assume the 2nd round of $7M @ $20M valuation, giving those investors 35%. So the founders are left with 45%. Further assume the 3rd round of $40M @ $500M valuation, giving those investors 8%. So the founders…
I'm not sure that your numbers account for share dilution. Let's assume the employee stock pool is 10% before any funding is raised so the founders start with 90% and the employees 10%. Assuming your numbers above are correct, the founders are left with 72% after the first round of investment (500k at 2.5m = 20%) and the employees are left with 8% (think 72 + 8 + 20 = 100). The second round of investment takes 35% of the company, leaving the founders with 46.8%, employees with 5.2%, first investors with 13% and the new investors with 35% (46.8 + 5.2 + 13 + 35 = 100). The third round of investment takes 8% of the company leaving the founders with 43.056%, the employees with 4.784%, the first investors with 11.96%, the second investors with 32.2 and the new investors with 8% (43.056 + 4.784 + 11.96 + 32.2 = 100).
If my math is correct, the founders may have ended up with more like $430,560,000 between them ($215,280,000 each assuming 50/50).
Re: Facebook acquires Instagram
#163"Sell to Goole" era is ending. "Sell to Facebook" era is beginning.
Re: Facebook acquires Instagram
#164How many photo-related startups has Facebook acquired now? And what do they gain from Instagram? A user base? Most of them are probably already on Facebook? Technology for handling photos? Doesn't Facebook already do this as well as anyone else? Design and UI talent for mobile apps? Don't they already have Mike Matas?
>Design and UI talent for mobile apps? Don't they already have Mike Matas?
I don't know who Mike Matas is, but given the quality of the Facebook for Android application and the amount of time Facebook's been spending on it... well... $1 billion is still a lot to buy a team to make your Android app not suck.
Though, on that note, the Instagram team wouldn't be the one to buy. Another startup that (took ages to) port their UI to Android and kept the crufty old iOS appearance.
Re: Facebook acquires Instagram
#165This price makes plenty of sense if you think of as "instagram was bought for x% of facebook". I don't know facebook's current valuation, but I could be convinced that instagram is worth something between 2-10% of it (500M users vs 30M users, all sharing pictures daily). The reason for the billion dollar number has nothing to do with instagram, and everything to do with facebook.
Re: Facebook acquires Instagram
#166Earlier quoted context omitted.
I would like someone to sit me down, and explain the economics of why accept a buyout immediately after raising. And NOT the part of accepting $1 Billon. But why they closed a round with a buyout just around the corner.
For 2 main reasons that I can think of: a) You don't know if the acquisition will actually happen. Therefore if it doesn't, you aren't left with nothing. b) It gives you a stronger bargaining chip to increase the price of the acquisition because you literally have a strong alternative. Instagram could tell FB to screw off, they are already getting $50M.
I wonder if the investors (Sequoia, Greylock) knew of the pending acquisition offer from FaceBook when they put forth the 50M investment? If they did, that was the easiest investment ever.
Re: Facebook acquires Instagram
#167Earlier quoted context omitted.
"Where's the money in Instagram?" Preventing Instagram from developing into something that has a negative effect on Facebook. It's a "keep your enemies closer" move.
and keeping Instagram away from Google. it's a good move.
But back to the original proposition, is this indicative of a bubble when you drop 1 Billion, or >1% of your estimated market cap on a preventive/defensive measure?
Re: Facebook acquires Instagram
#168Earlier quoted context omitted.
I think the mere fact that they just raised $50M @ $500M valuation is the reason that this price is so high. Those investors in that round had to at least double their money...if the price was indeed $1B, that's all they did. Just 2X. Although, the argument can be made that a 2X return in 1 - 2 months isn't bad...but then again, VC funds don't have a 2 month life, so over the long-term value (i.e. 10 years most-times…
100% return in 3 months (it won't close to the end of the quarter) is an annualized 400% return. If you're a VC you took $50M out of a fund put back $100M, now you can make 2 bets at $50M when before you only had one. I don't see any way that this isn't a great deal for the VCs. That being said, this wasn't part of the S-1 and Facebook really has to tell potential investors how this will affect the financials, so pre…
Usually, that's not how it works (VC's don't reinvest) but I will have to admit I'm fascinated by the story behind a large round so quickly followed by an acquisition. Too bad we'll likely not hear it.
Re: Facebook acquires Instagram
#169So, I found something very interesting in Mark Zuckerberg's post about acquiring Instagram:
> we're committed to building and growing Instagram independently. Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people.
Facebook has always integrated whatever it purchased (that I know of) very tightly into the core product, or just done an acqui-hire. Instead, they've taken what is arguably the best way to share photos and decided to keep it as a product that exists on its own.
This is a major strategy change for Facebook and speaks to something I have suspected for some time - they now understand that in order to continue spurring growth, they cannot just acquire and roll in every product. As the ecosystem starts to hit a long-term maturity cycle, other products that fulfill particular functions better will be key to maintaining dominance over the market as a whole.
Let's face it: G+ cannot topple Facebook (though it probably wasn't intended to anyway), Twitter is fairly specialized and Pinterest has come up with a new way to share that fits neatly with the other two. Instagram makes immense logic as a purchase for Facebook as they'll control one of the most important ways people share photos outside their product, neatly roping everyone that uses it right into the FB circle without feeling forced to do so.
Re: Facebook acquires Instagram
#170Some of you might find this useful: https://instagram.com/accounts/remove/request/
It's funny, just a few hours ago I was going through my apps looking for rarely used ones to delete. I was on the fence about Instagram; I'm not using it much but I left it there "just in case". Well, seems this acquisition solved the dilemma.