Facebook Outbid Twitter For Instagram

Posted Apr 15, 2012

When Facebook bought out Instagram, they had outbid Twitter for a deal. Twitter co-founder Jack Dorsey was also an investor in Instagram and he tried to purchase the company before Facebook. Dorsey had used Instagram on a daily basis to send photos to Twitter, but since the deal has been announced he stopped using it.

Dorsey had joined Chris Sacca, Baseline Ventures, Benchmark Capital, and Adam D’Angelo in a $7 million Series A round. Dorsey saw a significant return on investment after the acquisition, but losing out on an acquisition deal to a competitor can be frustrating. Instagram CEO Kevin Systrom made $400 million from the deal.

Twitter’s interest in the acquisition may have helped drive the price up quite a bit. Systrom said that the service is “not going away” and that they will be working with Facebook to evolve the service. Facebook CEO Mark Zuckerberg said that they will continue to build on Instagram’s strengths.

The New York Times wrote a great back-story on how Instagram grew. After thousands of people started to download Instagram, the computer systems handling the photos had kept crashing and neither Kevin Systrom or Mike Krieger knew what to do. They called up former Facebook CTO Adam D’Angelo once the servers came crashing down. ?Adam spent like 30 minutes on the phone with us,? said Systrom, ?walking us through the basic things we needed to do to get back up.?

D’Angelo and Systrom met at Stanford seven years earlier at the Sigma Nu fraternity. D’Angelo helped Systrom find engineers, set up databases, and create features. Systrom also made connections when working as an intern at the company that became Twitter.

Systrom was introduced to Marc Andreessen when working at Google. In the spring of 2010 before Instagram was even born, Andreessen wrote him a check for $250,000.