Right before its billion dollar buyout from Facebook, Instagram closed a $50 million Series B round from Sequoia, with Thrive Capital, Greylock, and Benchmark which pegged the company at a $500 million valuation. Instagram was wired those monies last Thursday before the holiday weekend. So, that means the investors doubled their money in one business day. Wow.
Reports indicate some investors were “surprised” by the sale to Facebook. However, that’s extremely unlikely. A set of Series B round legal docs would surely have included controls around a sale. So that smells like B.S. Also, believe it or not, VCs don’t invest in high risk companies like Instagram to merely double their money — usually no matter the time period. I know an overnight double is most likely an exception, but again, investors had to know this was a highly likely scenario. If Facebook was kicking tires, I’m sure this fact came up a few times during the diligence process.
With a Facebook IPO on the horizon, the next question is whether CEO Mark Zuckerberg lost his fiscal discipline and made an emotional investment. Already, Instagram CEO Kevin Systrom and Zuckerberg seem to have deeply conflicting statements about the future of Instagram. Systrom says he’ll be running the company “independently” of Facebook while Zuckerberg said “we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.”
A possible clash of egos? If you’re a Series B investor in Instagram, who cares?
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