How Kevin Systrom sold Instagram to Facebook for $1,000,000,000

1. Who is Kevin Systrom?

Kevin Systrom was born on December 30,1983 in Holliston, Massassuchets.

He is the co-founder of Instagram, a social media platform for sharing photos and videos that he sold to Facebook for $1,000,000,000 in 2012.

Kevin is currently working on Artifact, an AI-driven news aggregation and discovery platform that he created with his fellow Instagram co-founder Mike Krieger.

2. What did Kevin do before launching Instagram that contributed to his success?

• Started to learn programming while he was in middle school.
• Became President of the photography club in High school which further developped his passion for photography.
• Studied in Standford University which is in the heart of the Silicon Valley and allowed him to build valuable connections.
• Was one of the 12 students selected to participate in the Mayfield Fellows Program at Stanford University. The program offers students in-depth training and experience in high-tech entrepreneurship.
• Interned at Odeo, a podcasting company co-founded by Evan Williams, who would later become Twitter.
• Worked at Google for two years as a product manager where he had the opportunity to work on products like Gmail, Google Calendar, Docs, and Spreadsheets.

3. How did Kevin come to launch Instagram?

Kevin wanted to be his own boss and to create something by himself. At the time, check-in location apps were very popular so he started to work on an app called Burbn.

This early version of Burbn allowed users to check-in at locations, make plans, and share photos. However, the app was cluttered with too many features and never really took off.

When his co-founder Mike Krieger joined him, they decided to start from scratch and to redefine their product vision. From that moment on, they focused on simplifying Burbn, removing unnecessary features, and concentrating on photo-sharing. They later changed the name to Instagram.

4. What were Instagram’s key milestones?

User Growth

• October 6, 2010: Official Launch of Instagram. Gets 25,000 users on Launch Day.
• October 13, 2010: Reached 100,000 users (1 week after Launch)
• December 12, 2010: Reached 1,000,000 users (67 days after Launch)
• June 2011: Reached 5 million users ( 9 months after Launch)
• September 2011: Reached 10 million users (Less than 1 year after Launch)
• April 3, 2012: 30 million registered accounts on Iphone. Android version is released and gets over 1,000,000 downloads in one day.

Funding

• March 2010: Raised $500,000 in seed funding from Baseline Ventures and Andreessen Horowitz to develop the initial version of the app then called Burbn.
• February 2011: Raised $7 million in a Series A funding round led by Benchmark Capital, with participation from Baseline Ventures, Andreessen Horowitz, and individual investors such as Jack Dorsey, Chris Sacca, and Adam D’Angelo, valuing the company at $25 million.
• April 5, 2012: Raised $50,000,000 in a Series B funding round at a valuation of $500,000,000. Investors include Sequoia Capital, Thrive Capital, Greylock Partners, and Benchmark Capital.

5. What were Instagram’s KPI right before selling?

• 30,000,000 registered users on iOS and exponential growth.
• Launched Instagram on Android a few days before and we got 1,000,000 registered users on the first day.
• A recent Series B funding of $50,000,000 which valued Instagram at $500,000,000.
• 13 employees
• No revenue

6. The Exit

On April 9, 2012, Instagram got acquired by Facebook for $1,000,000,000 in cash and stocks.

The deal included $300,000,000 in cash and 23,000,000 Facebook shares which were then valued around $30 a share (Facebook was not publicly listed at the time).

7. How did Kevin decide to sell Instagram to Facebook?

At the time, Kevin actually did not want to sell.

He got approached first by Jack Dorsey from Twitter who made himan offer to buy Instagram for $500,000,000 in stocks but no cash. Mark Zuckenberg from Facebook had also expressed interest.

After they raised $50,000,000 in their Series B funding, they had the means to grow while staying independant. They therefore turned down both acquisition offers.

Mark would not take no for an answer and ended up convincing Kevin by offering $1,000,000,000 including $300,000,000 in cash and most of all giving him guarantees that they would keep operating as an independent entity.

8. The Buyer

Facebook is a social media and social networking service that was launched in February 2004 by Mark Zuckerberg. It has grown to become one of the largest and most influential social media platforms in the world.

Facebook’s revenue for the year 2011 was about $3.71 billion with a net profit of around $1,000,000,000.

9. How did Kevin get introduced to them?

Kevin had known Mark Zuckenberg since 2004. They met when he was a student at Standford University and Mark offered him to come work at Facebook.

He declined his offer and went to study Photography in Florence instead but they kept in touch and Kevin regularly went to his place to have dinner with him while he was working on Instagram.

10. Why did they acquire Instagram?

Facebook acquired Instagram for the following motives:

• Strenghtening their position in the mobile market: Acquiring Instagram allowed Facebook to strengthen its position in the rapidly growing mobile market, which was becoming increasingly important for social networking.
• Neutralizing a competitor: Instagram was one of the fastest-growing social media platforms at the time and posed a potential threat to Facebook’s dominance.
• Staying Ahead of Rivals: Acquiring Instagram prevented other tech giants like Google and Twitter from gaining a competitive advantage by purchasing the platform themselves.
• Expansion of User Base: Instagram attracted a younger demographic, which was crucial for Facebook as it sought to expand its user base.
• Technological Synergies: The acquisition allowed Facebook to leverage Instagram’s technology and expertise in mobile photo sharing and apply it across its own products and services​.

11. What were the key factors of success that allowed Kevin to sell Instagram to Facebook for $1,000,000,000?

1. Exponential Growth

One of the primary reasons why they managed to sell Instagram at such a high price despite having no revenue was its rapid user growth. This enabled them to secure $7 million in Series A funding, attract significant media attention, and ultimately receive acquisition offers from both Twitter and Facebook.

2. Networking

Kevin attended Stanford University which is located in the heart of Silicon Valley,just a few miles from major tech giants. It was there that he met his co-founder, Mike Krieger. Being at Stanford also helped him secure an internship at Odeo, which would soon become Twitter. 
At Odeo, he worked alongside renowned entrepreneurs like Evan Williams (co-founder of Twitter and founder of Blogger and Medium) and Jack Dorsey (co-founder of Twitter).

Afterwards, he worked at Google for two years before joining NextStop, a startup founded by ex-Googlers. During a party, he met investors from Baseline Ventures and Andreessen Horowitz, to whom he presented a prototype of his app Burbn, securing $500,000 in funding.

He also had the opportunity to show the beta version of Instagram to Twitter co-founder Jack Dorsey to get feedback before its launch. Prior to selling Instagram , he had known Mark Zuckerberg for many years.

3. The Right Timing

Kevin launched Instagram just a few months after the iPhone 4 was released on June 24, 2010.

The timing was ideal because the improved camera quality of the iPhone 4 encouraged people to take more photos and share them more frequently.

At that time, Facebook was primarily desktop-based and struggling to adapt to mobile, giving Instagram an excellent opportunity to capture market share.

4. Focus & Simplicity

Initially, Burbn was a check-in app with various features, including photo sharing, but users found it too complicated.

They decided to simplify the app and focus solely on photo sharing. They stripped away all other functionalities and rebranded the app as Instagram, emphasizing its ease of use and social photo-sharing capabilities.

In terms of focus, they launched Instagram solely on iOS for the first 18 months before expanding to Android.

5. Follow your passion

Kevin has been passionate about photography since he was young.
It led him to serve as the president of his high school photography club and to study photography in Florence during his winter term.

6. Start young

Kevin began programming in middle school. Although he didn’t major in Computer Science and primarily worked in marketing, he continued coding side projects in his free time until he eventually started developing Instagram.

12. What is Kevin you currently working on?

Kevin is currently focused on his latest venture, Artifact.
Artifact is an AI-driven news aggregation and discovery platform he created with Instagram co-founder Mike Krieger.

They recently got acquired by Yahoo which means Artifact’s technology will be integrated into Yahoo’s ecosystem, enhancing Yahoo News with AI-powered personalization and content curation features.

Kevin will be now working with Yahoo in an advisory capacity during the transition period.

13. Recommended or used by Kevin

Two of Kevin’s favourites books* are: 

• Principles by Ray Dalio
• The Lean Start-up by Eric Ries

14. Connect with Kevin

Linkedin: https://www.linkedin.com/in/kevinsystrom/

Twitter: https://x.com/kevin

Website: https://artifact.news/