Everyone is talking about Facebook’s big news, that it has just acquired the popular photo-sharing Instagram for $1 billion in cash and stock. But the timing is also notable.
In a post on Facebook, Facebook CEO wrote of the deal: “For years, we’ve focused on building the best experience for sharing photos with your friends and family. Now, 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.”
Facebook, wrote Zuckerberg, will continue to run Instagram “independently,” as “people around the world love the Instagram app and the brand associated with it.”
No doubt Instagram’s supercharged growth since its inception in March 2010 drove the deal. Earlier this month, Instagram revealed that it has attracted roughly 30 million iOS users in its year-and-a-half on the market. It also announced its availability on Android phones, which should give its usage an enormous bump. Indeed, Instagram, co-founder Kevin Systrom told Techcrunch last week that with 500 million active Android users, hitting 100 million users across both devices – relatively soon – is not far-fetched, in his view.
Still, it’s easy to wonder if Sequoia Capital’s interest in Instagram didn’t also bring Facebook to the bargaining table so quickly. AllThingsD last week reported that Sequoia was trying to lead a $50 million Series B in Instagram, at a $500 million valuation. (The only other institutional funding raised by the company was a $7 million Series A led by Benchmark Capital just over a year ago.)
The reality is that Facebook has a long history of alienating Sequoia. Readers might recall that Sean Parker, one of Mark Zuckerberg’s earliest advisors, had been canned from his startup Plaxo by Sequoia-led board of directors. As Parker told author David Kirkpatrick in Kirkpatrick’s best-selling account of Facebook’s early days, The Facebook Effect: “There was no way we were ever going to take money from Sequoia, given what they’d done to me.”
Indeed, when Sequoia expressed an interest in funding Facebook, Parker and Zuckerberg spied an opportunity for revenge and took it. To wit, Zuckerberg and early Facebook employee Andrew McCollum showed up at an 8 a.m. pitch meeting with Sequoia in their pajamas, and proceeded to pitch Sequoia’s gathered partners on why not to invest in Wirehog, a friend-to-friend file sharing program co-developed by Zuckerberg and Parker that very obviously not the object of Sequoia’s interest.
Zuckerberg later said to Kirkpatrick: “I assume we really offended [Sequoia] and now I feel really bad about that.” And McCollum recently stated at the question-and-answer site Quora that “while it’s true that we didn’t really plan on taking money from Sequoia, I’m not sure it’s accurate to say we pitched them Wirehog purely as joke.”
Still, it isn’t hard to imagine that there’s still some bad blood there — especially not after today.
[Update: I have not yet received direct affirmation, but numerous outlets are now confirming what TechCrunch reported earlier, that the $50 million Sequoia-led round did close at the eleventh hour. Dan Primack of Fortune is reporting that Instagram wasn’t talking with Sequoia and Facebook simultaneously but rather that the closed round triggered an offer from Facebook.]