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What the Instagram-Facebook exit means for aspiring entrepreneurs

April 12, 2012 Leave a comment

When Instagram announced that it was being acquired by Facebook for $1 billion, a few thoughts immediately came to mind. First: Wow, is Instagram worth $1 billion and what does this mean for the product and for the social media titan – Facebook? Next, I immediately looked up how many employees Instagram has, how long they’ve been around, and how they got started. Like a lot of entrepreneurs (and non-entrepreneurs for that matter), I felt a twinge of envy quickly followed by joy for both Instagram, Silicon Valley and entrepreneurs everywhere.

Here was a team of two co-founders, Kevin Systrom and Mike Krieger with a vision, ambition and a dream. Both are young, recent college graduates, much like many entrepreneurs running the hundreds, if not thousands, of start-ups that receive outside funding every year. In March 2010, Instagram received $500,000 in seed financing, a rather modest amount from Baseline Ventures and Andreessen Horowitz.  The Company launched their product in October 2010 with 80 initial users, announced Foursquare integration  two months later, then reach 1 million users shortly after. Now, 1 million users is quite impressive by most measurements and by that time, most people in tech have heard of Instagram (including their larger $7 million financing round). Still, with only a handful of employees, Instagram kept appropriately lean while scaling out features, dealing with their 50k+ daily new users and releases real-time APIs that allow universal sharing on any service. Meanwhile, Facebook had been repeatedly rumored to have made acquisition attempts for Instagram. These are the stories that inspire entrepreneurs – both current and future/aspiring ones. The Company closed $50 million of funding at a $500 million valuation just days before announcing the $1 billion Facebook acquisition.

So what does the Instagram acquisition mean for aspiring entrepreneurs and what lessons can we take away? First – growth does not necessarily mean headcount. When Instagram raised $7 million in early 2011, they certainly could have hired more than 10-12 employees (their supposed headcount is “about 13” employees). Instead, they stayed laser focused on the product and business with the user experience in mind. Second – always have a number. Instagram probably had many interested buyers including Facebook. But when Facebook finally came with a “real offer”, Instagram acted quickly. For many start-up “wantentrepreneurs” – Instagram is a classic example of the bet-big, get-big mentality that is pervasive within start-up culture. Perhaps the $1 billion exit will lead to more wanabe-entrepreneurs to make the leap and start something. Or perhaps, it will simply lead to jealousy and bear-talk about another pending bubble. If there’s one thing I’ve learned since starting ChoicePass, it’s that success takes discipline, hard work, belief, passion and [calculated] risk. For most people on a paycheck, seeing Instagram sold for a large sum of money is the equivalent of winning the lottery for them. But for those aspiring entrepreneurs with a great idea, this might be the push that gets them to start. Maybe they too can create the next Instagram. I’m happy for Instagram because the founders stayed true to their vision and executed beautifully in a space that they were passionate about. We can probably all agree that a photo-sharing app with filters isn’t going to be on the top of our list of “most innovative” new products. But Instagram’s zero-to-one billion story resonates with entrepreneurs because of this simplicity. Try to do one thing very well instead of a dozen not-so-well. Focus on reaching your milestones. Stay lean. And most of all, remember to have fun.

Zero to 1 Billion - Infographic