
What Really Happened When Facebook Bought Instagram - ms-rm
http://www.vanityfair.com/business/2013/06/kara-swisher-instagram
======
SandB0x
You may as well be reading about a rock band here. This story does not and
will not apply to you. This is the one in a thousand/million fairy-tale of the
frivolous app dreamed up in coffee shops, fuelled by rapid investment and sold
for vast sums to a tech giant without so much as a whiff of a business model.

~~~
logicallee
I see.

Let's say I see a big incumbent who's UNIQUE selling point is 'we have
everyone's private photos. people have to come to us if they want to see their
friend's photos.'

I start threatening them.

They pay and buy us.

I get rich. The incumbent gets to keep everyone's photos.

At what point in the above do we not have a business model?

Oh, you mean it can't possibly WORK! Except that it just did.

Well, I'm sorry, but something that just worked obviously did work.

~~~
jeremymcanally
What you've just stated is, essentially, the business equivalent of the
lottery. You could almost replace any reference to business terms in your post
with "lottery" and have the same amount of truth applied.

The whole point of a "model" is that it's repeatable and definable. "Getting
acquired because they fear us" isn't a business model.

~~~
jacquesm
> "Getting acquired because they fear us" isn't a business model.

No, but it is one of the best reasons to be acquired, far far above 'they
acquired the team for the talent, and shut down the project' and 'they
acquired us to get our customers (aka buying growth)'.

~~~
jmh42
I think there is an elephant in the room here. (Sorry if this stings anyone)

The collective We have been led to believe that we must make something
original to be great. Don't make another social network, too tough. Don't do
what Instagram did, it's too (pick your reason) risky / saturated / lucky /
etc.

The thing is, entrepreneurs have no reason not to shoot for the moon, recreate
everything. Why do we resist? The big name funds probably won't invest for
fear of cannibalizing their current holdings. Think about that next time you
hear a VC or read their commentary (or any commentary for that matter).

------
saddino
What I really enjoy about Kara Swisher's article is how her writing style and
her framing of the story reflects the whirlwind reality that found Systrom and
Krieger in an 18 month exit.

There are no superhuman heroics involved here nor supersecret backroom deals.
This is really just a simple story of good luck and timing, a spot on pivot
and execution, and honestly brokered business relationships.

You can't duplicate the Instagram strategy because there was no strategy.
These guys didn't build an app to flip. They built an app that was cool: to
them, their friends, their investors, their users, and ultimately their
suitors and acquirer.

Kudos to them.

~~~
gbog
> writing style

I beg to differ, I yawned on the first page, on the second page, and got
somewhere else. Information density is very low. It looks like this
journalist, as many other, is paid by the line, and adds too much water in the
soup.

~~~
Skibb
Indeed, writing is vapid at best.

~~~
kmfrk
Vapid is too strong a word, but it nothing but glorifies successful start-ups,
and provides no caution for people who'd like to learn something from this.
The only conflict described is agonizing over which multi-gazillion offer to
take(!).

It's also fairly thin on new insights into the history and acquisition.

~~~
subsystem
I think it has to do with the intended audience and the format of the
publication, more than anything else.

~~~
Skibb
Also, vapid according to dictionary: Offering nothing that is stimulating or
challenging. Guess you're right. It was challenging to read the whole thing
till the end.

------
pshin45
I much preferred Josh Williams' (former Gowalla CEO) recent blog post [1] on
the Foursquare vs. Gowalla "Check-in Wars" and how it was Instagram who
ironically emerged as the "victor". Much more informative and insightful than
this Vanity Fair piece.

[1] <https://medium.com/work-education/6152adc41de9>

------
soup10
Well connected individuals flipping over-valued companies to large
corporations who have more capital than they know what to do with.

Wake me up when VCs choose to fund companies that seek something other than
validation and profit.

~~~
jacquesm
I'm perfectly ok with VCs choosing to fund companies that seek profits.

~~~
brazzy
So when do you think tehy'll start doing that again?

~~~
jacquesm
There seems to be this terrible misunderstanding that 'VC' is a uniform unit
the multiple of which is VCs.

In fact, every VC is different, every VC has their own ideas of what companies
are good to fund and which they'd rather pass on.

So, right now there are VCs that will not fund companies that do not have a
clear idea of how they're going to become profitable.

~~~
logicallee
The only terrible thing about the misunderstanding that VC's are uniform herd
animals who all act the same way, have the saem ideas of what's good and what
they'd rather pass on, is that it's true!

Terrible but true. You will literally see vc look at the other VC and do
exactly what they're doing.

You can literally create your own VC market by making VC A think that VC B is
interested, which is true, because VC B is interested in anything that VC A is
interested in.

~~~
jacquesm
Some questions for you:

Do you run your own company?

Do you have employees?

Co-founders?

Have you ever received funding from a VC?

Have you ever solicited funding?

Were you accepted?

Rejected?

~~~
logicallee
all of the above (yes to all seven question marks) except for number four
receiving funding (from a vc), as in check clears, no that hasn't happened
yet.

going through this process now - and I can tell you, if I fucked up with one
VC I would fuck up with them all. everyone talks.

On the flip side, when you're hot everyone wants you, you don't have enough
equity to sell to everyone!

~~~
jacquesm
Check out the story behind Cisco before you give up.

And on another note, ask a VC if they reject you _why_ they reject you, there
really is a huge difference in the spectrum of available parties to work with,
from assholes to fantastic people to work with and everything in between, make
sure you partner with a group that feels right rather than just looking at the
terms sheet. That's where the action is of course but sometimes it is better
not to have a deal than to have a deal with the wrong party.

------
EGreg
I think this story also shows how super-important connections can be. This guy
was well connected in the valley.

The question is, how can someone who moves there from, say, New York, actually
make those connections?

~~~
pathy
My guess would be that it is harder, especially to get connections like
Zuckerberg, if nothing else because he, and others like him, are now quite
hard to reach.

That said, getting to know the up-and-coming Valley entrepreneurs should be
doable. It is not as easy as getting to know them while you are in college but
go to conventions, go to coffee shops, bars. If that is not your thing, start
conversations on HN, Twitter, professional communities etc. One important
thing to remember, people love to talk about themselves and their business.
Especially entrepreneurs.

On a personal level, I am finishing up my Masters (in Amsterdam - so no where
close to 'The Valley') and I really feel that I should have done more
networking. It is not that hard to get to know people if you make an effort
but I have been way too comfortable with my group(s)of friends.

~~~
mailshanx
But doesn't a huge part of the problem stem from geography? Like you, i'm
finishing up my Masters in Singapore - that is pretty much on the opposite
side of the globe as SV. Surely i can't afford to go flying around to SV
conferences as a student. I'll be speaking at a few conferences in Europe this
summer, but still, i feel that if you are not located at least in the USA, you
are missing out on a huge piece of startup action...

~~~
joonix
Stay in Singapore. Build something for an Asian, or African, market.

Am I the only one who cringes when reading stories like this about the Valley?
I do not want to be in a bubble. I do not want to take part in gossip or the
popularity contest. I would much rather stay under the radar, out of the
sights of competition, in an underserved market.

------
cft
Silicon Valley has come a long way from 1966: from cutting edge material
science <http://youtu.be/z47Gv2cdFtA> to applying open source sepia filter...

I am afraid that the logical end of this race to the bottom in terms of
technology is the end of the Silicon Valley (perhaps something like Hollywood
for "new media" replacing technology)

~~~
stephenrcarter
Consumer-facing products are always going to garner the most press, but that
doesn't mean more technically interesting things aren't going on as well.

There are tons of core technology startups in Silicon Valley - we just don't
talk about them on YCombinator very much. I find the software defined
datacenter space really interesting. Check out Nutanix: A startup that aims to
redefine enterprise datacenter architecture. Or how about the recent
acquisition of Nicira (a software defined networking company) by VMware. Just
look at Khosla Ventures product portfolio:
<http://www.khoslaventures.com/information-technology.html>. Food science
startups, semiconductor, enterprise hardware/software, AND social media. The
whole gamut.

------
Skibb
Ugh this is linkbait and upvote-bait if I ever saw one. The whole tone of the
article is so contrived and fake-mysterious that it's kind of digusting.
Basically the whole thing can be tracked down to a rich privileged white kid
doing what rich privileged kids do. NOTHING worth reading about here. And the
shitty app could maybe start about thinking of getting some cash flow.

~~~
pathy
You appear to be very jealous of their success. This is Hacker News, we should
celebrate the entrepreneurial spirit and look at the lessons that can be
learned from success stories like this.

If I could build Instagram and sell it for $1b I sure as hell would. Might not
be saving the world but people appear enjoy using it so who cares. They did
manage to sell a company for $1b, a feat which practically all of us never
will achieve.

That said, they probably should try to get some cash flow some time soon.

~~~
gramsey
Oh please. Spare us the jealousy insinuations, and stop perpetuating the myth
that if entrepreneurs are actually worth anything and work hard, it is
guaranteed that they will swiftly become inundated with success.

Sometimes there are no "lessons that can be learned from success stories like
this". Believe it or not, for every Instagram, there's a hundred startups with
founders that are just as smart and try just as hard, but don't make the cut.
Do the founders of Instagram deserve their success? Sure! Should we pat them
on the back and "celebrate the entrepreneurial spirit"? Absolutely. But let's
not fall over ourselves praying to the success gods while we forget to work on
our own products.

> If I could build Instagram and sell it for $1b I sure as hell would

Bullshit. Maybe you could! All you need is hard work, the skills to get there,
and yes, a good amount of luck. But let's not pretend you, or the founders of
Instagram, are destined for success because you're special or you "knew" your
ideas would kick off. Look up hindsight bias in the dictionary.

~~~
NoahTheDuke
> But let's not pretend you, or the founders of Instagram, are destined for
> success

That's not what the other poster said at all. They were making a remark about
their potential attitude towards "cashing out", not about their perceived
likelihood of being offered $1bn.

~~~
pathy
Yes, that was my intention. Turns out I need to work a bit on my English, I
can be a bit unclear at times I fear. English isn't my native tongue so at
least I can blame my shortcomings on something :)

------
sharkfood
Sounds great.... The dream we all long for; Silicon Valley dream.

Though does anyone tell the stories where the little guy is invited out there
by big influentials only to be baited into giving away their secret algorithm
and then being stomped on?

Beware innovators/entrepreneurs sharks abound, especially for the little guy.
They'll sell you on your dreams only to get what they want from you then kick
you and your dreams to the curb.

Signed a lost and now destitute innovator/entrepreneur

~~~
gbog
> Silicon Valley dream

That's interesting, because most of the technical focus is on scalability, and
this "Silicon Valley dream" is so very much not scalable.

The "American dream" had more scalability potential, don't you think so?

------
paprika
So Instagram was sold for $750m and not $1bn. Majority of $300m went to
investors.

It's a great story to read (and maybe Ashton Kutcher can play Systrom as well,
or at least Nicholas Hoult... Hunter Parish to play Krieger and it's time that
Michael Cera debuts at Zuckerberg) but I can't help but think it would've been
so much better for us, users, that Twitter bought them.

I see it as a perfect social network - Vine for video sharing, Instagram for
photo sharing, Twitter as a connecting platform with numerous additions -
Radio, ...

I just don't get Facebook anymore. Sure, a few years ago we were mad about it,
spending days on it but I sense that hype is gone. Honestly I don't know why
I'm still on it - stories from liked pages are the same as on my Twitter feed,
I use Instagram to share my photos. Surely if you're serious about keeping in
touch with people from the past, you already have their email or phone number.

------
maceo
"Rags to riches?" What a bunch of BS. Dude never experienced a moment of
poverty in his life, and I doubt he would deny that.

~~~
virtualwhys
Well, the article does mention that he was born in Brazil. Perhaps he was a
glue sniffing Sao Paulo street kid who was adopted by a caring American WASP
family that got him on the fast track to old/new money success.

Seriously, boarding schools are choc full of uber achievers; the notion that
wealthy kids are lazy is a myth (assuming trust-afarians are taken out of the
equation).

------
digitalengineer
A good read, for sure. As someone _outside_ of the US, it makes me wonder if
Instagram's succes would have been possible if it was a non-US company, or
even a startup outside of California?

~~~
crimsonzagar
Direct answer: no. Indirect answer: no.

The probability is low because guys outside of bay area don't build app to
dent anything. They don't aim to build an app that is cool: to them, their
friends, their investors, their users, and ultimately their suitors and
acquirer.

They build it to mint money, which is why this story inspires them too.

~~~
dualogy
Suuure, everyone outside the valley builds apps only for "money minting", not
for "cool to everyone". Nice Cali bubble you live in ;D

~~~
crimsonzagar
Even if an individual tries to do it for coolness, and is passionate about it,
the rest of the guys around him are not. And that can be a significant
cultural influence.

You're living in a bubble, if you can't see that.

------
xyproto
Pivoting is an integral part of the iterations of a lean startup and not
"screwing up" as written in the clueless article.

~~~
mcherm
I prefer to think that pivoting (as opposed to minor tweaks to business plan)
is indeed, "screwing up", but that making mistakes is not a bad thing... as
long as you can learn from it and move on to do better. Failing to screw up
ever means you're not taking enough risks.

------
loceng
Makes you realize in part, the clever name of Instagram, is just a name that
now people associate with filters - though wasn't popular until its advent.

------
chankey_pathak
They killed it!

