The latest issue of Vanity Fair features a profile of Instagram and company founder, Kevin Systrom (seen in the pic above) by Kara Swisher. The piece delves into how Systrom came to choose Facebook over Twitter as the company to sell his photo-sharing service to, as both were in hot pursuit to acquire it.
“They got a lot of traffic from Facebook,” Zuckerberg says. “And it occurred to me we could be one company.” Presumably, it also occurred to him that the then little Instagram could pose a very real threat to Facebook. It was not an idle worry: Instagram was hip, elegant, fun, and “mobile-first,” and moving to mobile was a burgeoning problem for the largely desktop-bound Facebook.
Most of all, Instagram represented the constant fear that even the greatest of Internet giants fret about daily: in Silicon Valley, the young can sometimes eat the old, instead of the other way around.
Meanwhile, interest from Twitter waned while Jack Dorsey was distanced from the company for a time, due to his removal from the leadership infrastructure. When he returned as executive chairman, in March of 2011, Dorsey resumed his advances with new gusto, trying to convince Systrom that the social-media company would be his best partner going forward.
Twitter, Swisher writes, made Systrom an offer of $500 million in stock for Instagram. After mulling it over, Systrom decided to pass on the offer in favor of remaining independent and growing the company with an infusion of cash from Sequoia, a private equity firm.
Systrom also contacted Zuckerberg to let him know about his decision. But, unlike Twitter, Zuckerberg wouldn’t take no for an answer and texted Systrom the next day, asking to talk in greater detail about his interest. “A gesture does not equal an offer, because every tech company is always talking to every other,” Zuckerberg says of his persistence. “So, I wanted to be very clear that we were very serious.”
Zuckerberg had the power at Facebook to make quick and dramatic moves like this. He invited Systrom over to his home in Palo Alto on Friday, two days after Instagram had spurned Twitter, for a series of long and detailed talks about where the two men could take Instagram with Facebook’s massive firepower.
“This never had the feeling of negotiation, because we kind of wanted to work together,” Zuckerberg says. He wanted it very much, events would prove, and the discussions that Friday quickly led to an offer that was essentially double what Twitter had floated and venture capitalists had valued the company at. More enticing still, Zuckerberg’s offer included a giant, $300 million dollop of cash.
Systrom was overwhelmed by Zuckerberg’s massive offer and intensity, which blurred his focus on keeping Instagram independent. “I’m not sure what changed my mind, but he presented an entire plan of action, and it went from a $500 million valuation from Sequoia to a $1 billion [one from Facebook],” says Systrom. “Obviously, the equation was completely different.”
Go read the whole thing when you have time here.