Right Before Acquisition, Instagram Closed $50M At A $500M Valuation From Sequoia, Thrive, Greylock And Benchmark

Welcome to the Monday where Facebook buys Instagram. Actually I’m as shocked as you are about this acquisition, namely because I was working on it as a funding story all morning. From what I’m hearing investors were shocked as well …

Because the rumors are true, right before its billion dollar acquisition from Facebook, Instagram closed a $50 million Series B round from Sequoia, Josh Kushner’s Thrive Capital, Greylock and Benchmark at a $500 million valuation. The round was led by Sequoia, as first reported by AllThingsD’s Liz Gannes.

Investors, many of whom didn’t know about the Facebook acquisition, literally doubled their money (which was wired to Instagram last Thursday) overnight. So why would Systrom dilute his share by accepting financing so close to an acquisition? Well as Christine Heron points out, Instagram may have been using the A-list investment to drive up the company’s valuation during acquisition negotiations, and vice versa.

Instagram last raised funding a little over a year ago, in a modest $7 million round from angels Adam D’AngeloJack DorseyChris SaccaBaseline Ventures and Benchmark Capital. Two years ago, Steve Andersen from Baseline invested in the company’s $500k seed round along with Andreessen Horowitz, which was shut out of subsequent rounds due to its investment in PicPlz and Path.

In a blog post announcing the deal, Instagram CEO Kevin Systrom said that he would continue to run the company “independently.” Facebook CEO Mark Zuckerberg had this to say, ” “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.”

Many are comparing this buy to Google’s $1.65 billion acquisition of YouTube, which makes sense from both a user and vertical integration stand point. Facebook, which was rumored to be building its own standalone photosharing apps, is well aware just how much of the “stickiness” of its platform revolves around photosharing, especially via mobile.


More On The Instagram acquisition

Facebook Buys Instagram For $1 Billion, Turns Budding Rival Into Its Standalone Photo App

From 0 To $1 Billion In Two Years: Instagram’s Rose-Tinted Ride To Glory

Facestagram: Five New Features Facebook + Instagram Could Launch

With Instagram Buy, Facebook Officially Pushes M&A Strategy Beyond The ‘Acqui-hire’

Insta-Backlash: Twitterverse Overreacts To Facebook’s Instagram Acquisition, Users Delete Accounts