Facebook acquiring Instagram for $1 billion

[Wood]

I know comics often go hand in hand with other types of geekery, inclusive of techno gadgetry.  So I'm guessing quite a few of you are Instagram users.

Well, Facebook is acquiring the photo-sharing service for $1 billion today.

While that may sound like a lot, it's even more impressive when you consider:

1) Instagram did not exist two years ago
2) Instagram had just 13 employees
3) Instagram has next to NO revenues
4) Instagram had 30mm active users (Facebook has nearly 900 million)

This is really an astounding thing. Imagine coming up with an idea and, two years later, selling it for more than a billion dollars?

[David]

I'm not sure how I feel about this yet.

[Julian Lytle]

I know comics often go hand in hand with other types of geekery, inclusive of techno gadgetry.  So I'm guessing quite a few of you are Instagram users.

Well, Facebook is acquiring the photo-sharing service for $1 billion today.

While that may sound like a lot, it's even more impressive when you consider:

1) Instagram did not exist two years ago
2) Instagram had just 13 employees
3) Instagram has next to NO revenues
4) Instagram had 30mm active users (Facebook has nearly 900 million)

This is really an astounding thing. Imagine coming up with an idea and, two years later, selling it for more than a billion dollars?

Those guys deserve it for all the pretty girls that like to take pictures of themselves all day and post them for to see to get us through the day.

KUDOS to instagram! Get money like junior mafia.

[Invader Tim]

I don't have a cell phone and don't use Facebook, so I can not speak from any experience with either, but I certainly see how Facebook would leverage the service to simply add additional value to their social network (for their customers), rather than directly monetize it somehow. I wouldn't be surprised if Google was making a play for it as well, which could have contributed to the high price.

[Wood]

I don't have a cell phone and don't use Facebook, so I can not speak from any experience with either, but I certainly see how Facebook would leverage the service to simply add a great deal of additional value to their social network (rather than directly monetize it somehow). I wouldn't be surprised if Google was making a play for it as well, which could have contributed to the high price.

I don't think there was a prayer Google could've ever acquired Instagram. Intagram's major backers were mainly current and former Facebook execs.

[Invader Tim]

I don't think there was a prayer Google could've ever acquired Instagram. Intagram's major backers were mainly current and former Facebook execs.

Ah, ok... I didn't know that. Interesting.

[Jeff B.]

From the little I read of it, this deal seemed to point to Facebook not wanting to deal with Instagram becoming a major player down the road or losing out on the purchase to a competitor.  Instagram's app numbers were quite astounding and were adding users at quite a pace they were bound to get noticed.  $1 billion is certainly getting noticed.  Good for them. 

After working for an individual who sold his business in the 90s to AT&T for some ungodly amount of money, I remember him telling me timing is everything.  What he did would never happen again for him, it was a culmination of so many factors at play all at once including the dotcom craze, the feeding frenzy at the time for IT consultant types, etc.  Looks like Instragram was in the right place at the right time.

Hopefully I don't have to wait much longer for my $1 billion idea to pop into my head 

[thefreakytiki]

So it's not $1 billion cash, it's a cash/stock combo.  This raises a couple of basic questions in my naive mind:

- I can't find what % is cash and what % is stock.  Anyone know the breakdown?

- I am also curious if a deal like this has a "holding date" for how long they have to wait til they can sell those stocks (a stock that technically does not exist on NASDAQ yet))... And by default that may actually skew what this buying price actually is.  Does anyone know if they have to wait to sell?

- When something like this happens, do the Venture Capitalists who invested in this idea/product get money off the top before the creators or do they technically own a specific % of the company (obviously negotiated earlier)? 


The Tiki

[NiceAndBlue]

Now it will be easier than ever to share my shitty lomo'd photos with the world.

[Wood]

So it's not $1 billion cash, it's a cash/stock combo.  This raises a couple of basic questions in my naive mind:

- I can't find what % is cash and what % is stock.  Anyone know the breakdown?

The terms haven't been released yet, but they'll be detailed in an updated S-1 filing by Facebook in the coming days, I would think. My guess is it's substantially for stock though.

- I am also curious if a deal like this has a "holding date" for how long they have to wait til they can sell those stocks (a stock that technically does not exist on NASDAQ yet))... And by default that may actually skew what this buying price actually is.  Does anyone know if they have to wait to sell?

Yes, Facebook is due to IPO in May. Any IPO has a "lock up period", which prevents any existing pre-IPO shareholders from selling the stock until the lock up is over. Even then, most key insiders have longer lock up periods to prevent dumping and to instill a sense of long-term commitment. And beyond that, many employees and insiders have a big portion of their value tied up in stock options or RSUs (restricted stock units) that vest over time, typically in a 3- to 5-year span.

- When something like this happens, do the Venture Capitalists who invested in this idea/product get money off the top before the creators or do they technically own a specific % of the company (obviously negotiated earlier)? 


The Tiki

VCs invest for a percentage of the company, and successful companies (which Instagram obviously was) raised the overall valuation of their company with each successive round. Each time a VC invests, the existing shareholders are diluted (unless they invest in the next round in kind) but that's usually deemed acceptable because it's a smaller % of a theoretically larger pie.

For example...

Founder starts a company -- he owns 100%
Founder raises a bit of VC money -- he might get $5mm and give up 40% of the company (he now owns 60%)
Founder raises a second round, significantly larger -- he might get $25mm and give up another 25% of the company (now he owns 35%, etc...)

VCs are subject to the same lock-up periods as executives and insiders.

[thefreakytiki]

Yes, Facebook is due to IPO in May. Any IPO has a "lock up period", which prevents any existing pre-IPO shareholders from selling the stock until the lock up is over. Even then, most key insiders have longer lock up periods to prevent dumping and to instill a sense of long-term commitment. And beyond that, many employees and insiders have a big portion of their value tied up in stock options or RSUs (restricted stock units) that vest over time, typically in a 3- to 5-year span.

  3-5 years for instagram guys to get their $$$ that's a loooong time to wait (and the value may shift... could be yay or ouch!).


Just saw this on MSNBC...

By msnbc.com staff

Wired has another angle on Facebook’s $1 billion purchase of photo-sharing service Instagram: CEO Kevin Systrom is about to be a very rich guy.

Forget Porsche -- the Lamborghini dealer should be looking up this guy’s number.

According to Wired, Systrom owns 40 percent of Instagram, meaning he will get $400 million in the cash-and-stock deal. Co-founder Mike Krieger, with a 10 percent stake, will net about $100 million, according to Wired.

 Several venture capital firms also each stand to get $100 million or more of the purchase price.

The rest of the company’s 13 full-time employees will each get a portion of a nearly $100 million pool, with specific amounts awarded by how long the employee has worked at Instagram.

Only 13 employees to split that? That’s only slightly less cool than winning the lottery.


the Tiki

[Felt Martin]

The rest of the company’s 13 full-time employees will each get a portion of a nearly $100 million pool, with specific amounts awarded by how long the employee has worked at Instagram.

Only 13 employees to split that? That’s only slightly less cool than winning the lottery.

What a dream!
I'd cash in and retire immediately.   

[Wood]

What a dream!
I'd cash in and retire immediately.   

An even cooler story, is that the CEO of OMGPop! -- the make of the drawing game that Zynga just bought for $230mm, apparently re-hired people they had laid off so he could make them whole when Zynga acquired the company. I don't know if the story is true, it's floating around the tech blogosphere, but if it is, WOW.

[Invader Tim]

An even cooler story, is that the CEO of OMGPop! -- the make of the drawing game that Zynga just bought for $230mm, apparently re-hired people they had laid off so he could make them whole when Zynga acquired the company. I don't know if the story is true, it's floating around the tech blogosphere, but if it is, WOW.

Yeah, pretty cool.
http://www.businessinsider.com/the-incredible-story-of-how-laid-off-omgpop-workers-got-hired-back-just-in-time-to-cash-in-on-the-big-sale-2012-4

[thefreakytiki]

An even cooler story, is that the CEO of OMGPop! -- the make of the drawing game that Zynga just bought for $230mm, apparently re-hired people they had laid off so he could make them whole when Zynga acquired the company. I don't know if the story is true, it's floating around the tech blogosphere, but if it is, WOW.

If true, THIS is the type of thing that makes me happy.  There is SO much greed in today's "ME" culture that stories like this give me hope.

The Tiki

[S. Earl]

An even cooler story, is that the CEO of OMGPop! -- the make of the drawing game that Zynga just bought for $230mm, apparently re-hired people they had laid off so he could make them whole when Zynga acquired the company. I don't know if the story is true, it's floating around the tech blogosphere, but if it is, WOW.

I work a block from Zynga's SF headquarters and I can't say I'm a fan, but I'm glad to see something good come from their AP monopoly like this story.