Deborah Perry Piscione - Creating Value First

Creating Value before Making Money

by Deborah Perry Piscione

In 2010, Stanford University graduate Kevin Systrom was working on a multifeatured HTML5 (the markup language that structures content for the web) check-in project on mobile photography, originally called Burbn. He began to build the prototype without any branding elements or design at all, just concentrating on its functionality and usability. After meeting a VC from Baseline Ventures and another from Andreesen Horowitz at a party, Systrom pitched his idea and within two weeks, he had raised a total $500,000 from both.

Systrom recruited a Stanford friend, Mike Krieger, to help him develop the company. Together, they decided to focus exclusively on mobile photos. After developing a prototype of Burbn, they felt the app was too cluttered and overrun with features.  One area where the app excelled in was its distinctive feature that confined photos to a square shape. So, they renamed the resulting program Instagram, to conjure the idea of an “instant telegram.”

Deborah Perry Piscione - InstagramIn December 2010, Instragram announced full photo support and sharing on Foursquare, a location based social networking site for mobile phones, and quickly grew to a million registered users. After the impressive launch of Instagram, Kevin Systrom called on a fellow Stanford University Sigma Nu brother, Adam D’Angelo, former chief technology officer at Facebook. D’Angelo spent 30 minutes on the phone walking Systrom through all the basic things Instagram needed to do in order to get technically backed up. He made it clear that Systrom should spend time talking and getting to know the people around him, because one day, those people could be the ones to “press money into his palm”.

In February 2011, Instagram raised $7 million in Series A round, the name typically given to a statup’s first significant round of venture capital funding, from a variety of investors, including Benchmark Capital and serial entrepreneur Jack Dorsey. Instagram grew to 5 million users by June 2011, over 10 million by September, and in April 2012 announced its explosive growth to over 30 million users. All the while Instagram’s extraordinary success grew without any revenue. In the fall of 2011, new reports stated that the company was seeking a $20 million valuation as it planned to go after another round of funding. In April 2012, Sequoia Capital was said to be leading a $50 million funding round for the company, valuing Instagram at $500 million. Then, within that same month, Facebook announced their agreement to acquire Instagram for $1 billion in cash and stock, with plans to keep the company independently managed.

 

Deborah Perry Piscione has written four bestselling books, is an authority on business innovation and is a popular keynote speaker for important business events.