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The making of billion dollar app Instagram

Dominic Rushe (via SMH) | April 11, 2012
Kevin Systrom and Mike Krieger have made their fortunes remarkably quickly, even by Silicon Valley standards.
The Instagram team in July 2011 .... when it consisted of only four. From left to right: Instagram engineer and co-founder Mike Krieger, engineer Shayne Sweeney, CEO and co-founder Kevin Systrom and community manager Josh Riedell.

The Instagram team in July 2011 .... when it consisted of only four. From left to right: Instagram engineer and co-founder Mike Krieger, engineer Shayne Sweeney, CEO and co-founder Kevin Systrom and community manager Josh Riedell. Photo: Instagram blog

California has been famous since the gold rush for creating fortunes overnight. The Golden State was a dream factory for get-rich-quick schemes from pioneers with pickaxes to beautiful people aiming to be Hollywood stars.

But only in Silicon Valley can a couple of 20-somethings turn 551 days, or 78 weeks, of work into a $US1b fortune.

Kevin Systrom, 28, joined the long line of technocrats turned plutocrats on Monday in the US when he sold Instagram, a profitless photo-sharing app that's less than two years old, for $US1b. He sold it to that other wunderkind, Mark Zuckerberg, 27, the Facebook founder whose social network is now worth an estimated $US100b.

Instagram co-founders Mike Krieger and Kevin Systrom.

Instagram co-founders Mike Krieger and Kevin Systrom. Photo: codypickens.com

Systrom, a former Google employee, is understood to own about 40 per cent of Instagram, which is now worth $US400m. His co-founder Mike Krieger, 25, is believed to have about 10 per cent, worth $US100m. The rest will be shared with investors and the company's other employees - all 11 of them. Even by Silicon Valley standards, it's a remarkable haul for a company that's been around for less than two years.

If Facebook had been paying Instagram from the start it would work out Instagram was making roughly $US1.8m a day from the social networking giant or $US12.7m a week.

Instagram wasn't the first, or the only, mobile app offering people a way to share their photos on Twitter, Facebook or Flickr. Nor was its use of filters to add visual effects to those shots a new idea. But what made it stand out was its success.

Last week Instagram raised $US50m from venture capital firms, valuing Systrom and Krieger's baby at $US500m. Zuckerberg had reportedly already approached Systrom and asked to buy the firm but after the funding he came back with an offer that couldn't be refused: double the price.

Instagram might not make a cent but it is the hottest mobile app in the world and Facebook is preparing for the biggest IPO in tech history.

 

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