URL:http://www.vanityfair.com/business/2013/06/kara-swisher-instagram
“Like,” indeed.
Systrom went back to his hotel room and scoured the Internet, trying to figure out how to make a filter. That day, he created the first, which he called X-Pro II, after the “cross-processing where you take the wrong chemicals for the wrong film and you put them together.” He and Nicole started taking pictures using the filter and posted the first Instagram photo in this unusual style of a little Mexican dog lying next to Nicole’s foot. Once they had the filters, they aimed to launch the new service in just eight weeks.
Excited, Systrom and Krieger shared their new plans with their backers. Andreessen Horowitz had no objection, nor did Baseline’s Anderson, who was soon working with them closely on the shift. “I remember thinking, Finally,” says Anderson, who had been frustrated watching Systrom’s difficulties in finding the right recipe for success.
When it came to naming the new service, Systrom and Krieger agreed that “instant” was the key word. After trying hundreds of possible mashups, they settled on “telegram” as the second component.
With the beta version readied, Systrom and Krieger introduced the app to tech luminaries and key media outlets, mining connections from Stanford and their previous jobs in the Valley. Due in no small part to the combination of Systrom’s infectious enthusiasm and Krieger’s charm, the feedback was encouraging, especially when important figures such as Twitter’s Jack Dorsey got interested. Systrom, who had interned at Twitter’s precursor, Odeo, when he was in college (and sat right next to Dorsey at the office all summer), met with Dorsey to show him Instagram. Dorsey was an instant fan.
“From the start, Instagram was a simple application and a joy to use,” Dorsey remembers. “I was blown away by how much detail they put into the experience. It reminded me about how much Kevin talked about photos [when he worked at Odeo]. There was an obvious obsession there, but it had never been put into practice until then.”
Instagram launched on October 6, 2010, with users sharing on both Twitter and Facebook, among others. On that first day, the app had 25,000 users, and it grew exponentially from there.
Early on, there was a San Francisco Giants playoff game taking place at AT&T Park, near the company’s offices. As Systrom recalls, this led to another aha moment: “We were hearing the roars of home runs, not feeling like we were actually there,” he recalls. “We did an ad hoc [search] within the database to see if anyone was using Instagram in the area, and there were 140 photos in the last two hours taken in the stadium, so we could see the game [through the app]. . . . And that was the moment we realized Instagram could be far more than photo sharing.”
Photo Ops
The media and general public alike were almost instantaneously captivated by Instagram, but it wasn’t long before Systrom and Krieger confronted their first unexpected setback.
In 2010, around the time Andreessen Horowitz made its $250,000 investment in Burbn, the firm had also put money into PicPlz, a photo service co-founded by longtime entrepreneur Dalton Caldwell. Though PicPlz was aimed at the growing Google Android mobile eco-system, and the V.C. firm was supportive of Systrom and Krieger’s pivot, the investors felt they were facing an “ethical issue,” as Horowitz later put it, and thus duty-bound to honor their relationship with PicPlz, to which Instagram was now, unexpectedly, a competitor—and so, a month after Instagram’s launch, Andreessen Horowitz announced it was making an additional investment, of $5 million, in PicPlz, forgoing any further investment in Instagram. (The firm would make $78 million on the Facebook sale, thanks to its initial stake in Burbn—a roughly 31,000 percent return.) Systrom, who had been aware of the conflict, learned about the deal by reading it in The New York Times and was devastated. “Instagram was clearly taking off and we just wanted a fair shake,” he says. “Andreessen Horowitz was a big name … and it was like, It sucks to get turned away.”
Ben Horowitz, who had been through his share of investment and start-up disasters, says, “We should have told [Systrom] the second the decision was made.” Indeed, Systrom felt ambushed at the time. “I chalk it up to a moment in time where we were really excited about the momentum we had and we just didn’t quite understand the dynamics,” he says.
There was still plenty of interest from other investors, though, and Systrom quickly zeroed in on one venture capitalist he thought would bring the most to the situation, including star power: Matt Cohler, of Benchmark Capital. The 36-year-old Cohler is a demi-god to entrepreneurs, with a résumé that includes an early stint as an exec at LinkedIn and then a spot as one of the first five employees hired at Facebook. He left his job there running product management in 2008 to become a venture capitalist.
“It was very clear [Instagram] was striking a chord and fulfilling an unmet need,” says Cohler. “This was the first app I had seen for smartphones that was built native for this platform. . . . It was a programmable remote for life.”
By February of 2011, Benchmark was leading a $7 million Series A round of funding, which valued Instagram at $25 million and which also included investments from Dorsey, angel investor Chris Sacca, and another former Facebook tech star, Adam D’Angelo, who just happened to have been Mark Zuckerberg’s roommate at Exeter, and was then running his own start-up, a question-and-answer Web site called Quora.
At a party just a month later, at a retro cocktail bar called Bloodhound in San Francisco, to celebrate millions more users, Krieger toasted Cohler and the group.
“To the good old days,” said Krieger.
“Mike,” replied Cohler, who was the grand old man of the group at 33 years old, “these are the good old days.”
Deal Breaker
I ndeed, with fewer than a dozen employees, Instagram found it nearly impossible to keep up with its geometric growth in users. While Krieger manned the tech operations, Systrom focused on product improvements and fielding interest from big companies looking to buy Instagram, still less than a year old. Chief among the suitors were Dorsey, at Twitter, and Zuckerberg, at Facebook.
“Kevin would call me and I would call him,” Zuckerberg says of his relationship with Systrom during the early days of Instagram. The two had been casual acquaintances ever since meeting at various gatherings at Stanford while Systrom was a student. (Zuckerberg had even tried to get Systrom to drop out to work at Facebook.) After Instagram’s launch, Zuckerberg had Systrom over to his house in Palo Alto for dinner several times to talk about what he called “philosophy.”
It wasn’t just a matter of selfless mentorship and theoretical discourse, though; Zuckerberg had to pay attention to the rising tide of Instagram, especially since photo uploading had been a key element of Facebook’s own initial surge in popularity.
“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.
At the same time, Systrom got a call from another young and aggressive venture capitalist, Roelof Botha, of Sequoia Capital, an investor in Tumblr and a number of other trending start-ups in the social space. He had been watching Instagram’s growth carefully and reached out to Systrom in early 2012, impressed by its “stickiness.”
“A lot of hot start-ups were losing users as quickly as they get them, like people who get on a bus and then get off in the back,” says Botha. “But they retained their users.” Almost immediately Botha committed to $50 million in new funding for Instagram.