It’s been almost a year since Facebook bought Instagram for $1 billion, and this is a painful memory Twitter co-founder Jack Dorsey hates to revisit since Twitter was looking to purchase Instagram as well but couldn’t offer up the kind of money as the almighty king Zuckerberg.
See in April of 2012, many investors and tech companies were interested in Instagram.
A group of venture capitalists gave Instagram co-founders Kevin Systrom and Mike Krieger $50 million, valuing the budding photo-sharing network at $500 million.
This was the exact amount Twitter offered to buy Instagram shortly after this value was determined.
It turns out that Jack Dorsey had worked alongside Systrom in the mid 2000′s at podcast-sharing service Odeo. Systrom was actually Dorsey’s intern. Dorsey invested a lot of money in Instagram early on, as he considered himself a mentor for Systrom and was very proud of his pupil’s work.
After receiving the additional $50 million from their investors, Instagram told Facebook and Twitter that they would remain a private company.
Zuckerberg, who had known Systrom since his days at Stanford University, simply would not take no for an answer. He invited Systrom to meet up over Easter weekend and discuss some changes that could be made in a prospective deal. It was here when Zuckerberg doubled Twitter’s offer and agreed to buy Instagram for more than $730 million in cash and stock.
Systrom called his investors to give them news of the sale.
Dorsey received no word of the deal until one of his employees told him about it. Dorsey and Systrom haven’t been on good terms ever since.
“I found out about the deal when I got to work and one of my employees told me about it, after reading it online I got a notice later that day since I was an investor,” Dorsey told Vanity Fair. “So I was heartbroken, since I did not hear from Kevin at all. We exchanged e-mails once or twice, and I have seen him at parties. But we have not really talked at all since then, and that’s sad.”
When asked about what made Systrom change his mind about selling, he said that Zuckerberg changed “the equation” quite a bit just days after he turned down Twitter.
“I’m not sure what changed my mind, but [Zuckerberg] presented an entire plan of action, and it went from a $500 million valuation from Sequoia to a $1 billion [one from Facebook],” Systrom said. “I think everyone thinks that the acquisition was made in a dark room with Trent Reznor music playing. And it turns out that some of the biggest decisions get made relatively quickly, without much fanfare.”
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