Facebook’s acquisition of Instagram has immediately sparked fears of another dotcom bubble, turning a handful of bright entrepreneurs into overnight multi-millionaires but threatening to leave a wider pool of investors with their fingers badly burnt.
Kevin Systrom and Mike Krieger, the two young Stanford University graduates who developed the addictive photosharing app, will make around $400m and $100m respectively from the deal. Mr Systrom, who turned down a job offer from Facebook in 2004 in order to finish his studies, joked that the sale will enable him to afford a few more bottles of Champagne. With that sort of money he could buy the Champagne producer and a lot more besides.
Facebook has doubled the value put on Instagram just a week ago, when it closed a $50m funding round from investors including Sequoia Capital. Put another way, it has paid $80m per employee and more than $33 for every one of Instagram’s 30m users. It’s even valued the company ahead of The New York Times, which has a market capitalisation of $942m.