Comment by dmk23 | Hacker News Reader

Comment by dmk23 | Hacker News Reader

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The post is missing the most important point.

Instagram would not be worth $1B to Facebook if it has not raised a large round. Without the resources to fuel the expansion, build out the product, develop an application platform, invest in revenue team and so on Instagram would be in no position to threaten Facebook. As soon as the funding closed Facebook was suddenly facing a viable threat in mobile vs. just another resource-starved startup hanging onto dear life.

So it is pretty questionable to assume that Instagram itself "pulled an Instagram". They raised Series B because that was the deal that could happen first. Once it happened the environment changed and Facebook saw the need to take Instagram off the table.

If anything, the point is to avoid trying to pull "uncertain multi-step transactions". Use various strategic alternatives to create urgency / better terms for other alternatives, choose between the options you can get and focus on optimizing your immediate next step.

"As soon as the funding closed Facebook was suddenly facing a viable threat in mobile vs. just another resource-starved startup hanging onto dear life."

You are stating that like it's a fait accompli that the threat is real and a done deal as opposed to a mountain that they have to continue to climb and achieve with all sorts of things that could cause the dream (after $500m funding) to not even happen.

Perhaps it's the same bias on the part of Facebook that caused them to make this acquisition and overreact (possibly - and of course we'll never know the answer) to Instagram's funding.

And what about the fact that they waited until they were funded as opposed to having a system in place to identify the threat from "just another resource-starved startup hanging onto dear life" and getting involved before that?

One thing I haven't seen anyone mention is that, depending on the stock vs. cash split (I guess we'll see in the S-1 eventually), the acquisition not only knocks out a potentual competitor/keeps bigger competitors away from Instagram, gains a talented team and a cool product, but also acts as a pre-IPO liquidation event. Instagram now has at least ~10% of Facebook's 2011 revenue banked.

I didn't miss that point. I agree with what you say. But - there are very few companies that could pull this off so my post was to point this out to people.

It may be obvious to you but all the chatter this week has been about getting big rounds of VC before M&A. My thesis was that this will backfire for 99% of companies. In Instagram's case it worked like a charm. Precisely because they were so valuable to Facebook.

So, yes, I think Instagram "pulled an Instragram" if I could be so recursive.

Facebook saw the need to take Instagram off the table.

instagram's former marketing director could say that is BS (former, because being still around would have raised eyebrows).

Just look at the people behind fb/inst and rejoice on the "pulling another round before acquisition" -- as if that would have come as a surprise to any of the parties involved.

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