Instagram Originally Asked Facebook for $2 Billion

In the three days leading up to his acquisition of the photo-sharing app Instagram, Facebook CEO Mark Zuckerberg talked the startup’s founder, Kevin Systrom, down to $1 billion from his original offer of $2 billion, according to the Wall Street Journal.

Instagram had just secured $50 million from Sequoia Capital and other investors, bringing the company’s valuation up to $500 million. The company’s user base jumped to 35 million people after they released Instagram on the Android. However, the app was free and the company had no other sources of revenue.

Mr. Zuckerberg, who planned to pay for Instagram mostly with stock, asked Mr. Systrom what he thought Facebook would be worth, the people said. If he believed Facebook would one day be worth as much as a company like Google at $200 billion or more, then the equivalent of 1% of Facebook would be sufficient to meet his price, Mr. Zuckerberg told Mr. Systrom, the people said.

WSJ reporters Shayndi Raice, Spencer E. Ante and Emily Glazer pointed out that normally a deal like this takes several days, if not weeks, to complete, and usually involves more lawyers and bankers than were present during the negotiations.

Facebook’s board, apparently, was not happy.


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