Instagram To Raise $50 Million at a $500 Million Valuation

Android users aren’t the only ones climbing aboard the Instagram train this week. AllThingsD’s sources say that the company is closing in on $50 million in a round of Series B funding led by Sequoia Capital. This would raise the company’s valuation to $500 million.

Launched in March 2010, Instagram won the hearts of hipsters and other enemies of high-definition photography by applying vintage light filters to photos shot with smartphones.  The mobile app had 30 million users on the iPhone when Instagram finally made its way to the Android market on April 3, 2012. The Android app got over one million downloads overnight.

In November 2010 Instagram CEO and co-founder Kevin Systrom told TechCrunch, “Of course at some point we’re going to be raising a round, but I haven’t even created a pitch deck. I haven’t signed a term sheet. We’re sitting in the office programming all day. We’re just not at the stage where we need to raise a series A.” But he ended up raising $7 million in a round of Series A funding led by Benchmark Capital with participation from other investors like Jack Dorsey, who co-founded Twitter and Square.

Rumors about another round of funding first circulated in March, when the Wall Street Journal reported that the company may be raising $40 million, making it worth 20 times what it was a year ago. At the time, investors were skeptical that a free mobile application could turn enough of a profit to justify such a large valuation.

Systrom outlined his company’s plans for earning revenue in an interview with PandoDaily’s Sarah Lacy at Business Insider’s Ignition West.”We want to create a stage,” he said. “What we want to do is build a platform where advertisers can come and perform their advertisements.” See the rest of the video below.

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