FACEBOOK RAISED a lot of eyebrows when it bought Instagram for $1 billion last week.
But that’s actually a bargain compared with Instagram CEO Kevin Systrom’s original asking price of $2 billion.
That spectacular number appears in Wall Street Journal, which has run details of the intense negotiations between Systrom and Facebook CEO Mark Zuckerberg.
Zuck apparently phoned Systrom on Thursday, April 5, after talking to Facebook COO Sheryl Sandberg and telling her he wanted to buy the company. He reached out directly because he was afraid that going through lawyers, as is normally done with big M&A deals, would have turned Systrom off.
Systrom drove from his home in San Francisco to Zuckerberg’s house in Palo Alto repeatedly over the next three days, hammering out a deal. Zuck only told the board of directors about it on Sunday, April 8.
A great tidbit: Facebook board member Marc Andreessen was sitting in Zuckerberg’s living room waiting for one of his regular meetings with the CEO when Systrom walked out. Andreessen, who invested $250,000 into Instagram early on, was surprised to see him there.
Two points stand out.
First, even though Instagram had ony 13 employees and no revenue, Systrom knew how valuable it was to Facebook — Zuckerberg had tried to buy the company the previous summer, and his direct call made it clear that he was concerned about Instagram’s rapid growth posing a threat to Facebook, particularly after Instagram added several million new users within a few days of releasing an Android deal. Two billion may have been a stretch, but if Facebook is eventualy worth $200 billion, as many observers think it will be, that would only be 1% of the company’s value.
Second, in case you needed to be reminded again, Zuckerberg controls Facebook. He owns the majority of the voting shares, and has made it very clear he’s going to keep running the show, placing long-term bets instead of valuting short-term earnings growth.
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