Behind Instagram, networking the old way
SOMINI SENGUPTA, NICOLE PERLROTH & JENNA WORTHAM
KEVIN Systrom and Mike Krieger introduced a photosharing iPhone application called Instagram. In a matter of hours, thousands downloaded it. The computer systems handling the photos kept crashing. Neither knew what to do.
Systrom then remembered Adam D’Angelo, a former chief technology officer at Facebook. They had met at a party seven years earlier. That night in October 2010, D’Angelo became Instagram’s lifeline.
“Adam spent like 30 minutes on the phone with us,” Systrom recalled, “walking us through the basic things we needed to do to get back up.” Systrom, now 29, offered this as a parable for the roomful of would-be entrepreneurs who came to hear him talk at Stanford last spring. “Make sure to spend some time after the talk getting to know the people around you,” he told his audience.
This week, barely 18 months after that night in the warehouse, Instagram was scooped up by Facebook for $1 billion, turning Systrom, Krieger and several of their friends-turned-investors into multimillionaires.
By and large, Instagram is a network of young men, many who attended Stanford and had the attention of the world’s biggest venture capitalists before they even left campus. Among this set, risktaking is regarded as a badge of honour.
Ideas are disposable: If one doesn’t work, you quickly move on to another. Timing matters. You make your own luck.
“There is some serendipity for entrepreneurs, but the people who are the rainmakers are the ones who entrepreneurs need to meet in order to make those connections that lead to success,” said Ted Zoller, a senior fellow at the Ewing Marion Kauffman Foundation who studies economic development around entrepreneurship. “The social ties that you make are directly correlated to success.” For Systrom, the connections forged at Stanford were crucial.
D’Angelo, a 2006 graduate of the California Institute of Technology, helped him find engineers, set up databases and flesh out features. Soon after Instagram came out of the box, he put his money into it. So did Jack Dorsey, 35, a founder of Twitter; Systrom had been an intern at the company that became Twitter.
A colleague at Google introduced him to Marc Andreessen, a venture capitalist who had already invested millions in Facebook. In spring 2010, even before Instagram was born, Andreessen wrote him a check for $250,000.
The hothouse for many of these vital connections was a competitive workstudy programme for budding entrepreneurs called the Mayfield Fellowship Programme. Systrom was a 2005 fellow; Krieger followed two years later. It was equally important in putting the two men in direct contact with new, hot startups in the Bay Area, along with venture capitalists looking to seed newer, hotter startups.
Systrom’s peers recall Systrom as having an eye for photography and design.
He was naturally gregarious and also keen to be an entrepreneur. After graduation, Systrom went to work for Google in neighbouring Mountain View. He lasted there less than three years and moved on to Nextstop, a travel recommendation site that was founded by former colleagues at Google and was eventually acquired by Facebook. But Systrom, as Gurevich recalled, was “antsy.” He had made enough investor contacts from his Stanford days and, by early 2010, he had a germ of a business idea.
His big break came at a party in January 2010. There he met Steve Anderson, 44, founder of Baseline Ventures and an experienced investor who had by then banked on Twitter.
As Anderson recalled it, Systrom had a prototype and a vague idea. He wanted to build a service that let people share their location with friends, like the popular app Foursquare, with some photo tools attached to it. He was testing the prototype with friends.
“We knew the mobile was going to be important, and we knew there was an opportunity to create compelling experiences for mobile devices,” Anderson remembered of their initial conversations. “But we didn’t know a heck of a lot more than that.” Anderson worried about one thing: the echo chamber that can plague a one-person startup. He suggested that Systrom find a business partner. Within days, Anderson wired $250,000 to a newly hatched company. Systrom’s search for a partner naturally led him to the Mayfield network and to Krieger, an immigrant from Brazil known as Mikey and, in Gurevich’s words, “a stud engineer.” Krieger brought different skills. He had majored in symbolic systems, an interdisciplinary programme that blends coding with psychology, linguistics and philosophy.
One of Krieger’s projects, as his professor Clifford Nass recalled, was to design a computer interface to gauge human emotion.
“He clearly was very interested and thoughtful about psychology,” Nass said.
“You see that in Instagram. It’s not a technology triumph. It’s a design and psychology triumph.” One of the key lessons of Instagram is that its founders did not spend a lot of time fussing over their original idea.
Soon after they started working together in March 2010, Krieger and Systrom decided that Burbn would not work. It had too many features. It was too close to what Foursquare was already doing.
They quickly moved on. They decided that photos, popular with Burbn users, would be front and centre.
The release of the iPhone 4 gave them a perfect hook: It had a high-performing camera and could display higher-resolution images. Users could take a picture, tweak it, write a caption and send it out to the world. They gave it a new name: Instagram.
“We renamed because we felt it better captured what you were doing – an instant telegram of sorts,” Systrom said.
The duo worked into the wee hours on October 6, 2010, to get Instagram up and running.
Instagram took off like a rocket, in part because Systrom had whipped up demand. Systrom let some influential technology bloggers and contacts, like Dorsey of Twitter, try a test version of the app before its official release. Soon Dorsey was using it to send photos to his Twitter followers, and word spread.
But the frenzy was as much blessing as curse. The heavy load prompted an allnight effort to switch to Amazon.com’s rent-a-server service, which made it easy to add capacity to keep up with growth.
Systrom and Krieger soon took to carrying MacBook Airs and wireless cards everywhere. If there were glitches, they could quickly get online and troubleshoot.
“Which happened a lot, due to the influx of traffic,” Abbott said.
From 25,000 users in the first 24 hours, Instagram grew to 300,000 by Week 3, and then into the tens of millions.
Celebrities got on board, including the pop star Justin Bieber in July. On Twitter, he posted an Instagram photo of traffic in Los Angeles. An Android version of the app, released this month, brought in 1 million people in its first 24 hours.
Benchmark Capital, whose partners Systrom had met while in college, led an investment round of $7 million in February 2010. Last week came a second round of financing that valued the company at $500 million. Systrom told associates in recent months that he was not interested in selling the company.
Then Mark Zuckerberg called.
When he and Systrom talked on April 6, Zuckerberg, Facebook’s chief, was blunt: Facebook wanted to buy Instagram. Over the next 48 hours, the two companies hammered out the details for a $1 billion cash-and-stock deal, according to people with knowledge of the matter who spoke on the condition of anonymity because the discussions were private.
To toast the occasion, Zuckerberg wrote a lengthy post on his personal Facebook page, calling the transaction an “important milestone” for the company, which has been eager to get a stronger foothold in mobile apps. The deal, and the speed with which it came together, implies that Zuckerberg saw Instagram’s meteoric rise as a potential threat, whether as a standalone service or in the hands of one of its rivals like Google or Twitter.
The Instagram team showed up at Facebook this week, as documented by a Facebook vice president on – where else – Instagram. Whether Systrom will stay there for long is anyone’s guess. With a public offering imminent, there is the risk that Facebook may soon become what Google was – a safe place to be but not terribly cool. And Systrom may again get antsy.