How to sell your way from 0 to $1 billion in 17 months.

In October 2010, Kevin Systrom founded Instagram.

Today, Facebook announced it was buying the company for $1 billion in cash and stock.

This is the stuff of start-up dreams.

It happened because smart people who knew the right people came up with a simple product and scaled its user base like crazy. Instagram acquired users at a faster rate than Facebook.

Fast Company published this profile of him last June. It explains that:

Networks matter

  • Systrom was a Stanford undergrad when he met Mark Zuckerberg and Adam D’Angelo soon after they arrived in Palo Alto, via his fraternity Sigma Nu.
  • He then joined Odeo as an intern. Odeo’s founders went on to found Twitter.
  • Then he worked at Google.
  • His investors included early employees at Facebook, Google and Twitter.

“Everyone has their Facebook story, so I won’t say that’s necessarily unique. What I mean is that everyone has their story about how they had the chance to work at X, Y, or Z. But being at Stanford, I was given the opportunity to be in the middle of a ton of innovation, and meet some of the smartest people doing the coolest stuff in the world. When I finally did it [myself],” he adds, “It just felt so right.”

Simplicity matters

“Products can introduce more complexity over time, but as far as launching and introducing a new product in to the market, it’s a marketing problem,” Systrom tells Fast Company. “You have to explain everything you do, and people have to understand it, within seconds.” For Instagram, that meant cutting out the clutter. Systrom refers to Burbn (Instagram’s first iteration) now as a “science experiment,” a way to test “just about everything to figure out what stuck.” That meant experimenting with check-ins, posting photos and videos, adding comments and Like buttons, incorporating game mechanics, and tinkering with a feature called Plans, which related to future check-ins.

“When you’re introducing a mobile app, you look around and say, we could be doing 15 different things, but how do we communicate to someone why they would want to download and even sign up for this thing?” Systrom says. “In the mobile context, you need to explain what you do in 30 seconds or less because people move on to the next shiny object. There are so many apps and people are vying for your attention on the go. It’s the one context in which you’ve got lots and lots of other stuff going on. You’re not sitting in front of a computer; you’re at a bus stop or in a meeting.”

Talent matters – talk about a jobless recovery. 

Divide valuation by number of employees to see what is happening at the vanguard of the US economy:

  • Instagram’s worth $1 billion and employs 12 people. Each hire is worth $83 million.
  • Facebook: $30 million per employee.
  • Google: $7 million.
  • General Electric: $700,000.

As Naval Ravikant put it today: 

Scaling product reduces external coordination costs. Scaling team increases internal coordination costs. Ratio of the two is leverage.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s