Venture Capital Firms

Mobile Photo App Instagram Raises $20 million in VC Funding

Instagram, a company that develops mobile photo applications, has raised a first round of funding of about $20 million on November 11th. The iPhone app seems to be adding artsy filters to photos and also sharing them across different social-media networks.

Sequoia Capital has been reported to be positioned as the lead investor in the round. Sequoia lost out on GroupMe before funding Instagram, so this could be a nice consolation prize.
The valuation of around $20 million, revealed by multiple sources, represents a sizable figure for a venture that is presently restricted to only one mobile platform and that also has absolutely no source of revenue yet.

Instagram’s founders are also said to have been courting potential buyers such as Facebook founder Mark Zuckerberg.

Instagram clearly has a very talented team in former Meebo engineer Mike Krieger and in Systrom, a former Googler. What appeals about Instagram is not really the fact that it can make horrible camera-phone photos look nice, but the user interface and also the advanced technology behind it. A great deal of its content downloads and uploads in the background and the user can perform other tasks meanwhile, turning the entire process into a speedy experience, much speedier than the average iPhone app.
There has been a tough choice between transforming Instagram into a real enterprise and making easy money on it while it’s hot.

Andreessen Horowitz, previous Instagram backer, has also invested $5 million in Mixed Media Labs, Instagram rival and also developers of the mobile photo application named PicPlz.

Speculation was prompted by the move that a possible conflict of interest showed that Instagram would be sold. The most likely acquirer is probably Facebook.

Most venture capitalists usually try not to invest in competing companies, due to the obvious conflicts of interest. Entrepreneurs know that they should not try to raise money from those VCs who have already invested in competition.

To find out more about this iPhone app, visit http://instagr.am/.

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