While Facebook just announced it’s acquiring Instagram (the picture take&share app) for $1 Billion (yes you read it right ONE BILLION DOLLARS), hundreds of entrepreneurs may just ask themselves : “how much worth what I’m doing?”
Good question to ask yourself. To summarize here is why Instagram worths $1B. :
- +30 millions active users
- Available on iOS and Android (only since last week)
- +$50 millions in fundings
- 15 employees
- Running for 551 days
- An API, well integrated with major social networks
- One of the best UI and UX for an app
Well ok, these are good arguments… but is that really worth 1 billion ? Don’t think so.
Facebook would have easily build a better app, let’s simulate that :
- $ 20Mio. to hire the best app developers
- $ 30Mio. to get the product running
- $300Mio. to get over 30 millions user (10$ to get one)
And the total would be “only” $350 millions… so why Facebook is buying Instagram? Because they need to show off before their IPO, because they need to demonstrate that their own valuation ($100B.) is also due to their capacity of having the best of technology inhouse…
This kind of acquisition is giving entrepreneurs headache, on one hand this is a good sign that they can exit and value their work, on the other it’s showing that there is no need to solve the biggest problem of the humanity to get funded, neither to have a strong business model. So the next time, an investor is asking you “what problems are you solving?”, just answer “did Instagram resolved any?”. But don’t stop working on what you are working, keep executing, keep cheeping !