Instagram CEO wanted $2 billion from Facebook (rumor)

Instagram co-founder and CEO Kevin Systrom wanted $2 billion for his company. Facebook co-founder and CEO Mark Zuckerberg convinced him to sell for $1 billion, according to a new rumor.

We'll probably never know what actually happened in the days before Facebook announced plans to acquire Instagram for approximately $1 billion in cash and stock, because Facebook co-founder and CEO Mark Zuckerberg as well as Instagram co-founder and CEO Kevin Systrom will never tell. Still, rumors like the one suggesting Facebook beat Twitter to Instagram will keep coming, as long as there are sources willing divulge tidbits and there are those willing to speculate about them.

So, here's the latest from "several people familiar with the matter" cited by The Wall Street Journal. The biggest shocker, to me at least, is that Systrom originally wanted $2 billion:

Negotiating mostly on his own, Mr. Zuckerberg had fielded Mr. Systrom's opening number, $2 billion, and whittled it down over several meetings at Mr. Zuckerberg's $7 million five-bedroom home in Palo Alto. Later that Sunday, the two 20-somethings would agree on a sale valued at $1 billion.

Zuckerberg convinced Systrom of the lower price with the following argument (remember Facebook's last valuation was $102.8 billion):

Mr. Zuckerberg, who planned to pay for Instagram mostly with stock, asked Mr. Systrom what he thought Facebook would be worth, the people said. If he believed Facebook would one day be worth as much as a company like Google at $200 billion or more, then the equivalent of 1% of Facebook would be sufficient to meet his price, Mr. Zuckerberg told Mr. Systrom, the people said.

The back-and-forth discussions started on April 5 when Zuckerberg called Systrom and asked for a meeting. That night, the two CEOs met at Zuckerberg's $7 million five-bedroom home in Palo Alto, and continued for three days straight:

The two CEOs began their talks Thursday night at Mr. Zuckerberg's remodeled, century-old home, and met there again Friday and Saturday, wrapping up with a 12-hour session on Sunday, people familiar with the matter said. Each night, Mr. Systrom drove back to his house in San Francisco, one of the people said.

The process was likely very short because Zuckerberg made a point not to tell his company's board of directors anything in advance, nor did he involve the lawyers and bankers that scrutinize a deal before proceeding:

On the morning of Sunday, April 8, Facebook Inc.'s youthful chief executive, Mark Zuckerberg, alerted his board of directors that he intended to buy Instagram, the hot photo-sharing service.

As you know, Zuckerberg made the announcement via his Facebook profile on April 9. This means the board made a very quick decision, if you can call it a decision at all:

By the time Facebook's board was brought in, the deal was all but done. The board, according to one person familiar with the matter, "Was told, not consulted."

Facebook's board did vote on the deal, according to people familiar with the matter, though it was largely symbolic.

The rest, as they say, is already history.

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