Web

Venture Capital firm made $78 million on $250,000 investment in Instagram, still called failure

twitter has blocked instagrams find friends feature instagram facebook mainSpeculating on a tech bubble is a bit like shooting craps: Just because the odds are there, doesn’t mean you’ll be right. As the economist John Maynard Keynes famously put it, “The market can stay irrational longer than you can stay solvent.” Which is why we won’t just come out and say there is a tech bubble; however, the recent sale of Instagram to Facebook for a cool $1 billion certainly portends an era of magical thinking — the popular photo taking and sharing app was around for just shy of two years before it got gobbled up by the monolithic social network, despite currently generating exactly no money. We know that Zuckerberg and Co. paid top-dollar for Instagram’s cultishly devoted user base, which is just waiting to be monetized, as well as to quell a fast growing would-be competitor — in other words, out of fear. But to truly get a scope of the size of the deal, one must look no further than to one of the first venture capital firms that put up seed money for Instagram: VC firm Andreesen Horowitz’s original $250,000 investment is now worth $78,000,000. Yes, that is 78 followed by six zeroes, or 312 times its initial investment.

The news comes by way of Andreesen Horowitz general partner Ben Horowitz, who was criticized in The New York Times last week for failing to double-down on his firm’s initial investment in Instagram — a decision that left gains in the order of hundreds of millions of dollars hanging in the air. As competing firm  Baseline Ventures upped its $250,000 seed investment to more than $5 million by the time Instagram was bought, historically aggressive Andreesen Horowitz — early backers of silicon valley blockbusters such as LinkedIn, Skype, and Twitter — instead opted to hold back. Baseline’s cut of the deal is now estimated at over $300 million. 

You see, in the majestic land of the tech startup, VC’s lavish absurd amounts of money on skilled programmers based on little more than interesting ideas and casual conversation. In fact, one VC gave up that first $250,000 to Instagram even though the company “hardly had a product, let alone a PowerPoint presentation,” according to The New York Times. Indeed, when the first round of investments went out, including Andreesen’s investment of a quarter million, Instagram was actually known as Burbn, and it was a glorified Foursquare knockoff. But Instagram founder Kevin Systrom pivoted midway through development after taking on co-founder Mike Krieger — as startups are wont to do — and quickly reshaped the company as a photo sharing app, the aspect of Burbn that seemed to be attracting the most avid users.

The problem was that Andreesen had already made a rather large investment in a competing photo sharing app, called Picplz, and the conflict of interest caused the firm to sidestep any further investment in Instagram. As The New York Times writes, “It was a calculated bet against Instagram and it left Mr. Systrom livid.” The important point to note, however, is that the decision to forego further investment in Instagram was in fact a moral one. Andreesen actually gave back rights to purchase more stake in Systrom’s company, and completely free of charge — even though it had no legal obligation to do so. It simply felt that funding two competing companies was a disservice to both parties (because really, startups are a zero sum game when they really become successful) and it had already committed to Picplz. History, of course, has shown that Andreesen indeed backed the wrong horse: Picplz struggled to amass 100,000 users in its first 6 months. Instagram, on the other hand, currently boasts more than 30 million users; the app added 100,000 users in its first week. But calling a $77,750,000 profit a mistake just shows how completely wild the VC business has become — that’s a mistake we’d be happy to make.

Emerging Tech

Star gives off superflare equal to 80 billion megatonnes of TNT. That’s a lot

A tiny star the size of Jupiter has been observed giving off a massive superflare 10 times more powerful than any flare from our Sun. The findings are raising questions about how much energy small stars can hold.
Home Theater

These awesome A/V receivers will swarm you with surround sound at any budget

There is no one-size-fits-all approach to shopping for a receiver, so we assembled our favorites for 2019, at multiple price points and all loaded with features, from Dolby Atmos to 4K HDR and much more.
Digital Trends Live

Digital Trends Live: Samsung Galaxy Fold woes, zombie pigs, and more

Today's topics: Samsung Galaxy Fold, Facebook A.I. voice assistants, YouTube comes to Fire TV, facial recognition on airline flights, the SpaceX DART program, Yale's zombie pigs, and much more!
Trash

These awesome A/V receivers will swarm you with surround sound at any budget

There is no one-size-fits-all approach to shopping for a receiver, so we assembled our favorites for 2018, at multiple price points and all loaded with features, from Dolby Atmos to 4K HDR, and much more.
Social Media

How to protect yourself from GoFundMe scams before donating

Can you spot a GoFundMe scam? While the fundraising platform says scams make up less than a tenth of one percent of campaigns, some do try to take advantages of others' charity -- like a case last year that made national news.
Computing

House votes to restore net neutrality rules, but effort faces long odds

The U.S. House of Representatives has approved the Save the Internet Act, a measure intended to restore net neutrality rules that were repealed in 2017 by the Federal Communications Commission.
Mobile

The FCC and White House want to bring high-speed internet to rural areas

The FCC and the White House unveiled new initiatives to bring high-speed internet to rural areas, including $20.4 billion in incentives to companies to build infrastructure. The FCC also announced ways to speed up the rollout of 5G.
Web

Search all of Craigslist at once with these great tools on web and mobile

Not finding what you need in your local area? Craigslist can be great for finding goods and services from further afield too. All you need do is learn these tips for how to search all of Craigslist at once.
Computing

Internet Explorer zero-day exploit makes files vulnerable to hacks on Windows PCs

Evidence of an Internet Explorer zero-day exploit capable of letting hackers steal files from Windows PCs was published online by a security researcher who also claims Microsoft knew of the vulnerability and opted not to patch it.
Business

Buying airline tickets too early is no longer a costly mistake, study suggests

When you book can play a big role in the cost of airline tickets -- so when is the best time to book flights? Earlier than you'd think, a new study suggests. Data from CheapAir.com suggests the window of time to buy at the best prices is…
Computing

Report says 20% of all 2018 web traffic came from bad bots

Distil Networks published its annual Bad Bot Report this week and announced that 20% of all web traffic in 2018 came from bad bots. The report had other similarly surprising findings regarding the state of bots as well.
Computing

Google Chrome will get a Reader Mode for distraction-free desktop browsing

If Google's testing of Reader Mode on the Chrome Canary desktop browser is successful, soon all Chrome users will gain access to this feature. Reader Mode strips away irrelevant content on a webpage for distraction-free browsing.
Computing

Worried about your online privacy? We tested the best VPN services

Browsing the web can be less secure than most users would hope. If that concerns you, a virtual private network — aka a VPN — is a decent solution. Check out a few of the best VPN services on the market.
Computing

Want to make calls across the internet for less? Try these great VOIP services

Voice over IP services are getting more and more popular, but there are still a few that stand above the pack. In this guide, we'll give you a few options for the best VOIP services for home and business users.