How did Facebook reach $1B valuation for buying Instagram

Just how did Facebook reach the valuation of one Billion Dollars that it paid for in stock and cash to Instagram?  Just last week, the app company was valued half at $500 Million by  Sequoia Capital in a venture that raised $60 million in financing spearheaded by Sequoia.

Not bad for a company that has no revenues yet.  Instagram has just 13 employees, up from four a year ago, when the app was used by 4 million consumers.  Now they have over 30 million users and are projected to reach 50 million by the end of the year.

Only in February of last year,  the photo-sharing app raised $7 million in a Series A round, led by Benchmark Capital and that purportedly included Twitter co-founder Jack Dorsey and the Silicon Valley investor Chris Sacca.

Facebook probably had no cut and dried valuation for putting up the $1B value, except its projection for future valuation and direction of the mobile smart phone photo sharing market, which Instagram clearly has a big corner stake at.G-20 Internet Access

No doubt, Instagram CEO Kevin Systrom is very very happy with his fade-causing app.


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