Path, Instagram, and what the 'Facebook mafia' sees

The sector of the tech news world that isn't talking about today's launches of News Corp.'s iPad publication, The Daily, or Google's Android Honeycomb operating system is probably talking about two start-ups called Instagram and Path. Both are mobile photo-sharing companies that announced today that they've finalized their Series A funding rounds. Here comes the speculation over which one could "kill" the other.

Well, the two aren't straight-up rivals. Both are photo-sharing services that center, at least at launch, on the iPhone, but they're quite different in structure. Instagram, with its portfolio of retro filters and easy ability to share on Twitter, Foursquare, and a handful of other services, is handcrafted for the viral Web; users tend to share photos that are artsy, scenic, or otherwise visually noteworthy. Path has no filters and permits sharing with only 50 other individuals, so the focus is far more likely to be photographs of personal significance. You could argue that there may in fact be little overlap between the user bases of the two.

But invariably the two will be pitted against one another, especially given the laundry list of Silicon Valley heavy hitters who have backed them, leading some to wonder whether they're taking sides. Instagram, founded by former Googler Kevin Systrom, raised a $7 million round led by Benchmark Capital's Matt Cohler, an early Facebook executive, with additional contributions from existing investor Baseline Ventures and angel investors Adam D'Angelo (early Facebook employee and Quora co-founder), Jack Dorsey (Twitter co-founder, Square co-founder, and investor in hyped companies like Flipboard and Foursquare), and Chris Sacca (former Googler, now through Lowercase Capital an angel investor in just about everything).

Path, meanwhile, was co-founded by a longtime and prominent Facebooker, Dave Morin, along with former Napster creator Shawn Fanning, and has now raised $8.65 million from prominent venture firms Kleiner Perkins Caulfield & Byers (which has a renewed focus on social media) and Index Ventures. It already boasts a laundry list of angel investors with prominent ties to Facebook, like the Founders Fund (where early Facebook investor Peter Thiel and ex-exec Sean Parker are managing partners), Sam Lessin (who sold his company Drop.io to Facebook), Paul Buccheit (who sold his company FriendFeed to Facebook), Dustin Moskovitz (who co-founded Facebook), and Matt Cohler (who's now heavily invested in...Instagram).

The formation of this young, moneyed "Facebook mafia"--early executives like Moskovitz and D'Angelo, early investors and advisors like Thiel, and newer arrivals to the company's leadership like Buccheit (who left Facebook to join incubator Y Combinator) and Lessin--will only grow more prominent in the tech investor scene as the still-private company's second-market trading keeps getting hotter in advance of an IPO. But judging the long-term future of a company based on how many early Facebook employees have backed it is a little bit more than premature. More than a few of them are probably tossing some pocket change (so to speak) to a friend without much strategic thought.

It's also tough to see exactly where both companies are going and what kind of momentum they have. Instagram has taken off like wildfire, but could easily prove to be a fad; Path's lock-and-key private sharing means that it's tough to get a gauge on exactly who's using it. Instagram is definitely bigger, saying that it sees 290,000 photographs posted per day; Path said that 2 million "moments" have been shared thus far. That means that Instagram adds the entirety of a Path in terms of photo content in less than a week.

There are some wacky rumors going around, too, most notably the TechCrunch report that Google offered Path $100 million, perhaps to get Morin on board so that it could better lure Facebook employees to its engineering ranks, and Path turned it down. If true, it has more to say about Google's concern about Facebook's status as a more desirable company to work for than about Path's real value, but it points to the same truth that Path and Instagram's investor lineups do: A big portion of these start-ups' value still lies in the identities of the founding teams and angel investors.

These are new companies. A lot could happen. When well-connectedness is still held up as a trump card--remember when Gowalla was supposed to have a huge advantage over Foursquare because of its closer ties to the Facebook elite?--you know it's too early to make a real judgment call.