Facebook shocked the tech community with its $1 billion acquisition of Instagram, but perhaps more shocking is the price the photo-sharing app's CEO originally wanted for his company: $2 billion.
During three days of quiet negotiations, Facebook CEO Mark Zuckerberg halved Kevin Systrom's asking price -- all without involving bankers or his own board of directors, according to a report in The Wall Street Journal (subscription required). In fact, Zuckerberg, who controls roughly 57 percent of the company's voting rights, had pretty much closed the deal with Instagram CEO Kevin Systrom before even informing the board of the acquisition.
The board "was told, not consulted" about the deal on April 8, the day before the rest of the world learned of the deal, one person familiar with the matter told the Journal.
Zuckerberg began the negotiations on April 5 by calling Systrom and inviting him to drive down from San Francisco to meet with him at his Palo Alto home, the Journal reported. Zuckerberg reportedly informed Facebook COO Sheryl Sandberg of the decision, but she did not participate in the negotiations.
While the 18-month-old startup had yet to record any revenue, Zuckerberg was attracted by the mobile photo app's explosive growth in user base. Two days before the two 20-something chief executives started talking, Instagram released an Android version of its app and immediately saw its membership base. In the following 10 days, the free app that had previously been available only for iOS devices would add 10 million members.
In a moment of odd timing, Marc Andreessen -- a Facebook board member and an early Instagram investor -- was surprised to run into Systrom at Zuckerberg's house the day the deal closed. Andreessen was reportedly waiting in Zuckerberg's living room for his weekly meeting with Facebook's CEO while Systrom was in another room getting his company board's approval for the deal.