You may as well be reading about a rock band here. This story does not and will not apply to you. This is the one in a thousand/million fairy-tale of the frivolous app dreamed up in coffee shops, fuelled by rapid investment and sold for vast sums to a tech giant without so much as a whiff of a business model.

The name of the publication is "Vanity Fair".

Which also happens to have pretty good articles every now and then.

Hear Hear - Christopher Hitchens was its editor, so it can't be that bad.

Which frankly, baffles me. I see it at the supermarket, right? Next to the other fashion magazines and it also looks like a fashion magazine?

So I'm not contesting the truth that it sometimes has serious heavyweights writing for it, I'm just baffled by that fact. It's like if you found out Gore Vidal had been writing for Good Housekeeping.

Yea, you and me both are baffled! I almost wonder if he treated it as a sinecure.

Hitchens was a columnist, not its EIC.

In addition there aren't many lessons to be gleaned from the story. It might be entertaining to read but in the end it's as if you just wasted 20 minutes playing Solitaire.

I would say if there is a lesson at all - that it's helpful to be on friendly terms with several of the Silicon Valley elite before you start your company. Not taking away from Instagram being a great app, but it was catapulted towards success due to the founders personal connections.

It's not what you know, but who you know.

Bombermine is more fun.

I see.

Let's say I see a big incumbent who's UNIQUE selling point is 'we have everyone's private photos. people have to come to us if they want to see their friend's photos.'

I start threatening them.

They pay and buy us.

I get rich. The incumbent gets to keep everyone's photos.

At what point in the above do we not have a business model?

Oh, you mean it can't possibly WORK! Except that it just did.

Well, I'm sorry, but something that just worked obviously did work.

What you've just stated is, essentially, the business equivalent of the lottery. You could almost replace any reference to business terms in your post with "lottery" and have the same amount of truth applied.

The whole point of a "model" is that it's repeatable and definable. "Getting acquired because they fear us" isn't a business model.

> "Getting acquired because they fear us" isn't a business model.

No, but it is one of the best reasons to be acquired, far far above 'they acquired the team for the talent, and shut down the project' and 'they acquired us to get our customers (aka buying growth)'.

I think there is an elephant in the room here. (Sorry if this stings anyone)

The collective We have been led to believe that we must make something original to be great. Don't make another social network, too tough. Don't do what Instagram did, it's too (pick your reason) risky / saturated / lucky / etc.

The thing is, entrepreneurs have no reason not to shoot for the moon, recreate everything. Why do we resist? The big name funds probably won't invest for fear of cannibalizing their current holdings. Think about that next time you hear a VC or read their commentary (or any commentary for that matter).

Nature and capitalism share a structural characteristic: both require equilibrium or over-production to self-sustain. Any sustained deficit and the organism or economic entity suffers catastrophic failure.

It is absolutely possible to undermine the business model of a company like Facebook by winning a marginal piece of their business away from them.

Economists are so fervently engaged in trying to eliminate cash-flow/economic/business cycles because deficits have non-linear consequences when they manifest.

With that, instagram had only one possible exit strategy to execute and they did.

I have tried to understand what you have written. Help me out here.

> Nature and capitalism share a structural characteristic: both require equilibrium or over-production to self-sustain. Any sustained deficit and the organism or economic entity suffers catastrophic failure.

What does this actually mean in the context of this discussion? What does this have to do with anything?

> It is absolutely possible to undermine the business model of a company like Facebook by winning a marginal piece of their business away from them.

Nobody is denying that Instagram were a threat to Facebook. What people are saying are that the chances of becoming a threat are incredibly small and very much based on luck. There were many other well-executed apps that did not achieve the same success. That, and combined with the absence of a genuine business model, is why people mention the similarity to a lottery ticket.

> Economists are so fervently engaged in trying to eliminate cash-flow/economic/business cycles because deficits have non-linear consequences when they manifest.

Please explain to me what this means. What does it mean for a deficit to have a non-linear consequence?

"What does this have to do with anything?"

It means building a site like instagram, with zero revenue, can be very profitable if it competes with a revenue-generating site like Facebook. It is also repeatable.

Re: Lottery Ticket

Survivorship bias is not the same thing as playing the lottery even if the statistical probability of success launching a start-up or winning the lottery was identical. Instagram successfully built the technology, acquired the user base and sold to someone who found them valuable.

I don't think luck has anything to do with building a company. Bad luck is how losers explain their losses rather than learning from the loss.

Re: Non-linear consequence

You borrow $1,000 and service is $10/mo. The basic loan covenants would define a default if you can't pay all $10 in any single month according to schedule. That means $9.99 service of the debt gives the creditor legal capability to seize the entire collateral--business.

Fixed operating expenses can be viewed like debt service in that the economic entity breaksdown when all expenses can't be covered.

If the profit margin goes to zero, a company is still running, but extremely vulnerable to random economic volatility.

You seem to have snuck in "I start threatening them." as if that is easy and repeatable.

You seem to have snuck in the word "easy" there.

Out of curiosity - what percentage of real, viable business plans do you think are "easy"?

Seriously though. While not easy, it is 100% repeatable - it is one of the great ways to build a business. (Actually, regardless of whether the incumbent buys you out - their investors or those who regret being investors migth instead.)

"Out of curiosity - what percentage of real, viable business plans do you think are "easy"?"

I'd imagine they vary based on the business plan. I think what others are trying to say, but you don't seem to want to hear, is that while many business ideas are say, 20% to succeed, this particular business plan is <1% to succeed.

A business model insinuates a viable ongoing business, where you have customers, and profit. You know, an "ongoing concern".

Being bought because you're shiny? Not a business model. To say Instagram has a business model is to insult every hacker/doer/entrepreneur who is actually trying to build a real business.

That is so true and I already got -2 points for trying to same the same thing in another comment.

Selling company stock is not a business model, howeverr great an exit strategy it might be for founders. It does mean that someone substantially values the company, but doesn't say anything about its role in the economy outside that one transaction.

So, the unique selling point is that they own "everybody's memories" ("Blade Runner" reference)

Remember that failed Terms of Service agreement as mentioned in the article; the one that allowed Instagram to own everyone's photos? (Memories.)

It went like this:

"...Some or all of the Service may be supported by advertising revenue. To help us deliver interesting paid or sponsored content or promotions, you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you...."

Do you realize the "stock-photo" potential Facebook would have had by selling limited rights to say a photo of Johnny Depp smoking a Gauloise cigarette, or Gwen Stefani in high school drinking a diet coke?

Maybe that was the "instagram" business model as seen by Facebook?

Planning on a very specific other company wanting to buy you out isn't actually a business model. A business model is something that will keep the business self-propelled.

I'm fairly confident this is Path's ultimate business model.

Yes, but I like fairy tales.

What's with the negativity? Are you telling inspiring musicians to stop trying as well?

Aspiring musicians appreciate the vast odds against them becoming the Next Big Thing. It takes an extremely young or naive person to believe that they will become a wild success off the back of some unpaid gigs or their YouTube channel.

In fact, most musicians that I know are rightly insistent on being paid for their performances and are suspicious of promoters and agents who are eager for them to gain exposure by playing for free.

Edit: Essentially there is a continuum of risk/reward between

* Consulting or creating a small and stable business (or, say, playing as a session musician)

* Buying lottery tickets.

I just don't think that people are always aware of where they are on that scale and it doesn't seem right to give people false impressions of where they and their ideas stand. Yeah I do sound like a grumpy sod :)

If an aspiring musician were only motivated by the chance of making it big, I would definitely tell them to stop trying. Not because they’re pursuing an irrational goal, but because that’s not sufficient motivation to get through all the shit it takes to have a chance at making it big in music.

Similarly with startups, if someone is only motivated by a huge exit then they won’t last through the years of low-success and failure that precede building a moderately successful business. Individual who succeed in these careers get some satisfaction out of the process and the small successes along the way (e.g. performing before ten people in a bar or having one potential customer get excited about your new product).

I read it more as he's telling aspiring musicians to not go all in on a <1% prospect, which doesn't seem all that nuts to me.

in order to pursue anything abnormal you need to keep looking for validations. A good validation for musicians is if listeners like and share their music. If there is potential then there is a way.

Indeed this is one in a million.

My story is the total opposite... Where giants squash and step on the little guy innovator.

See thread I posted below https://news.ycombinator.com/item?id=5661273

You don't actually have any specifics of your story posted, just vague comments. Would you perhaps be willing to share details?

Agreed.

Lets look at the investor list: Seed was Baseline Ventures and Andreessen Horowitz. A-round was Adam D'Angelo, Jack Dorsey, Chris Sacca, Baseline Ventures, and Benchmark Capital. Then there was Joshua Kushner, and John Lilly.

Wait, who?

Adam D'Angelo - Quora founder. More importantly, "He was chief technology officer of Facebook, and also served as its vice president of engineering" . Top 25 TopCoder participant, respect.

Jack Dorsey - Twitter and Square founder

Joshua Kushner - son of the real estate mogul Charles B. Kushner and brother of Jared Kushner, owner of The New York Observer

We already know one of the founders went to school with Zuck. Cant find citations now, but it was in an online interview.

So it sure helps to be school buddies with Zuck, have ex-Facebook CTO and Zuck friends as investor, and new media (twitter) and old media (kushner famliy) owners as well.

What I really enjoy about Kara Swisher's article is how her writing style and her framing of the story reflects the whirlwind reality that found Systrom and Krieger in an 18 month exit.

There are no superhuman heroics involved here nor supersecret backroom deals. This is really just a simple story of good luck and timing, a spot on pivot and execution, and honestly brokered business relationships.

You can't duplicate the Instagram strategy because there was no strategy. These guys didn't build an app to flip. They built an app that was cool: to them, their friends, their investors, their users, and ultimately their suitors and acquirer.

Kudos to them.

> writing style

I beg to differ, I yawned on the first page, on the second page, and got somewhere else. Information density is very low. It looks like this journalist, as many other, is paid by the line, and adds too much water in the soup.

We also have to collectively agree to stop using the term "money shot" except when producing or filming a pornographic movie.

Indeed, writing is vapid at best.

Vapid is too strong a word, but it nothing but glorifies successful start-ups, and provides no caution for people who'd like to learn something from this. The only conflict described is agonizing over which multi-gazillion offer to take(!).

It's also fairly thin on new insights into the history and acquisition.

I think it has to do with the intended audience and the format of the publication, more than anything else.

Also, vapid according to dictionary: Offering nothing that is stimulating or challenging. Guess you're right. It was challenging to read the whole thing till the end.

Well it IS Vanity Fair after all.

... and a story that will continue to inspire product maniacs for a long long time to come.

That's the irony!

I much preferred Josh Williams' (former Gowalla CEO) recent blog post [1] on the Foursquare vs. Gowalla "Check-in Wars" and how it was Instagram who ironically emerged as the "victor". Much more informative and insightful than this Vanity Fair piece.

[1] https://medium.com/work-education/6152adc41de9

Well connected individuals flipping over-valued companies to large corporations who have more capital than they know what to do with.

Wake me up when VCs choose to fund companies that seek something other than validation and profit.

I'm perfectly ok with VCs choosing to fund companies that seek profits.

So when do you think tehy'll start doing that again?

There seems to be this terrible misunderstanding that 'VC' is a uniform unit the multiple of which is VCs.

In fact, every VC is different, every VC has their own ideas of what companies are good to fund and which they'd rather pass on.

So, right now there are VCs that will not fund companies that do not have a clear idea of how they're going to become profitable.

The only terrible thing about the misunderstanding that VC's are uniform herd animals who all act the same way, have the saem ideas of what's good and what they'd rather pass on, is that it's true!

Terrible but true. You will literally see vc look at the other VC and do exactly what they're doing.

You can literally create your own VC market by making VC A think that VC B is interested, which is true, because VC B is interested in anything that VC A is interested in.

Some questions for you:

Do you run your own company?

Do you have employees?

Co-founders?

Have you ever received funding from a VC?

Have you ever solicited funding?

Were you accepted?

Rejected?

all of the above (yes to all seven question marks) except for number four receiving funding (from a vc), as in check clears, no that hasn't happened yet.

going through this process now - and I can tell you, if I fucked up with one VC I would fuck up with them all. everyone talks.

On the flip side, when you're hot everyone wants you, you don't have enough equity to sell to everyone!

Check out the story behind Cisco before you give up.

And on another note, ask a VC if they reject you why they reject you, there really is a huge difference in the spectrum of available parties to work with, from assholes to fantastic people to work with and everything in between, make sure you partner with a group that feels right rather than just looking at the terms sheet. That's where the action is of course but sometimes it is better not to have a deal than to have a deal with the wrong party.

I think you overestimate how efficient the VC market is. You can fuck up a lot of pitches and still close. In fact, most people hear No much more than Yes. Very rare to just walk in and get an offer without knocking on doors.

which makes the sale of Shitagram slap in the face to all startups which actually have, oh I dunno, a business model lol

Wake me up when VCs choose to fund companies that seek profit.

I think this story also shows how super-important connections can be. This guy was well connected in the valley.

The question is, how can someone who moves there from, say, New York, actually make those connections?

My guess would be that it is harder, especially to get connections like Zuckerberg, if nothing else because he, and others like him, are now quite hard to reach.

That said, getting to know the up-and-coming Valley entrepreneurs should be doable. It is not as easy as getting to know them while you are in college but go to conventions, go to coffee shops, bars. If that is not your thing, start conversations on HN, Twitter, professional communities etc. One important thing to remember, people love to talk about themselves and their business. Especially entrepreneurs.

On a personal level, I am finishing up my Masters (in Amsterdam - so no where close to 'The Valley') and I really feel that I should have done more networking. It is not that hard to get to know people if you make an effort but I have been way too comfortable with my group(s)of friends.

But doesn't a huge part of the problem stem from geography? Like you, i'm finishing up my Masters in Singapore - that is pretty much on the opposite side of the globe as SV. Surely i can't afford to go flying around to SV conferences as a student. I'll be speaking at a few conferences in Europe this summer, but still, i feel that if you are not located at least in the USA, you are missing out on a huge piece of startup action...

Stay in Singapore. Build something for an Asian, or African, market.

Am I the only one who cringes when reading stories like this about the Valley? I do not want to be in a bubble. I do not want to take part in gossip or the popularity contest. I would much rather stay under the radar, out of the sights of competition, in an underserved market.

That is very true, it is unrealistic for us to travel to SV to just socialize. Speaking at conferences seems like a great way to build a reputation and get to meet people. If only I had something to speak about that would interest people... :)

We do miss out a lot of startup action but there are still large startups in Europe, and I assume Singapore. I do think making connections via HN/Twitter etc can mitigate some of the issues caused by geography but not entirely.

Talking to people in your industry (especially if your speciality is quite niche) goes a fairly long way. Perhaps someone in your niche went to your alma mater, or lived in Singapore - that is something in common that can spark a conversation.

I live in San Francisco. Its an awesome city and I love living here, but it is by no means a prerequisite to starting a successful business. People have problems everywhere that need solving.

I'm from NYC and just went to SF for a week. Have to say that most people and knowledge are way more accessible there because there are just so many more startups and so much more talent. Guys like Zuck are hard to reach sure, but within a week we were able to get meetings with a couple well known folks and they actually had interesting things to say. In NYC there are only a handful of large "start-ups".

Ha.

I would say a better question is, how does someone who grows up poor do this? And/or someone with parents who do not give them access to excellent schooling. And/or currently feels excluded from the industry despite being talented.

This was exactly my big gripe with the story, particularly Swisher's insistence on writing it as "rags to riches" (even using that very well worn cliche verbatim). The fact is, Systrom, like Zuckerberg, was practically guaranteed success in life, starting with his $30k/year prep school. This isn't rags to riches, it's well-off to obscenely rich, or if you prefer, how to go from the 1% to the .1%.

Not that it isn't a story, it sure ain't Horatio Alger, though.

Silicon Valley has come a long way from 1966: from cutting edge material science http://youtu.be/z47Gv2cdFtA to applying open source sepia filter...

I am afraid that the logical end of this race to the bottom in terms of technology is the end of the Silicon Valley (perhaps something like Hollywood for "new media" replacing technology)

Consumer-facing products are always going to garner the most press, but that doesn't mean more technically interesting things aren't going on as well.

There are tons of core technology startups in Silicon Valley - we just don't talk about them on YCombinator very much. I find the software defined datacenter space really interesting. Check out Nutanix: A startup that aims to redefine enterprise datacenter architecture. Or how about the recent acquisition of Nicira (a software defined networking company) by VMware. Just look at Khosla Ventures product portfolio: http://www.khoslaventures.com/information-technology.html. Food science startups, semiconductor, enterprise hardware/software, AND social media. The whole gamut.

Ugh this is linkbait and upvote-bait if I ever saw one. The whole tone of the article is so contrived and fake-mysterious that it's kind of digusting. Basically the whole thing can be tracked down to a rich privileged white kid doing what rich privileged kids do. NOTHING worth reading about here. And the shitty app could maybe start about thinking of getting some cash flow.

You appear to be very jealous of their success. This is Hacker News, we should celebrate the entrepreneurial spirit and look at the lessons that can be learned from success stories like this.

If I could build Instagram and sell it for $1b I sure as hell would. Might not be saving the world but people appear enjoy using it so who cares. They did manage to sell a company for $1b, a feat which practically all of us never will achieve.

That said, they probably should try to get some cash flow some time soon.

Oh please. Spare us the jealousy insinuations, and stop perpetuating the myth that if entrepreneurs are actually worth anything and work hard, it is guaranteed that they will swiftly become inundated with success.

Sometimes there are no "lessons that can be learned from success stories like this". Believe it or not, for every Instagram, there's a hundred startups with founders that are just as smart and try just as hard, but don't make the cut. Do the founders of Instagram deserve their success? Sure! Should we pat them on the back and "celebrate the entrepreneurial spirit"? Absolutely. But let's not fall over ourselves praying to the success gods while we forget to work on our own products.

> If I could build Instagram and sell it for $1b I sure as hell would

Bullshit. Maybe you could! All you need is hard work, the skills to get there, and yes, a good amount of luck. But let's not pretend you, or the founders of Instagram, are destined for success because you're special or you "knew" your ideas would kick off. Look up hindsight bias in the dictionary.

>> If I could build Instagram and sell it for $1b

>> I sure as hell would

> Bullshit. Maybe you could!

You need to read up on how the word "if" works.

> Do the founders of Instagram deserve their success?

no! good for them - but I don't see any way they 'deserved' it

If the OP I replied to don't scream of jealousy I don't know what does.

That said, you are very right: Most startups fail, or barely break even. But without the inspirational properties of the likes of Instagram, would SV be the same? Would so many flock to Silicon Valley to try their luck? Probably not.

There are many many hard working entrepreneurs who never make it, that is fact. I do not, at least not yet, count myself among the hard working entrepreneurs. I am under no illusion that I will succeed in my future ventures nor that I am special and will automatically succeed where others have failed.

Of course there is always hindsight bias and the iOS market is more unreliable than the bitcoin price. My comment regarding building Instagram is meant as: If I had the right circumstances to take advantage of my 'unfair' advantage as a white, privileged male I would. The Instagram founders did and got lucky.

Lastly, I hope that your own startup venture is successful in the future. You seem to have done more good for the world, via volunteer work, than I ever have. I hope that you are not too disillusioned by the future to stop being an entrepreneur. Sometimes we just get that bit of extra luck that we need and hopefully that will turn out true for you as well as for me. (My apologies for kinda stalking you, I could not resist checking out your profile)

> But let's not pretend you, or the founders of Instagram, are destined for success

That's not what the other poster said at all. They were making a remark about their potential attitude towards "cashing out", not about their perceived likelihood of being offered $1bn.

Yes, that was my intention. Turns out I need to work a bit on my English, I can be a bit unclear at times I fear. English isn't my native tongue so at least I can blame my shortcomings on something :)

I don't understand the line of thinking that strong opposing opinion = jealousy. Why are you trying to project your own thinking patterns onto me? I have nothing to be jealous about. Not everything in life is about getting a billion of $. My strong feelings are sparked by the fact that the article and some individual place so much importance in selling a company for $1bn, for the very small reason (at least!) that 99% of you won't even get a chance to do it. Entreprenurial spirit is a reward in itself! And Instagram lacks it through the very fact that it was established without so much as a vision of creating any cash-flow. Which in turn just makes its glorification a target for scoffing.

What does being white have to do with it?

Only everything?

I'm not sure how an article in a print magazine reproduced online for free can be "link bait".

I think the wording you are looking for is "I did not find this interesting or worthy of my time", which is fine, but I wish people would let other members of the community decide if they think a link is vote-worthy or not rather than arguing the merits of an upvote in the comments.

Sounds great.... The dream we all long for; Silicon Valley dream.

Though does anyone tell the stories where the little guy is invited out there by big influentials only to be baited into giving away their secret algorithm and then being stomped on?

Beware innovators/entrepreneurs sharks abound, especially for the little guy. They'll sell you on your dreams only to get what they want from you then kick you and your dreams to the curb.

Signed a lost and now destitute innovator/entrepreneur

> Silicon Valley dream

That's interesting, because most of the technical focus is on scalability, and this "Silicon Valley dream" is so very much not scalable.

The "American dream" had more scalability potential, don't you think so?

Would you mind sharing some of your experiences a little bit more?

If you built something special that people were willing to stab you in the back for, you can build something special again.

Yes, there are predators and thieves everywhere. It's amazing how quickly an IP can be unwittingly pried out of a creators hands. Never underestimate that.

And to anyone who will listen: never never never do a deal without having a lawyer go through it, no matter how smart you think you are or how straight-toward the deal seems.

So Instagram was sold for $750m and not $1bn. Majority of $300m went to investors.

It's a great story to read (and maybe Ashton Kutcher can play Systrom as well, or at least Nicholas Hoult... Hunter Parish to play Krieger and it's time that Michael Cera debuts at Zuckerberg) but I can't help but think it would've been so much better for us, users, that Twitter bought them.

I see it as a perfect social network - Vine for video sharing, Instagram for photo sharing, Twitter as a connecting platform with numerous additions - Radio, ...

I just don't get Facebook anymore. Sure, a few years ago we were mad about it, spending days on it but I sense that hype is gone. Honestly I don't know why I'm still on it - stories from liked pages are the same as on my Twitter feed, I use Instagram to share my photos. Surely if you're serious about keeping in touch with people from the past, you already have their email or phone number.

"Rags to riches?" What a bunch of BS. Dude never experienced a moment of poverty in his life, and I doubt he would deny that.

Well, the article does mention that he was born in Brazil. Perhaps he was a glue sniffing Sao Paulo street kid who was adopted by a caring American WASP family that got him on the fast track to old/new money success.

Seriously, boarding schools are choc full of uber achievers; the notion that wealthy kids are lazy is a myth (assuming trust-afarians are taken out of the equation).

A good read, for sure. As someone outside of the US, it makes me wonder if Instagram's succes would have been possible if it was a non-US company, or even a startup outside of California?

Reading between the lines, it seems the major contributing factors to their success were the connections they had to other ex-Stanford alumni (Zuckerberg himself being one of them), the internship at Twitter and the stint at Google. A more interesting question (at least for me) is: Would Instagram's success have been possible (or that fast) if the founders had not gone to Stanford?

Zuckerberg is a gentleman of Harvard! I say good day!

Ha good point! I always forget he didn't attend Stanford.

As someone in the US and in California, but !in the bay area and !in rapport with the likes of Marc Andreessen, Jack Dorsey and Mark Zuckerberg, I too wonder if Instagram-like success would be possible for a startup that is not in that position. And if it isn't possible, perhaps the rest of us should think twice about aspiring to that specific type of success.

It's kind of your fault.

That's a provocative statement, here's the justification:

Instagram had "only" 18 employees. Wherever you are, will1000, hiring 18 employees of the caliber who built Instagram for 18 months would cost you $2M. Instagram was able to pay for them with equity, instesad of starting with $2M in the bank.

The direct reason that this doesn't work outside silicon valley is that outside silicon valley you, will1000, will not work for me for equity instead of a market salary. That is only possible in Silicon Valley.

In other words, you don't want to believe that a % is worth anything, and that's why you won't accept equity based compensation (outside silicon vallye).

look in your heart and you know it's true. what's the lowest salary + equity compensation you would accept?

Could instagram have afforded you?

> The direct reason that this doesn't work outside silicon valley is that outside silicon valley you, will1000, will not work for me for equity and no salary. That is only possible in Silicon Valley.

Right, because only in Silicon Valley will people work for equity and no salary. They live off the air.

Explain to me how talented coder 'x' (whoever, maybe will1000) will be able to live without any compensation whatsoever during 18 months.

Even in SV that's an exception, not a rule, and even in SV people need to eat. So the more commonly employed scenario is that there is a bit of funding which is made to stretch as far as it will go by compensating key employees with equity rather than salary for some portion of their total package.

0 salary and just equity is an exception.

The portion you refer to is pocket change - it would not retain these employees outside Silicon Valley, where such caliber of employees are willing to give great weight to equity.

Read http://www.dailymail.co.uk/news/article-2127882/Meet-OTHER-n... and it becomes clear that the 18 employees were recruited mostly with equity.

Hiring the quality of talent that we're talking about, in will1000's market, just doesn't happen using the kind of equity (e.g. 10% pool) that instagram was using, without enough cash in the bank to pay a large base salary to each of those extremely talented people.

Outside silicon valley that's what you would need to do something like this: a whole ton of cash, or lower your standard of employee. Only in Silicon Valley can equity be used for this kind of bargaining power, to retain 18 people who are of such a quality that they are able 36-handedly to build a company in 18 months that is worth $1Billion.

As a simple example: I could never get you to work for me part-time for $0 and 30% equity in our company: except in silicon valley, where I could do so extremely easily, just by showing a product that is near completion.

It's your fault. You're the one who doesn't want the riches and results. You're the one who doesn't want to change the future, by working for next to free for it, and having just equity.

There's a reason a couple of kids in silicon valley can build multibillion dollar companies while on a ramen diet, and you can't.

you (and the market you're in) just doesn't want to.

> The portion you refer to is pocket change.

You're currently running a company with in excess of 18 talented engineers without a viable income stream?

And your payroll is 'pocket change'?

> Hiring the quality of talent that we're talking about, in will1000's market, just doesn't happen with the kind of equity (e.g. 10% pool) that instagram was using - outside of silicon valley that is.

Of course it does.

You make some outrageous statement, then fail to back it up, next you make a new outrageous statement which is even further from the truth.

I'm a bit confused, we might have misunderstood each other.

There's nothing to "back up" - I said that the most talented employees in the world, who can build a $1B company up in 18 months, will not do so outside Silicon Valley in exchange for a 10% employee equity pool, and a low base salary.

Outside Silicon Valley they would only do so for a very high base salary.

Are you a foreign national who can't move to the valley? Because you certainly have an extremely distorted view of reality. People are not being hired with pure equity with the ease you seem to think. Also, I might add as the co-founder of a growing startup with offices in both Palo Alto and London, salaries are higher and competition for employees stiffer in the valley.

Let me put it to you this way. Can you hire a talented CEO in London within the next month, who will work for you for below half the median wage in London and be able to build a company with you and a cofounder that is worth $10M within a year?

In the valley, this is easy. You do have to give up equity though.

In London, the above will get you shown the door, with a grin. Haha, good luck.

I'll ignore the fact that hiring a CEO is something that startups pretty much do not do and ask you this: why do you think it's so easy to hire top talent on primarily equity?

It's not easy to hire top talent with either primarily equity or primarily salary anywhere in the world: in the valley, the former is at least possible.

You are an incredibly lucky person if living for 18 months with no salary is plausible for you. Either that or you've already worked somewhere for a large salary. You shouldn't talk down to people because they haven't experienced the same luck as you. Instagram was an exception to just about every rule, and I don't think it's a bad thing that a majority of the world would laugh at anybody trying to sell them the idea of work in it for equity.

That was part of my point that Instagram would be less likely to work out outside of SV. This article helps us on the outside looking in understand how many things you have to have going for you other than just talent and a good idea to achieve the level of success Instagram has.

All right, that's fair. But people hugely underestimate the difference that employees willing to consider equity as serious compensation makes. It's the difference between being able to afford to change the world and not being able to afford to do that.

That is one of the biggest things about the valley.

Whoah! Instagram didn't pay salaries to any of their 18 employees?

The portion you refer to is pocket change.

Read http://www.dailymail.co.uk/news/article-2127882/Meet-OTHER-n.... and it becomes clear that the 18 employees were recruited mostly with equity. Hiring the quality of talent that we're talking about, in will1000's market, just doesn't happen with the kind of equity (e.g. 10% pool) that instagram was using - outside of silicon valley that is.

It would be interesting to know how they pitched the jobs to their future employees? If someone came to me saying "Hey dude, work for free and you get 5% stake in a photo sharing app for the iPhone. It's cool app. We have filters!" I'd show him the door.

So there must have been some "we know people at $comp and they will buy us out"-talk to convince people to work for free.

I'd be interested in knowing where you're located. Not quite for "free" but including a very low salary what you've just derided seems like a fairly standard startup pitch...

There is no mention of salaries in that article. It seems like you are a little bit jealous and rampantly speculating about this whole scenario.

Obviously with the trajectory Instagram was on it was much easier to hire with equity. I don't know what you mean about the "level of talent" though. There are hundreds of small teams with the talent level of Instagram both in and out of the valley, but talent does not guarantee traction. What makes Instagram extraordinary is a confluence of factors, not just an amazing team.

I'm not jealous at all. Talent is one thing, but do you honestly think you can have a professional team working on the payroll that (I assume) Instagram had?

I just don't see it happening. one thing is you are right, I don't have detailed payroll figures. I was going on the prevailing wind and the fact that the employees were 20-somethigns.

You're just piling one assumption on top of another.

yep, these are my assumptions and experience.

Direct answer: no. Indirect answer: no.

The probability is low because guys outside of bay area don't build app to dent anything. They don't aim to build an app that is cool: to them, their friends, their investors, their users, and ultimately their suitors and acquirer.

They build it to mint money, which is why this story inspires them too.

It also counts that you are in a habitat where having beers with Zuck or being one of the first employees of google or twitter( or just name one..) is easy. If you need a 500000$ seed investment? No problem, I will talk to Andressen and it'll be done in a week.. Of course it's not always like this but SV is the place where this may happen. The biggest difference I notice with other places beyond the easier access to investment (I am from Spain), is that people there has a "can do" attitude that is almost completely missing everywhere else. If you go to Stanford, it is expected from you to go and make something big just because of that. Also there is the glorification of failure as a learning experience. Here in Spain I am seeing lots of good Ideas to start a small bussines or a Start up for almost no money, but even in the middle of the crisis, people who doesn't have a job gives me a blank stare every time I talk about them. They'll just keep looking for a simple job at a big company, as it that is the only possible way.

The think that most impacts me of this article is how they get 25000 users the first day. How do you do that?. Is due to having a huge net of early adopters as friends?

Edit: twitter spelling!(tweeter...)

The can-do attitude is something to be envied but the dynamism and opportunities available in the Valley and generally in the USA make a big difference. If your big idea doesn't pan out then the (almost) worst case scenario is that you simply go and work for somebody else. I don't think other country's economies are nearly as developed in that respect. In many cases developers are hired on the basis of cost and anything that the might prejudice that in the eyes of managers and employers (for example being a little too dynamic or independently minded) removes a lot of the cushion you have and makes going for the safe, corporate type of job more practical, not necessarily more desirable.

Don't forget the other side of the coin: that "can do attitude" and that environment can also, if you buy into it too far and don't get lucky, have you broke and homeless.

It's partially a gamble, and magazines write articles only about the winners.

I agree with that, but that´s true anywhere in the world. In Spain if your company fails you may be personally liable of the debt. Recently a bank removed 3000€ from my grandmother account because of a debt dated from 1993 of my deceased grandfather´s company. My grandmother is 97 years old, and the funniest part is that debt was settled long ago. Also if you fail nobody is going to trust in you any more, you are done.

I know that SV is not the golden city that this articles paint, but it is way ahead when we speak of entrepreneurship and startups.

> Also if you fail nobody is going to trust in you any more, you are done.

It's the same in Germany. If you fail with a business you are on the same level of a criminal to many people. I don't care about being jobless (because I know how to scrub together at least 1000 Euros every month). But the "failed business" stigma is really what inhibits entrepreneurship here.

My point was not so much about SV but about the "can do attitude" - when taken too far it will have you go deeper into debt and chasing pipe dreams rather than cut your losses. It can kill good companies too, if it leads you to ignore risks.

Yes I agree that jumping to start a project without some planning can be devastating. I can´t find the PG essay where he talks about minimize expenses and try to have infinite runway, but after one year and a half of entrepreneurship that is the way I going to try next (first I have to fail this one ;) )

Suuure, everyone outside the valley builds apps only for "money minting", not for "cool to everyone". Nice Cali bubble you live in ;D

Even if an individual tries to do it for coolness, and is passionate about it, the rest of the guys around him are not. And that can be a significant cultural influence.

You're living in a bubble, if you can't see that.

Pivoting is an integral part of the iterations of a lean startup and not "screwing up" as written in the clueless article.

I prefer to think that pivoting (as opposed to minor tweaks to business plan) is indeed, "screwing up", but that making mistakes is not a bad thing... as long as you can learn from it and move on to do better. Failing to screw up ever means you're not taking enough risks.

Makes you realize in part, the clever name of Instagram, is just a name that now people associate with filters - though wasn't popular until its advent.