Just days before Facebook acquired Instagram for $1 billion, a few VC firms bought a piece of the company.
Greylock Partners, Sequoia Capital and Thrive Capital all invested $50 million in Instagram at a $500 million valuation last week. Sources tell us they weren’t expecting Instagram to exit quickly. They expected to be with Instagram for the long haul, helping it grow into a massive company. Facebook wasn’t a part of last week’s funding talks at all.
When Facebook learned of the $50 million cash infusion, it swooped in and made an offer CEO Kevin Systrom couldn’t refuse. The $1 billion deal happened quickly, in the last 48 hours.
It’s impressive to see Thrive Capital in the mix alongside much older, established firms, Sequoia and Greylock. Thrive is only two years old and it’s run by a 26-year-old, Joshua Kushner.
In 2010, Kushner launched Thrive Capital and raised a $10 million fund; he brought on big-name advisors including Twitter and Square co-founder Jack Dorsey and Joel Cutler of General Catalyst.
After investing in more than 15 startups including two with exits, GroupMe to Skype and HotPotato to Facebook, Kushner raised a $40 million fund that can scale to $100 million last August.
Since launching Thrive, Kushner has made an impressive portfolio for himself. His investments include crowdsource funding site Kickstarter, payment company Dwolla, home decor site Fab, discount glasses retailer Warby Parker, and learn-to-code company, Codecademy.
Dwolla, Warby Parker and Codecademy were some of the most desired funding rounds among investors last year. Dwolla, for example, had inbound requests from more than 700 investors. Kushner was one of a handful to work his way into the deal.
Kushner is extremely well connected. Aside from his impressive list of advisors, he’s also good friends with Ashton Kutcher, whom he met through his brother, Jared. Jared owns the New York Observer and is married to Ivanka Trump. Kutcher and Kushner have invested in several startups together, including Dwolla and Fab.
Of course, it’s nearly impossible to judge the success of a two-year-old fund like Kushner’s. The best funds in history have an average hold time of ~ 7 years per investment.
And in most cases, Instagram included, making a 2X return isn’t ideal for an investor — investors seek a minimum of a 3-5X return on their entire fund and often seek returns of 10X+ on individual deals to get there. Instagram’s quick acquisition is more lucky for Kushner than telling of his portfolio management talents.
Still, with exits like GroupMe, HotPotato and Instagram, Kushner is returning capital quickly to his LPs and rapidly building cards for himself, which is mostly what matters in the venture game anyway. And he’ll be able to play those cards to get into future financing rounds at hot companies and continue proving himself as an investor.
To learn more about Instagram’s other investors, check out: The 13 Lucky Employees And 9 Investors Behind $1 Billion Instagram >
Watch below an archive interview with Josh Kushner about competing with seasoned VCs: