One Investor Who May Not Be Leading Instagram’s New $40 Million Round*

Marc Andreessen Bloomberg West

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In November 2010, Andreessen Horowitz found itself a predicament.The hot venture capital firm invested in seed rounds of two startups, Instagram and PicPlz.

At the time Instagram wasn’t a photo sharing company. But it became a direct competitor to PicPlz. 

“We’ve developed a conflict,” Marc Andreessen wrote on Quora. “Therefore [we] can only invest in one of them going forward.”

Andreessen Horowitz chose PicPlz.* Headlines read, “PicPlz 1, Instagram 0.”

A source close to the matter says PicPlz was chosen for a few reasons. First and foremost, it was a photo sharing startup before Instagram was.  Secondly, at the time of the conflict PicPlz was raising a round of financing; Instagram was not.

But given the history, it may be hard for Instagram to work with Andreessen Horowitz again.

From what we’re hearing at SXSW, the big funding round is definitely happening.

An investor who’s firm passed on the deal tells us the WSJ reported $500 million valuation is accurate, although the $40 check-size may fluctuate sightly.

*Originally we reported that Andreessen Horowitz chose PicPlz over Instagram and stated the move was publicly insulting to co-founder Kevin Systrom. A source says the firm was methodical in choosing PicPlz, and that Systrom was kept informed throughout the entire process.