6 Lessons from Instagram on how to build a $1B app in 18 months

In 1975 a Kodak employee invented the digital camera, but the company executives believed that people would never want to view their photos on a TV…Kodak folded in 2012. The fact is that digital photography took off in a big way. New technology has given amateur photographers around the world the ability to take hundreds of selfies and then share the one pic that makes you look like a supermodel to your fans friends. Smartphones have elevated taking and editing pics to a whole new level, lead by the proliferation of apps that allow you to edit, frame, apply filters or even swap faces to your photos. Of the thousands of photography apps available in the App Store Instagram is undoubtedly the leader.

A quick glance of Instagram’s numbers make for some pretty impressive reading:

  • 400 Million Active Monthly Users
  • 75 Million Active Daily Users
  • Acquired by Facebook for $1 Billion within 18 Months of launching

Developing an app that reaches this level of success is what dreams are made of, and continues to fuel the investment in tech startups in Australia and around the world. But how did the founders manage to take an idea through to one of the most popular app’s in the world?

Like many tech startups Instagram started as a simple product with a small and dedicated team. Kevin Systrom, the app’s founder, had been toying with several ideas before coding a rudimentary version of Instagra, even though he had no formal programming qualifications. At the time the app was called Burbn which was essentially another Foursquare (a location based check-in app) and included features such as location check-ins and a point earning system.

With the Burbn app in his pocket Systrom ran into investors from Baseline Ventures while sipping cocktails at a party for another tech startup. After showing the investors his prototype and following up with a coffee Systrom secured $500,000 in startup capital within 2 weeks. With his new found capital Synstrom began building a small team that would eventually develop the Instagram app.

Mike Krieger was the first member to join and became the co-founder of Instagram alongside Systrom. The pair took a hard look at Burbn and decided that it needed to be simpler, so they removed features and focused on its most popular elements — photo sharing, comments and likes. Over just 8 weeks a new iteration of Burbn had formed, along with a new name; combining the words Instant and Telegram, and thus, Instagram was born. The beta was again shared with friends and acquaintances, and bugs were ironed out while the app continued to evolve. Systrom and Krieger stayed agile by basing crucial product decisions on experimentation, feedback and good old fashioned intuition.

It was October 2010 when Instagram first hit the App Store in the wee hours of the morn. Systrom and Krieger figured they’d go home, get some much needed shut eye, and check in on the app’s progress come morning. But their plan for rejuvenating sleep was quickly foiled as the app reached 10,000 downloads within a few hours of being released and went on to reach 100,000 within one week. The app’s audience continued to grow at a staggering rate, reaching a million users by December of 2010, just two months from its initial launch. Uplifted by their success, another round of funding began and the company was valued at $20 million shortly after the start of the New Year; not bad for a company that still boasted less than a dozen employees.

The app continued to grow over the coming year, but little changed in its core functionality. Instead, its creators focused on improving performance and addressing their growing community’s needs. By March 2012, the app’s registered users had topped 27 million, and the founders began to focus on another round of funding. That April, a group of investors raised $50 million on a $500 million valuation, and four days later, they earned 100 percent return on their capital when Instagram was purchased by Facebook for $1 billion.

Even though Synstrom has become incredibly wealthy from the sale of Instagram he continues to develop the app and nurture its vast community of users. Systrom believes sticking to their roots and remaining humble will be key to Instagram’s longevity.

So What Can We Learn?

In what is a pretty amazing success story there are some key lessons to takeaway.

  1. Investors invest in people first, the idea second. For Kevin Systrom to raise $500,000 based on a rudimentary prototype the investors were backing his vision and ability to execute more than the app itself.
  2. Make your own luck by getting involved in the tech community and don’t be afraid to discuss and share your idea, the more feedback you get the better. You never know where a conversation may lead, it is rare to raise $500,000 in 2 weeks but not impossible.
  3. Know when to pivot! The founders validated their product early and responded quickly and decisively.
  4. Build a great product and they will come. Instagram is a simple app that looks great, is easy to use and has one core function — making your photos look awesome. Without a great product there is no way they would have achieved the viral growth that they did
  5. Focus on your MVP (Minimum Viable Product). One of the biggest mistakes startups make is over engineering their product and taking too long to release it and validate the idea with real people. Instagram kept it simple and released it after 8 weeks, from that point they iterated and responded to user feedback. I can guarantee that it didn’t look like it does today, but the product was cool enough to get a lot of early adopters, and fast.
  6. Consumer apps should focus on growing users first, revenue second. When Facebook acquired Instagram for $1 billion they had no revenue and a team of 12 people, but they had millions of users. If you get the user base it will be valuable to someone or you can figure out how to make money out of them later.

So what is your billion dollar idea?

If you have an app idea that you would like to discuss or are interested in learning more about how to develop an app visit us at www.dapperapps.com.au

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