When Instagram was bought by Facebook earlier this spring for $1 billion, one question lingering on everyone’s minds was how much VC firm Andreessen Horowitz made on the deal. The firm had made an early investment in the photo sharing startup but then bet against it after Instagram’s pivot by later by supporting a rival.
A few days after the Facebook-Instagram acquisition was announced, the firm’s partner Ben Horowitz took to his blog to not only reveal the back story of the investment in Instagram, but also how much the firm had made off the deal under the terms of the acquisition—$78 million off of a $250,000 investment
Transparency in the VC world is the new black. From the outside, investing terms look like a black box — in goes the company and out comes a cap table. Dialogue that was previously reserved for closed-door, back-office meetings is now taking place in the open public.
For example, take Founders Fund partner Brian Singerman’s recent TechCrunch post on “The Paradox of VC Seed Funding.” Singerman laid out the brutal economics of seed funding, and concluded that they don’t really make sense. In the same post, Andreessen Horowitz’s Marc Andreessen left a comment to explain the dynamics of the firm’s strategy in seed rounds, and why.
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