If you have an iPhone, you know just how great Instagram is. If you don’t have an iPhone, well, Instagram says that they are working on making that iPhone app absolutely prefect before rolling it out to other platforms like Android and BlackBerry. But, the real story behind Instagram isn’t that this app is the coolest photo app around, it’s that this company doesn’t generate any revenue. That’s right, Instagram doesn’t gain one single cent from the 15 million users that it has.
To top off that shocking fact, Instagram is now raising another $40 million in funding, and it looks like the company –valued at $500 million – will get the money that they’re asking for – maybe. If you’re into investments, this tech startup is certainly one to watch.
The sheer fact that Instagram is worth $500 million dollars, but doesn’t earn a cent from its many million users is mind-blowing. How can a startup that doesn’t generate any revenue subsist? Well, that’s a good question and it also might be the reason why Instagram is asking investors for another $40 million in funding. In order to perfect the Instagram app, the developers behind the photo wonder need money, makes sense, right? What does make sense is for investors to throw money at a startup that isn’t raking in any dollars.
After all, investors want to see the money that they put in returned in some manner. But, a company like Instagram that doesn’t make any money can’t return any money – simple mathematics or logic. That’s why the Wall Street Journal reports that some Instagram investors are a bit hesitant to provide the startup with additional funding. Sure, Instagram is popular and many people can’t live without it, but is a company that’s highly valued and doesn’t have a clear revenue plan in place worth investing in? Maybe. It’s possible that the developers behind Instagram have a revenue plan in mind, though that plan is largely unknown currently. On the investment side of things, it will be very interesting to watch and see how the Instagram funding story unfolds.
What Is the Funding For?
Instagram wants to gain additional funding to make the app even better than it is right now. Throughout the past two years, Instagram has gone through some interesting changes (mostly filter and UI based). Perfectionists all around, the Instagram team won’t provide Android, BlackBerry, or Windows users with access to the app until it is absolutely perfect. Some funding money might also be used to help the company build a better future business plan by hiring some consultants or working out marketing ideas on the business side of things.
It’s currently looking like Instagram might not get all the funding it needs from investors, but if that plan fails there’s always KickStarter – millions of fans who can’t live without Instagram are certain to pitch in for the beloved app, and these investors won’t require any kind of a revenue roadmap.