Silicon Valley Investor Lost $200 Million Betting Against Instagram

Netscape co-founder Marc Andreessen, one of Silicon Valley’s most prolific investors, earned big bucks investing money in sites like LinkedIn, Skype and Twitter. He would have earned more if his company Andreessen Horowitz stuck it out with Instagram.

Facebook just acquired the photo-sharing site for a cool US$1 billion. Andreessen Horowitz initially invested US$250,000 in Instagram when it was still called Burbn.

The mobile application development was originally intended to have a location check-in feature similar to Foursquare. It was developed by Google employee Kevin Systrom.

Months after Andreessen Horowitz placed their initial investment, and following no contact nor communication with business partners, Burbn’s development changed course and became a photo-sharing site for iPhone.

This has caused a conflict with Andreessen Horowitz’s other investment in Picplz, an application with the same features.

And while other investors to Systrom’s Instagram doubled their stake and invested even more, Andreessen Horowitz chose to instead go with Picplz and poured US$5 million.

Andreesen took to Quora, a question-and-answer site many developers and proponents of Silicon Valley frequent, to address his company’s decision. He said there was a conflict of interest following the evolution of the product as Burbn to Instagram.

The decision proved to be a mistake. In July of 2011, and after six months of trying to gain 100,000 users, the site was turned over by its founders to Sporcle, an online trivia site.

Andreessen Horowitz’s initial investment of US$250,000 on Burbn—now Instagram—was dissolved to $US7 million. But it would have been $US200 million had the company stayed on.

Tagged facebook, Instagram, iPhone, Marc Andreessen