I had a brief twitter chat with two active people in the NYC tech ecosystem, but wanted to further clarify my perspective in a blog post.
As a prelude, this post is not a reflection as to which company is better or which specific community is better but an example of how two separate exits can have a distinct impact on their respective tech communities.
Both Instagram and Indeed ($1.1B) were amazing exits for the Founders and early investors. That being said, the Indeed exit is much better for a tech ecosystem than the Instagram exit. Here are a few reasons why.
- Instagram had a total of 13 employees at the time of the exit. Per LinkedIn, Indeed has 553 employees. Indeed has created a lot more jobs.
- Indeed will continue to operate, grow their business and hire more people. Instagram was essentially a defensive acquisition by Facebook. I’m sure the Instagram team will continue to improve the product but I wonder how much larger the team is going to be and if they are going to be run somewhat independent than other teams at Facebook.
- Instagram was a no-revenue based startup with the focus on growing users and figuring out a monetization later. Indeed was built with the mind set of generating revenue in their early days and according to their investor, USV, Indeed didn’t need VC funding to grow their business. The Instagram exit propagates the idea that you can just build an application without a revenue model and become successful. Many entrepreneurs are trying to replicate an Instagram but sadly 99% will fail.
- Per Crunchbase, Instagram raised $57.5M, Indeed raised $5M. The Indeed acquisition provides a great example of how you can scale your business without raising a lot of money. The mindset of minimizing how much you raise is positive. VC funding is critical for many startups but raising too much money can have very negative consequences and I don’t want to see other entrepreneurs have the idea that raising a lot of money is some sort of badge of honor.
- To my earlier point, Indeed has a lot more employees, as a result, a lot of experienced employees will have the ability and money to start their own companies. My guess is that Indeed employees will create more startups than the Instagram employees.
As a last point that is not as relevant to which is better exit for a tech community, Indeed took nearly eight years to build, scale and sale their company. Instagram was built, scaled and sold in two years. Startup Founders need to understand that building a valuable company takes a lot of time, like an Indeed and not an Instagram.