My feed is filled with commentary on Ben Horowitz’s response to the Instagram acquisition. Ben is one of the partners at Andreessen Horowitz, an early investor in Instagram and former competitor PicPlz.
Essentially, journalists decided to criticize AH for choosing to follow-up its investment on PicPlz instead of Instagram, despite the fact that AH actually invested in Burbn, the predecessor to Instagram focused on checkins. PicPlz, founded by Dalton Caldwell, pivoted away from photo-sharing when it became clear Instagram would rule the market (update: Dalton actually pivoted away from PicPlz, but the app is still on the market).
From Horowitz’s post:
“After speaking with both entrepreneurs and much internal discussion, we concluded that funding Kevin to compete with Dalton would be a violation of the original implicit commitment we made to Daltonâ€”to not fund competitors to PicPlz. On the other hand, funding Dalton did not violate our implicit agreement with Kevin because he changed his businessâ€”weâ€™d funded Burbn not Instagram.
So our choices were: a) invest in Dalton b) invest in neither or c) invest in Kevin and violate our commitment to Dalton. As soon as we fully recognized those were the choices, we ruled out option c and elected option a.”
Read his entire post. It’s a lesson in transparency and ethics. I’m pretty sure AH’s limited partners aren’t complaining about AH’s massive return on Instagram.