Facebook’s Mark Zuckerberg Negotiated Instagram Deal Single-Handedly

Talk of the town this week is Facebook’s billion dollar acquisition of photo sharing site Instagram. While our contributor Nick Puno wrote how “Zuckerberg buys photo app instagram for $1b,” we never thought that it was indeed the young Facebook CEO himself who closed the deal. According to reports, the Facebook board was left in the dark on the deal, and only learned about it after the CEO closed negotiations with Instagram CEO Kevin Systrom. Was it Zuck’s personal touch that helped Instagram agree to the acquisition?

Instagram has been fast on the rise, with its iOS application topping the iTunes App Store charts, and the recently-released Android version garnering  5 million downloads in just six days. The startup has been ripe for the picking for investors and would-be buyers. Even Twitter has reportedly “expressed an interest” to acquire Instagram, despite its likewise young CEO Systrom rejecting the claim.

The deal was made just in time, after a three-day round of negotiation. Instagram was “just hours” from signing up for a fresh round of VC funding, which would have raised the company another US$ 50 million, at a valuation of US$ 500 million. That would have given Instagram a higher sale price in the future. Instagram actually wanted an acquisition price of US$ 2 billion. However, it was said that Zuckerberg’s personal touch made the deal sweeter for the Instagram team, even at a lower price.

A report by the Wall Street Journal indicates that the Facebook board had been concerned about how the CEO handled the deal. “By the time Facebook’s board was brought in, the deal was all but done. The board, according to one person familiar with the matter, ‘was told, not consulted,'” reports the Wall Street Journal. The board did vote on the deal, although this move was said to be largely symbolic. Only a few others knew about the discussions, notably Facebook COO Sherly Sanders. Board member and early Instagram investor Marc Andreesen was reportedly surprised to run into Systrom at Zuckerberg’s US$ 7 million restored mansion the day the deal closed.

Observers speculate that Zuckerberg did not want to involve a lot of people in the deal, such as lawyers, bankers and corporate board members, in a process which could have taken weeks to iron out. Zuckerberg was said to have banked on the upcoming Facebook IPO in making a deal with Systrom, and planned to pay for the acquisition mostly with Facebook stock. “If he believed Facebook would one day be worth as much as a company like Google at $200 billion or more, then the equivalent of 1% of Facebook would be sufficient to meet his [$2 billion] price.”

Zuckerberg has reportedly given assurances that Instagram will remain independent of Facebook after the acquisition. But what everyone is wondering at this point is whether this is a display of business savvy will be characteristic of Facebook and Zuckerberg in future deals to come.