Report: Instagram raising $40M at $500M valuation

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Photo-sharing solutions startup Instagram is poised to raise about $40 million in financing, vaulting the company's valuation to as much as $500 million--roughly 20 times what it was worth just a year ago--The Wall Street Journal reports.

Instagram

Instagram lets users edit and share photos on-the-go.

Named the top iPhone app of 2011 by Apple (NASDAQ:AAPL), Instagram enables users to filter and manipulate photographs, then share images across Facebook and other social networks. The free Instagram app touts more than 15 million users across Apple's iOS platform; late last year, CEO Kevin Systrom revealed the firm is working on a version optimized for Google's (NASDAQ:GOOG) Android, adding "I'm excited to be able to see our numbers today nearly double."

Citing sources familiar with the matter, the WSJ reports the new Instagram financing round has drawn significant interest from investors; when Instagram last raised funds in early 2011, the firm landed $7 million from Benchmark Capital, Baseline Ventures and Andreessen Horowitz, translating to a value of about $25 million. But some investors remain wary of Instagram, expressing doubts that it will be able to develop a sustainable revenue model around its solution--because the app devotes the majority of the smartphone screen to featuring photos, there is little if any real estate left over for advertisements, and the photo sharing model does not lend itself to other digital commerce strategies like daily deals.

On the other hand, Instagram is catching on with fashion brands like Urban Outfitters, Marc Jacobs and Ann Taylor, which have created accounts to promote their products. High-profile celebrity users ranging from President Barack Obama to pop singer Justin Bieber are also Instagram account holders.

In an email to the WSJ, Systrom said he couldn't comment on any speculation about Instagram's fundraising efforts.

For more:
- read this Wall Street Journal article

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