Instagram poised to raise $40 million as it surpasses 27 million users

Photo-sharing app Instagram is hoping to raise a new round of funding worth about $40 million, which will value the start-up at close to $500 million, after surpassing 27 million registered users.

Based in San Francisco, Instagram is a free photo-sharing application that allows users to take photos, apply a filter and share on the service or a variety of other social networking services.

Founded in 2010 by Mike Krieger and Kevin Systrom, the application is compatible with any iPhone, iPad or iPod Touch running iOS 3.1.2 or above.

But in contrast to the 3:2 aspect ratio normally used by iOS device cameras, Instagram pays homage to the Kodak Instamatic and Polaroid cameras, confining photos into a square shape.

In March 2010, Systrom closed a closed a $500,000 seed funding round from Baseline Ventures and Andreessen Horowitz whilst working on another tech start-up, Burbn.

Then in February last year, it was announced that Instagram had raised $7 million in Series A funding from the likes of Benchmark Capital, Jack Dorsey, Chris Sacca and Adam D’Angelo.

Now it’s been revealed Instagram is poised to pick up a new round of funding worth about $40 million, which will value the start-up at as much as $500 million.

However, the company is yet to offer any clarity on the rumours. Systrom told Tech Crunch “good companies are always fundraising”.

“Whether you’re meeting people or considering firms, you’re always fundraising. But it doesn’t mean we’re active,” he said.

“We’re trying to create a long-term, viable company that doesn’t come and go with fads. It should be something that lasts and creates meaningful value.”

While Instagram is remaining coy about its funding intentions, it did confirm it has surpassed 27 million registered users. It also unveiled its upcoming Android app at SXSW.

“In some ways, it’s better than our iOS app…I don’t think it took us so long [to develop an Android app]. We just had priorities,” Systrom said.

“Had we tried to be both on Android and iPhone at the same time, it would’ve been tough to innovate in the way that we have.”

The app doesn’t have any advertising or in-app purchases, but Systrom doesn’t seem overly concerned at this stage.

“We have a visual platform and advertisers like visual mediums. They like TV and magazines, but attention is moving online and they want to switch,” Systrom said.

“I do believe that Instagram has put a stake in the ground and we’re growing more quickly than anyone.”

“Is there something in there we could do to make it a multi-billion dollar business? I think we can figure out something along the way.”