The founders of Instagram were helped along the way by the tight web in the Bay Area tech scene in San Francisco

Somini Sengupta, Nicole Perlroth & Jenna Wortham

Past midnight, in a dimly lighted warehouse jutting into the San Francisco Bay, Kevin Systrom and Mike Krieger introduced something they had been working on for weeks: a photo-sharing iPhone application called Instagram. What happened next was crazier than they could have imagined. In a matter of hours, thousands downloaded it. The computer systems handling the photos kept crashing. Neither of them knew what to do.?Who?s, like, the smartest person I know who I can call up?? Systrom remembered thinking. He scrolled through his phone and found his man: Adam D?Angelo, a former chief technology officer at Facebook. They had met at a party seven years earlier, over beers in red plastic cups, at the Sigma Nu fraternity at Stanford University. That night in October 2010, D?Angelo became Instagram?s lifeline.

This week, barely 18 months after that night, Instagram was scooped up by Facebook for $1 billion, turning Systrom, Krieger and several of their friends-turned-investors into multimillionaires. The extraordinary success of Instagram is a tale about the culture of the Bay Area tech scene, driven by a tightly woven web of entrepreneurs and investors who nurture one another?s projects with money, advice and introductions to the right people. By and large, it is a network of young men, many who attended Stanford and had the attention of the world?s biggest venture capitalists before they even left campus. For Systrom, the connections forged at Stanford were crucial. D?Angelo, a 2006 graduate of the California Institute of Technology, helped him find engineers, set up databases and flesh out features. Soon after Instagram came out of the box, he put his money into it. So did Jack Dorsey, 35, a founder of Twitter; Systrom had been an intern at the company that became Twitter. A colleague at Google, where Systrom worked straight out of college, introduced him to Marc Andreessen, a venture capitalist who had already invested millions in Facebook. In the spring of 2010, even before Instagram was born, Andreessen wrote him a check for $250,000.

Systrom enrolled at Stanford in 2002, majoring in management science and engineering. He joined the Sigma Nu fraternity. His peers recall Systrom as having an eye for photography and design. He was gregarious and also keen to be an entrepreneur. He briefly ran a Craigslist-type marketplace catering to Stanford students. After graduation, he went to work for Google. By the standards of his peers, it was considered a good and safe job, though not terribly cool. He lasted there less than three years and moved on to Nextstop, a travel recommendation site that was founded by former colleagues at Google and was eventually acquired by Facebook. But Systrom, as his classmate Gurevich recalled, was ?antsy.? He had made enough investor contacts from his Stanford days, and by early 2010, he had a germ of a business idea.

His big break, if there was one, came at a party at the Madrone Art Bar in January 2010, where he met Steve Anderson, 44, founder of Baseline Ventures and an experienced investor who had by then banked on Twitter. Systrom pulled out his iPhone and showed him something he was building, called Burbn after his liquor of choice. As Anderson recalled it, Systrom had a prototype and a vague idea. He wanted to build a service that let people share their location with friends, like the popular app Foursquare, with some photo tools attached to it. He was testing the prototype with friends. Anderson worried about one thing: the echo chamber that can plague a one-person start-up. He suggested that Systrom find a business partner. Systrom agreed. Within days, Anderson wired $250,000 to a newly hatched company, set up by a lawyer whom he had recommended to Systrom. Andreessen would soon add $250,000 from his firm. His search for a partner naturally led him to Krieger, an immigrant from Brazil known as Mikey and, in Gurevich?s words, ?a stud engineer.? Krieger had majored in symbolic systems, a program that blends coding with psychology, linguistics and philosophy.

The two began working out of Dogpatch Labs, housed in an old pier, with fishing nets on the walls and long tables that functioned as shared office space for aspiring tech companies. Julian Green, who briefly worked out of Dogpatch, recalled that the two men were unusually obsessed with design detail. Once, he said, they spent two hours perfecting the rounded corners of the app?s icons. The release of the iPhone 4 gave them a perfect hook: it had a high-performing camera and could display higher-resolution images. They gave it a new name: Instagram. ?We renamed because we felt it better captured what you were doing ? an instant telegram of sorts,? Systrom wrote on Quora, a question-and-answer site started by D?Angelo. ?It also sounded camera-y.?

Instagram took off like a rocket. As he explained in an interview in January, Systrom let some influential technology bloggers and contacts, like Dorsey of Twitter, try a test version of the app before its official release. Soon Dorsey was using it to send photos to his Twitter followers, and word spread. From 25,000 users in the first 24 hours, Instagram grew to 300,000 by Week three, and then into the tens of millions. With its quirky borders and filters that gave photos extra punch or a nostalgic glow, it tugged at heart and soul. Celebrities got on board, including the pop star Justin Bieber last July. On Twitter, he posted an Instagram photo of traffic in Los Angeles. Teenage girls screamed ? and then checked out Instagram. An Android version of the app, released this month, brought in one million people in its first 24 hours. The founders kept their team lean, adding just 11 people since the app?s initial release, including several Stanford graduates. Investors lined up at the door.Benchmark Capital led an investment round of $7 million in February 2010. Dorsey and D?Angelo joined in. Last week came a second round of financing that valued the company at $500 million.

Then Mark Zuckerberg called. When he and Systrom talked last Friday, Zuckerberg, Facebook?s chief, was blunt: Facebook wanted to buy Instagram. Over the next 48 hours, the two companies hammered out the details for a $1 billion cash-and-stock deal. To toast the occasion, Zuckerberg wrote a lengthy post on his personal Facebook page, calling the transaction an ?important milestone? for the company. Systrom did not end up beating Foursquare. As it happened, he and Dennis Crowley, one of Foursquare?s founders, grew up in neighboring towns in Massachusetts. Over Christmas break two years ago they met at a local pub. Last month they met up on a business trip to London, where they met the prime minister, and decided to take a short vacation to Scotland together. Systrom may have lost one connection in the deal: Dorsey of Twitter. His company, according to several people briefed on the matter, had expressed interest in buying Instagram. Dorsey once used Instagram daily to send photos to Twitter, but he has not been back since the deal was announced.

The Instagram team showed up at Facebook this week, as documented by a Facebook vice president on ? where else ? Instagram. Whether Systrom will stay there for long is anyone?s guess. With a public offering imminent, there is the risk that Facebook may soon become what Google was ? a safe place to be, but not terribly cool. And Systrom may again get antsy.