What Is Instagram and Why Did They Get $7 Million?

iPhone photo editing and sharing app Instagram just got a big boost from investors. Now armed with an advisory team composed of ex-Facebook and current Twitter Chairmen, this 4 month old company is getting ready for the big leagues

iPhone app success story Instagram has more reasons to celebrate today as CEO Kevin Systrom announced in the company blog that they have raised $7 million in capital from Silicon Valley investor Benchmark Capital. The investment round was led by Matt Cohler, a former VP of Product Management at Facebook. Benchmark Capital has had a string successful investments in social media tech companies recently, including Twitter, Yelp, Quora and several others.

If you’re unfamiliar, Instagram is an iPhone photo app that lets users take regular photos and spruce them up with the tap of a button. Photos are usually posted to social networks like Facebook and Twitter which can be attributed to the apps widespread popularity. When I first reported about Instagram and its addictive and ego-driven nature, the app was virally spreading on Twitter and had close to 1 million users in mid-December. A month and half later, there are close to 2 million users and 290,000 photos being shared per day. Not bad for a company that was founded only 4 months ago.

In his humbling blog post, Systrom describes the companies early beginnings in co-working spaces and wildly unexpected growth to become one of the most highly downloaded applications in the App store and now attracted a celebrity roster of angel investors that would make any entrepreneur froth at the mouth. That includes former CTO of Facebook and Quora co-founder Adam D’Angelo, former Google exec Chris Sacca, and Jack Dorser – co-founder and Chairmen of Twitter.

With this kind of firepower under its belt, clearly the company has big plans. The new cash infusion will undoubtedly help bolster Instagram’s relatively basic feature set and guarantee the user base will be supported for a very long time. Currently a free app, the interest from investors indicates the company will likely be seeking additional channels of revenue beyond what it already makes in advertising. So it makes sense they’ll want to cash in and monetize with premium versions of the product and create tighter integration with social networks.

Sharing photos, after all, is what made Facebook what so popular in the first place. Many users still only use the social network for its photo sharing and tagging features. Services like Flickr and Facebook have benefited greatly from the widespread use of digital cameras. t’s not inconceivable then, that Intagram with its beautiful photo-jazzing features, could take photo editing out of the digital darkrooms and make it as easy and ubiquitous as tagging photos is now.

With the frenzy of location-based apps and mainstream explosion of Twitter in 2010, good old fashioned photo sharing largely took a backseat last year. Users were tweeting more than ever and checking in a lot too – but most weren’t taking a lot photos and sharing them on Twitter. And if they were, most of the time they weren’t very pretty. That has in large part had to do with the fact that most pictures taken by mobile phone cameras just don’t look that great. Everyone knows someone with web albums full of blurry and noise-laden photos that leave a lot to be desired. With Instagram’s instant photo filters, even the blurriest and most boring photos can be made to look striking.

From making pictures look retro to enhancing colours that lend the photo an artistic quality, Intagram makes up for your digital cameras weaknesses by making your photos look damn cool. People love to take pictures and post them online, but basic photo editing was always a hassle and most don’t bother with photo effects. Instagram is hoping to change that. With the widespread use of camera phones and higher resolution lenses coupled with support from major partners, this train isn’t showing signs of slowing down anytime soon.