California: In three years span a free photo sharing application startup Instagram transformed itself from being zero to $1 billion glory. The company has just been acquired by Facebook for $1 billion in cash and stock.

Founded in 2010 by Kevin Systrom, and Mike Krieger, Instagram is a free photo sharing application that allows users to take photos, apply a filter, and share it on the service or a variety of other social networking services, including Facebook, Twitter, Foursquare, Tumblr, Flickr, and Posterous.   

Few days back, the company succeeded in raising its series B round of funding of $50 million at a $500 valuation led by Sequoia Capital. The other investors in this round of funding were Thrive Capital, Greylock Partners, and Benchmark Capital. The recent round of funding has brought the total fund raised by the company to $57.5 million; $500,000 in seed round of funding from Andreesen Horowitz and Baseline Ventures in 2010; $7 million in series A round of funding from Adam D’Angelo, Jack Dorsey, Chris Sacca, Baseline Ventures and Benchmark Capital.

A quite amazing fact about Instagram, the company has succeeded in raising its valuation from $100 million a year ago to $500 million in April 2012. The rising valuation of the company was reflective of the growing audience it has been garnering. Also, Instagram succeeded in rocketing to 30 million iOS users in just 18 months and was named iPhone app of the year in 2011.

CEO Systrom owns 40 percent of Instagram. That will net Systrom $400 million to take home as a result of the deal. Co-founder Mike Krieger holds about a 10 percent stake, and will net around $100 million. Benchmark Capital, has about an 18 percent stake, getting roughly $180 million from the deal. Andreessen Horowitz and Baseline Ventures, each have about a 10 percent stake, netting just under $100 million apiece.

Mark Zukerberg wrote on his own Facebook page, “This is an important milestone for Facebook because it is the first time we have ever acquired a product and company with so many users. But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together.”

Kevin Systrom, CEO, Instagram, released a statement on the company blog, further assuring users that while the companies will be joining forces, Facebook wont monopolize Instagram. He wrote, “It is important to be clear that Instagram is not going away. We will be working with Facebook to evolve Instagram and build the network. We will continue to add new features to the product and find new ways to create a better mobile photos experience.”