Rumored Instagram funding may boost its valuation from $25M to $500M

Mobile photography application Instagram may be raising a $40 million round of funding, rocketing its valuation from $25 million to $500 million overnight.

The Wall Street Journal’s sources say that venture capitalists are definitely interested in the popular young company, but have some reservations about the high valuation.

Instagram is a photo-sharing application for iPhone. It allows you to take photos in-app, apply filters, and then post the photos to the Instagram photo-stream. It also posts images to a number of social networks including Twitter and Facebook. Indeed, Instagram sends a photo to Facebook six times every second, according to Instagram co-founder Kevin Systrom.

The app had already amassed 13 million users 13 months after its debut. It may now have as many 25 million members, but the company is still in the midst of defining its business model. The Journal points out that Instagram does have a celebrity following, however, with stars such as Snoop Dogg and Justin Bieber using the app. It may be able to figure out a monetization plan for their involvement, or streams associated with a particular brand. Until then, VCs may shy away from throwing money into the startup’s funding pool.

Instagram raised $7 million in funding in February 2011. The round was led by venture firm Benchmark Capital and included Baseline Ventures and Andreessen Horowitz.

Instagram did not immediately return a request for comment.

via The Wall Street Journal

VentureBeat is holding its second annual Mobile Summit this April 2-3 in Sausalito, Calif. The invitation-only event will debate the five key business and technology challenges facing the mobile industry today, and participants — 180 mobile executives, investors, and policymakers — will develop concrete, actionable solutions that will shape the future of the mobile industry. You can find out more at our Mobile Summit site.