🧠 Why Instagram's founders shut down their startup — Artifact

Hey Founders,

Welcome to The Runway Ventures, a weekly newsletter where I deep dive into startup mistakes and lessons learned to help you become a better founder.

Let’s get to it! 🚀

☠️ 1 Failed Startup: Artifact

🚀 The Rise of Artifact

Have you been using Instagram? Yes — Instagram was founded by Kevin Systrom and Mike Krieger in 2010 before it was acquired by Facebook for $1B in 2012.

Well, guess what? 11 years later, Kevin and Mike were back with a new venture. They launched Artifact in February 2023 as a kind of “TikTok for news” that provided personalised news and articles to readers using machine learning — just like how TikTok is providing personalised short-form videos to users.

Right after the launch, more than 100,000 users downloaded the app within that month.

• The Problem — Readers struggled to find relevant and high-quality news and articles that they wanted to see.

• The Solution — Artifact (mobile app) provided personalised news and articles to readers by using machine learning to understand their interests and preferences.

🤑 By the way, Artifact was self-funded by Kevin and Mike with a small team of 8 working on the app, including Robby Stein, a top product executive at Instagram from 2016 to 2021.

📉 The Fall of Artifact

Ever since Artifact was launched in February 2023, there were lots of iterations and changes over the next few months before Kevin officially announced they were shutting down in January 2024.

📱 Here’s what happened:

• 🟢 February 2023 — Artifact was launched with more than 100,000 downloads.

  • Readers could personalise their experience, visualise reading history, and see what’s popular in their network.

• April-May 2023 — More features were released where readers could comment on any article on Artifact, summarise articles using AI, and follow writers for a more personalised news feed.

  • After June 2023, the number of new downloads got stagnant with less than 2,000 downloads (on average) every month.

• 🟡 September 2023 — All of a sudden, Artifact released new features to promote social networks on its platform.

  • Readers could post their links on Artifact, just like Pinterest.

  • After that, readers could also create their own posts on Artifact, just like Twitter/X.

• October 2023 — Artifact launched another 2 new features.

  • Readers could share places, just like a recommendations engine.

  • Readers could create images with AI for their Artifact posts.

  • However, the growth got stagnant as Artifact only had 12,000 new downloads.

• December 2023 — A small spike of new downloads (final push from Artifact’s team maybe?).

• 🔴 January 2024 — Kevin announced Artifact was shutting down.

  • In his statement on Medium, Kevin shared that the market opportunity isn’t big enough to warrant continued investment moving forward, hence the decision to shut down Artifact.

Want to learn more about Artifact’s downfall?

• Official announcement of shutting down Artifact by Kevin Systrom

• Instagram co-founders’ news aggregation startup Artifact to shut down

• Artifact’s app downloads data from Appfigures

• What happened to Artifact?

⚠️ 2 Mistakes

Mistake 1: Lack of focus

When Artifact was launched in February 2023, its first few features focused on providing personalised news and articles to readers based on their interests.

However, in September 2023, Artifact suddenly released new features for social networking, like posting links on Artifact (i.e. Pinterest) and creating own posts on Artifact (i.e. Twitter/X).

It seems like Arfifact was experimenting with different features to see what worked and what didn’t work without a strong focus on a certain direction. It’s also possible that Artifact was trying to figure out how to increase the user stickiness of their app by launching different features.

From the outside, the wasn’t quite clear in terms of how Artifact wanted to position themselves and the value proposition for their readers, hence diluting their focus on building a great product.

Mistake 2: Competitive & small market opportunity

This was the reason shared by Kevin in his statement to shut down Artifact.

Although Kevin didn’t further explain what he meant by the market opportunity, it could potentially be due to the challenges faced by Artifact throughout its course:

• Artifact had an estimated 444,000 downloads since its launch in February 2023. After a huge spike of downloads in February, the subsequent monthly downloads declined significantly and eventually came to a stall.

• Compared to its competitor — SmartNews, which had 2 million downloads during Artifact’s lifespan, Artifact only had 444,000 downloads (almost 5x less than SmartNews).

• There was also a shift of how readers consumed news in the age of AI as they could easily get relevant news or answers using search engines or chatbots (i.e. ChatGPT), increasing the difficulty for Artifact to capture new readers.

• Artifact also struggled to expand internationally as Appfigures (app intelligence provider) found that the U.S. accounted for 44% of all the app’s downloads and no other country had more than a 4% share.

🧠 3 Lessons Learned

Lesson 1: Focus, focus, focus

While it’s good that Artifact iterated its product very quickly, it seems like the team was experimenting with different features without a core focus or direction for the product (social news reading app VS social network).

📌 Therefore, it’s important to focus your product USP and keep iterating features that are aligned with those USP and the benefits that you want to provide for your users.

Lesson 2: Big ambition needs big market opportunity

If you’re ambitious to build a startup that solves a painful and big problem in the market, the market opportunity should be sufficiently big, otherwise it’d be a waste of resources, time and effort.

🌳 However, in my opinion, whether you need to have a big market opportunity really boils down to the type of business you want to build and run.

If you want to build a lifestyle business, it’s perfectly fine to stay small, maintain a healthy cash flow, and be profitable without having to grow at all costs.

On the other hand, if you want to build a VC-backable business, the space you’re in must have a big market size or opportunity with high-growth potential.

Lesson 3: Know when to make the tough call

One thing I really admire Kevin is that he knew when to make the tough call.

Even though Kevin and Mike could easily raise funds from other VCs (given their success with Instagram) to keep growing Artifact, they decided not to simply because they knew they could have worked on other projects — something that’s newer, bigger, and better with the potential to reach many millions of people.

Besides, since Artifact was originally self-funded by Kevin and Mike, this could be another reason why they decided to cut their losses earlier than expected.

That's all for today

Thanks for reading. I hope you enjoyed today's issue. More than that, I hope it has helped you in some ways and brought you some peace of mind.

You can always write to me by simply replying to this newsletter and we can chat.

See you again next week.

- Admond

Disclaimer: The Runway Ventures content is for informational purposes only. Unless otherwise stated, any opinions expressed above belong solely to the author.