[muhammadatt]

What makes you think that Facebook allowed anything? What power does Facebook have to dictate anything to Instagram prior to purchase?

I think you have a misunderstanding of how deals like this take place. Facebook would have undoubtedly preferred to close the sale prior to the B round, but I am sure that whenever Facebook originally came calling, Instagram maintained that they were not interested in selling. I know this only because this is what hot target companies always say when receiving unsolicited offers. Instagram followed up by putting its money where its mouth was and closing a big round that gave it enough money to stay independent for a long time while growing the company. At that point, Facebook's only option was to go big or go home.

Facebook could have tried to preempt the B-round by raising its bid before the round closed, but it seems pretty clear that it was going to take about $1B to get Instagram off the block, whether that happened before or after the B round.

At the end of the day, the B-round does not make a huge deal to Facebook either way - to the extent that you are prepared to pay $1B for a company, you're not going to be too worried about a measly $50M going out the door.