More trouble for Color: shareholders and board vote to wind down company

http://venturebeat.com/2012/10/17/more-trouble-for-color-shareholders-and-board-vote-to-wind-down-company/

by waterlesscloud • 14 years ago

72 68 14 years ago

duiker101• 14 years ago

I wasn't expecting it.....that it took this long.

Same here. Maybe they should have been making something people would use instead of playing around with their ball pit and foosball table in their downtown Palo Alto office.

antr• 14 years ago

I still remember when Google allegedly offered $200m for this business-less startup. I know I'm playing Monday morning QB, but to reject such offer simply demonstrates lack of economic judgement - both at the management and investor level (and a lucky strike for Google).

We tend to complain plenty about Wall Street's greed but this represents no different behaviour.

arkitaip• 14 years ago

The danger of raising so much money - $41+ M - is that you risk being hold hostage by your investors.

ojbyrne• 14 years ago

This seems backwards. If you had invested significant sweat equity and then raised $41 million then perhaps so. But in this case it's more like you took your investors hostage and live in constant fear that they will escape.

TillE• 14 years ago

I think Google (or Facebook) would have done well with their technology and people. Color is a great feature, to paraphrase Steve Jobs. Though maybe not a $200m feature.

rikf• 14 years ago

You can develop a-lot of features and hire some (a-lot of) pretty fucking good people for $200m

waterlesscloud• 14 years ago

There's something in the idea of ad hoc social networks. Someone will find some gold there eventually.

MatthewPhillips6• 14 years ago

Google also, allegedly, offered GroupOn 6 billion.

cpeterso• 14 years ago

Pop!

nicholassmith• 14 years ago

I wonder if even the employees are surprised, I thought they'd already folded up given how quiet it's been from them.

hammock• 14 years ago

As troubled as Color is, it represents the future direction of location data. No longer will location data be just for its own sake- apps that answer "Where am I?" "Where are you?" "Where's lunch?" It's evolving to be something bigger. The future is integrating it into new uses, to answer questions we haven't even asked yet. For some examples, see:

News.me and Instapaper - Sync your articles to your phone as you leave your house, so that when you're underground on the train, you have all your content right there

Now - Combs instagram for clustered activity in your area, and then notifies you of what's going on (i.e. movie in the park that people are enjoying)

Dark Sky - Alerts you when it is going to rain in your precise location, based on radar

Square - Automatically logs you in as soon as you arrive at the coffee shop or wherever

What it boils down to is location is automating various parts of user interface. Making your life better in the process. (this post a tldr version of http://adage.com/article/special-report-digital-conference-s...)

danso2• 14 years ago

> (News.me and Instapaper - Sync your articles to your phone as you leave your house, so that when you're underground on the train, you have all your content right there

How is that location data? The sync operation is the same whether you're at home or at work.

evan_2• 14 years ago

It knows you're leaving a location, that's how.

MatthewPhillips6• 14 years ago

> The future is integrating it into new uses, to answer questions we haven't even asked yet.

Actually, I think that's the exact wrong lesson to take from this. That's what Color did: look for something that hasn't been done before and did that. It was a solution to a problem that doesn't exist: meeting strangers. People don't want to meet strangers, unless they're looking to hook up. That's why we construct amazing home entertainment systems; so we can avoid being around strangers. Ditto for Highlight and Airtime.

The takeaway from Color is not to go searching for the next big thing, but rather solve a problem that you yourself have (warning, you are probably not a normal person so don't spend too much time solving the problem before releasing something).

eta_carinae4• 14 years ago

> Actually, I think that's the exact wrong lesson to take from this. That's what Color did: look for something that hasn't been done before and did that. It was a solution to a problem that doesn't exist: meeting strangers

Color has never been about meeting strangers. Never.

v1 of the application allowed people who happen to be at the same place at the same time to share photos (still a great idea in my opinion, imagine concerts or random birthday parties where you hardly know anyone but everybody is taking pictures).

v2 was about live broadcasting (interesting tech but uninteresting product).

WiseWeasel• 14 years ago

And yet here we are, talking to strangers. All we needed was a good excuse and some notion of community expectations.

opensource• 14 years ago

Everyone agrees it's the future, but how will the Geosocial mobile proximity app/network nut be cracked-- to launch and achieve mass appeal/usage? http://news.ycombinator.com/item?id=4665294

k-mcgrady• 14 years ago

>> "News.me and Instapaper - Sync your articles to your phone as you leave your house, so that when you're underground on the train, you have all your content right there"

That's not really a feature, it's more of a hack. The only reason Instapaper does this (not sure about News.me but I assume it's the same) is to get around background downloading restrictions on iOS. It's the only was to activate the app and download articles in the background. I'm sure they would much prefer to just check the server every 5 minutes and download new articles without the user having to set their location.

tomasien3• 14 years ago

Color was coming out right as I was starting my first company. I was just becoming aware of Valley culture, and I found the Color story really, really confusing. As other things have started to click and I've moved from "not knowing anything" to "being consulted professionally on these matters" the whole story of Color remains pretty confusing to me.

tomasien3• 14 years ago

I don't mean to use hindsight to say I knew they were going to fail, just that I'm just as confused as to how this happens as I was the first day I got interested in startups.

cletus2• 14 years ago

This represents a rare (AFAICR) failure for Sequoia. I don't mean to be the naysayer but even at the time, for me, Color had disaster written all over it. All flash, no substance.

I wonder how much of that $40+ million is left and will be returned to investors. Anyone know how many employees Color has (had?)?

It's been said that the military is always busy planning for yesterday's war. The lessons of the past often don't reflect the change in circumstances. I think the tech sector suffers from a version of this, particularly for VCs. Facebook is big. Instagram sold big. Lots of people are chasing social. But IMHO social is largely yesterday's war.

Take one of my current bugbears: social search. Many view it as the Next Big Thing. Social is seen as a key future driver to recommendations and the like. IMHO this is completely overhyped. This is something that's been much-discussed already but a month or two ago I had an interesting conversation that I think shed some light on the problem.

Let's say Alice is friends with Bob. Bob likes a particular movie. We as programmers and entrepreneurs see an opportunity to use technology to solve a "problem" here: namely, how to allow Bob to express that information in such a way as to expose it to Alice, who it is argued, may well be interested in that.

The problem here is that the view of the "problem" here is backwards. We see social interactions as an inefficient way of disseminating information but in most cases in the real world, it's the opposite: that movie recommendation is simply a way of enabling and facilitating a social interaction. In other words, the movie recommendation is a means to an end not an end in and of itself. Too many social startups (IMHO) view the social interactions as a means to an end when in fact it is the end.

Anyway, my condolences in particular to the employees of Color, who I have no doubt worked hard over the last year or so. Luckily we're in a market where you should easily be able to move on to bigger and better things.

eta_carinae4• 14 years ago

> Color had disaster written all over it.

Hindsight is 20/20, it's easy to criticize now, but look at it from the investors' perspective:

- A CEO who not only sold his latest startup to Apple but who built about eight companies in the past twelve years, three that he sold and three that went public.

- A co founder team made from engineers that came from Google and Apple

... and you have a very solid foundation for a startup with much higher success odds than any other.

heyitsnick• 14 years ago

It's not just hindsight; a lot of people, commentators here and elsewhere, were bemused by the entire Color story. A ridiculous amount of money for a product that didn't exist, had no market, likely had niche interest at best, and had no clear business strategy.

It did have disaster written all of it, and a lot of people called them on it at the time.

As just one example, a quick google first turned up, but i read mountains of commentary like this: http://news.ycombinator.com/item?id=2655652

edit:the parent thread is better to read. this was after shit started hitting the fan, but i can't turn up earlier convos atm http://news.ycombinator.com/item?id=2655592

manuscreationis• 14 years ago

Hindsight is 20/20, but I think a lot of people looked at Color with very skeptical eyes. It seemed like a really strange concept (to me, at least, and I'm sure others) at the time that garnered a great deal of attention out of nowhere (not to mention an enviable amount of cash). I think some people wanted to believe it would be the next big "social thing", and they looked at the folks behind it and thought "Well, there's no way people wont eat this up!".

I mean, they made headlines by blowing a ridiculous amount of cash on a domain name. Why weren't they making headlines with how solid of a concept they had?

Why were we talking about their valuation, and how seemingly overblown it was, instead of how revolutionary their product was going to be, and how it was going to change / disrupt / whatever some existing market or industry?

Having an amazing set of people at the helm of a ship that no one seems interested in boarding doesn't do you much good.

wpietri• 14 years ago

You're right; that was probably the investor perspective, plus a slick sales job with a handwavey Big Idea (local! mobile! social!) and some hockey-stick curves. Pattern-matching and all that. But it's a little depressing that people will hand over $40m for that.

The core hypotheses could have been tested for far less. Indeed, the co-founders had enough dough that they could have tested them without VC involvement at all. There was no need to take investor money until they needed to scale.

Seems like a classic example of the Silicon Valley hype cycle, and the sort of idiocy that was a big feature in Bubble 1.0. "Internet! Shopping! Groceries! Can't miss!" And then we got WebVan. But I suppose Color should get some credit; they only blew tens of millions of dollars, not the $1 billion WebVan pissed away.

cletus2• 14 years ago

> Hindsight is 20/20

IMHO that's somewhat dismissive. I, for one, was pessimistic on the outcome of Color ever since I heard of it and I don't think I was alone and I"m sure I'm not particularly prophetic.

While your list of things are all good things to have (from an investor's point of view), at some point it doesn't add up and it just smells bad. Startups that make a big splash with little substance getting lots of attention at SXSW, lots of press on TC, etc tend to burn out rapidly.

Compare this to the likes of SpaceX (which, at this point, may well be one of the most important companies of the 21st century), Square (massive potential), Pinterest (despite the buzz dying down here I still think this one may well have legs), Instagram (which had a massive userbase), etc.

The things you listed come largely down to social proof. I get that they're important and why investors don't focus too much on the idea, given the likelihood of a pivot, but that doesn't mean you can look solely at social proof.

EDIT: to clarify, SXSW was an example of startups making a big splash, not specifically Color.

kmfrk• 14 years ago

Some dude once said that it can be preferable to invest in a company solely based on its founders, and that ideas aren't always a requirement.

pkulak• 14 years ago

I and everyone I know have been ripping on Color since the day they raised all that money. Maybe we all got lucky on one prediction, but for whatever reason, we were right. Hindsight or not.

MatthewPhillips6• 14 years ago

This is the wrong way to judge a company. Consumers don't care that the CEO is a startup flipper, or that smart people are working behind the scenes.

seivan• 14 years ago

This is not hindsight.

slashCJ• 14 years ago

Color was a completely reasonable investment, great team, ceo, vision. The failure wasn't the fact that they invested, its the check size. The guys at Sequoia should have said, great - love the idea, here's a $1M seed, make it happen. Produce a product we'll follow on with $5M, show traction, then you get the big round to scale.

A big round up front has the appeal to avoid the need to waste a product ceo's time of fundraising round after round. I think the big learning from the color investment is that a big round sets expectations unreasonably high. The press made a field day out of it as a sign of a bubble. The hindsight learning is big upfront rounds don't make sense, iterative investment that maps to the iterative learning of the company makes the most sense.

jpdoctor2• 14 years ago

> This represents a rare (AFAICR) failure for Sequoia.

??? Too numerous to remember. My favorite is still WebVan: $200M flushed down the toilet.

bmm6o• 14 years ago

> I don't mean to be the naysayer but even at the time, for me, Color had disaster written all over it.

I agree with you. I never knew what the investors saw in Color. But that's missing the point, really. Betting against companies is a sure thing - to a decent approximation, none of them achieve the kind of success that a VC is looking for.

rheide• 14 years ago

It 'only' has 440.000 active users? I'd be quite happy with a failure like that.

brk• 14 years ago

Given the amount of funding it required to get that many users, and the lack of a clear business model, I think that their active user count is about as relative as where they leased their copier from.

mibbitier• 14 years ago

Would you still be happy if you'd spent millions getting those 440k users?

For $41m investment, you could pay 410,000 people $100 to become a user.

topbanana• 14 years ago

Even if each one lost you money?

desigooner• 14 years ago

I wonder how many of those 440,000 "Active" users were a result of their partnership with Verizon to install Color on a bunch of their phones.

Also, does "active" mean # of installs in this case?

jrmg• 14 years ago

How does:

A source within the company tells us that the company’s shareholders and board last week voted to shut the company down.

Become, by the end of the article:

Color as a company still has plenty of cash in the bank, which means we’re likely to see another product from it before long.

devindra• 14 years ago

The company as it is may get shut down, but with the leftover cash it could easily rebrand under another name and a new product.

jpdoctor2• 14 years ago

Color as a company still has plenty of cash in the bank, which means we’re likely to see another product from it before long.

Sounds like cluelessness on the part of the reporter: You don't have a board meeting involving the words "shut down" and then decide it was really "pivot" after the fact.

The money will first go to any bondholders/accounts-payable, then the remainder back to the investors.

parfe• 14 years ago

Does this mean Verizon will allow me to uninstall Color? They bought their way onto my phone and I never even opened the app. You won't be missed.

protomyth• 14 years ago

I think Color shows one of the problems faced when people think about location and geo-locking of data. Color (V1 - no idea about V2) didn't bring people together or let distant people experience something that was happening to their friends, it created a pool of photos at a geo-locked location among friends with you and strangers.

Facebook works because it brings people together. Color only worked in places where dense numbers were expected. Targeting things that only work in a urban setting seems to be leaving out a lot of people including friends who just aren't there.

bduerst• 14 years ago

>brings people together

Facebook, and instagram, worked because they fed into the "braggart" mentality that has seized social media.

By allowing users to post doctored photos to their friends, you've tapped into their motivation to have better social standing in their "tribe". Few people care what complete strangers think about them.

aneth4• 14 years ago

How is it possible that Color has 120k daily active users. And certain that doesn't mean "no one is using the app."

Something is wrong here, either with facebook's numbers or this conclusion. That's not a small number.

Irishsteve• 14 years ago

I really liked the first colour, its just no one else used it meh. Tough luck for the guys hope everything works out as best as possible.

tomasien3• 14 years ago

I LOVED the first Color, if it had gotten any adoption I think it would have been awesome. Unfortunately (or perhaps fortunately) that's not how the world works, and it forces us to think beyond "hey wouldn't it be cool if everyone did THIS"

Kilimanjaro2• 14 years ago

Color was (and still is) a great idea.

Giving them $40M was not. Right there you killed the greatest force to do the undoable.

Motivation.

tatsuke95• 14 years ago

>Giving them $40M was not. Right there you killed the greatest force to do the undoable.

If motivation and investment capital are negatively correlated, then the Valley has bigger problems than I thought.

Kilimanjaro2• 14 years ago

> If motivation and investment capital are negatively correlated

At early stages, yes.

PG has it right, small investment enough to keep motivation high = food. Deliver and get another round = toys. Grow your user base and get another valuation = perks. Then you are ready to sit on the big table, with your balls, your morale and your thick skin.

If you give it all at once in the beginning, you lose motivation, morale, and your balls too.

Early money is the machete that will castrate you and turn you into a digital eunuch.

bane2• 14 years ago

This isn't trouble; this is the end.

bane2• 14 years ago

relevant http://news.ycombinator.com/item?id=4586946

vijayr• 14 years ago

This is somewhat similar to Cuil.

timmclean• 14 years ago

More trouble for Color: shareholders and board vote to wind down company

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