More trouble for Color: shareholders and board vote to wind down company
venturebeat.com
venturebeat.com
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.
?
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.
We tend to complain plenty about Wall Street's greed but this represents no different behaviour.
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...)
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).
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).
Yeah, v2 was about a different non-problem (normal people broadcasting their everyday lives).
No, you never meet strangers. You get their photos, they get yours. You know nothing about them, except they are not too far from you.
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.
How is that location data? The sync operation is the same whether you're at home or at work.
That's true, but there's also a feature in Instapaper (et al.) that will allow you to set up a geofence, and when you leave the geofence, it will launch itself in the background and sync.
It's useful for users who like to read Instapaper on a subway where there's no cell reception- you can set it to sync when you leave your office or house, and it will have downloaded everything by the time you get underground. It's just an automatic convenience so you don't have to remember to sync it manually.
Even though I don't ride a subway I find it useful, sometimes I'll get to a restaurant for lunch and there will be poor cell reception, but I can still read stuff I've just added to Instapaper.
It's also kind of a hack to allow periodic background syncing, because iOS doesn't allow apps to launch periodically to update themselves, but it DOES allow apps to launch when a geofence boundary is crossed.
Here's a blog post about it:
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.
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.
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
1) That it was an interesting idea.
or
2) That it was a talented team which justified the funding.
or
3) That being a "fat" start-up they had plenty of chances to get it right.
I don't remember many (any?) people saying it was a good idea that would succeed on its own merits.
It was an "interesting idea" in that most people really didn't know what the heck they were doing, or what problem they were trying to solve.
All anyone really knew was that they got a boatload of money, and spent a lot of money to get color.com.
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.
While this was an erroneous assumption, I can see how this may have contributed to a perception of lower risk to the investors.
What they seemed to ignore was that stuffing a very early consumer startup with a ton of cash and a lot of hype to live up to might have contributed to the failure. Instead of giving them resources to figure out the space, investors contributed rope with which the company could hang itself.
You didn't get lucky, your prediction was easy. About 5% (at most) startups succeed, so saying that one is going to fail is not exactly making a risky prediction.
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.
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.
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.
??? Too numerous to remember. My favorite is still WebVan: $200M flushed down the toilet.
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.
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.
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.
Something is wrong here, either with facebook's numbers or this conclusion. That's not a small number.
For $41m investment, you could pay 410,000 people $100 to become a user.
Also, does "active" mean # of installs in this case?
Giving them $40M was not. Right there you killed the greatest force to do the undoable.
Motivation.
If motivation and investment capital are negatively correlated, then the Valley has bigger problems than I thought.
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.