As someone else commented, Facebook could easily add a feature to show pictures from friends geotagged with your current location. (Not a perfect replacement but a lot of the magic.) Apple also appears to be getting aggressive in this space with the new version of mobile me. Color has an interesting vision, but I think traction as a photo sharing add-on is going to be tough once the social network and the mobile device maker get into the same exact business.
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What is far more likely is for Color to try to get themselves acquired by Facebook.
If this is their real company strategy, the $41M investment actually makes sense.
I'd say it's the opposite, it's made them very expensive to acquire. It's not inconceivable that with the right team and a very impressive tech demo Facebook might have been prepared to sink >$41 million into a strategic aqui-hire at a very early stage.
Now to give the VCs a return on their investment they're probably expected to exit at north of a billion, which means they're going to have to show Facebook something special in terms of revenue or user-interaction generation or targeting they can't get from any of the many other smart developers who've taken less funding for their location startups.
You don't think the investors would be happy with $400MM in pre-ipo Facebook shares?
I'm not sure Facebook's investors would be happy with $400MM in pre-IPO shares, except in the unlikely event the service is generating significant revenue per user or bigger than all their location-based competitors before Facebook IPOs. I believe that's double Y Combinator's biggest exit, so it's not as if you can't pick up great hackers with great products and actual revenues for a lot less, and with pre-profit location-based startups being not-exactly-unfashionable at the moment Facebook are spoilt for choice if they want to make strategic acquisitions in that space.
I think Color have committed themselves to trying to build something big enough to be considered a Facebook alternative. Taking $41 million in a Series A buys you a lot of premature optimisation or a lot of runway if you don't think you're going to get a better valuation in a series B round. It also more or less rules out the quick exit.
That's pure bubble talk - "we don't have to generate profit to justify the investment, we'll just get acquired by someone else"
SOMEONE has to generate a profit based on the technology which justifies the investment or acquisition cost, whether it's color or their eventual acquirer.
And I'm saying, the acquisition is already planned and these investors aren't investing in Color, they're essentially investing in Facebook pre-IPO without going through Goldman's special investment vehicle.
None of the investors mentioned (Sequoia, Bain Capital, SV Bank) are Facebook investors yet.
But... what if facebook just buys one of the inevitable competitors for a fraction of the price? Or builds the feature on their own?
So far I'm missing the special sauce that makes them a must-buy-can't-clone.
that's exactly what I was thinking. I see this as being a very novel concept that if reaches a certain threshold of brand-awareness and good design could be a perfect acquisition target because merely replicating the feature-set would be like Google Video before Google acquired YouTube (it wouldn't be about the technical capability as much as the culture and community around the novel concept).
Perhaps we're seeing the start of something new..
B2C = Business to consumer
B2B = Business to business
B2A = Business to acquisition?Building to flip is hardly a new trend.
True, but I just gave it a new acronym :)
Edit: I'd like to clarify that the business model I'm suggesting feels different somehow. Yes people have built companies to flip before, but their valuation was still based on what they do as a company.
If what I am suggesting is true, Color's valuation is based on potential shares in the company that it's being flipped to. These VCs are essentially investing in Facebook, pre-IPO (set for 2012) without going through Goldman's special purpose vehicle, and without dealing with the SEC's 500 shareholder regulations.
If true, that would make this Color investment a very clever hack.
the other scenario is that they have a tiny bluetooth camera pendant/lanyard (like microsoft's sensecam) that would allow people to literally immerse themselves in their friends' surroundings. having this bluetooth device and the platform would allow for a much higher valuation.