I don't know. Burning $40 million for a new venture takes a special kind of ignorance and incompetence when you're surrounded by shaking heads from all corners.
Sequoia believed in them. Maybe they haven't opened the bag of tricks yet. It's too early to write them off.
All those dollars aren't for equipment or even for salaries, they're likely for marketing/advertising in order to do a big rollout in the already crowded world of mobile social networks.
Further supporting my point. In 1999 you needed millions in the bank just to get the product ready for prime time, and competition was thin. In 2011 you got everybody and their 19-year-old college dropout brother pursuing a lean startup using free open source tools on bargain-basement hosting that can support tens of thousands of users for less than a 1-bedroom rent.
Raising 41m for a mobile app pre-launch is just too many eggs in one basket IMHO. Obviously this has tainted everyone's views of Color, and maybe they actually need the money and have a solid strategy, and I won't lie and say I'm not a little envious of their fundraising power, but mustering all the objectivity I can, I just can't get behind the strategy. Putting that kind of money in the bank on day 1 just drains the hustle right out of the team.
I find it hard to believe that anyone will lend them money in the next 24 months, so I'll take the over.
Seriously though, how is one expected to deploy that much cash so quickly with something so new and experimental? I can't help but feel there's more to the story.
The only reasonable explanation I can come up with is that they were going to go the service -> API -> platform -> advertiser platform -> data mining -> $$$ route. Or something like that.
