What could inspire me to blog after such a long "rest?" (a deserved rest, I might add, what with new daughter, 6 other children to parent, marathon to run, companies to start, etc.)
Well, the color of money. No, not the funky colors of Israeli monopoly money, but the good old greenbacks of US of A, a land where anything is possible, including raising $41 million dollars for a start-up that had NOT EVEN LAUNCHED A PRODUCT. And they are proud, check the press release here. And proud they should be -- showing off the heights of lunacy in America today.
Yes, I am talking about the recent news item that the legendary VC firm Sequoia Capital led a $41 million round for the company known as Color. What does Color do? I am not quite sure, but thanks to my new friend Tal Givoly I was alerted to this review. Check it out for a laugh, in a sentence I will take this in a more serious direction...
In searching through the web for clues as to how this insanity happened, I stumbled across an interview Color founder Bill Nguyen gave to Business Insider. You should read it in its' entirety (here), but let me just dwell on a few choice lines. Before I do, let me expose something about my relationship to Bill -- we don't know each other, but have bounced around similar circles. When I co-founded Delta Three, he founded OneBox, both playing in VoIP space. When I was focused on mobile email/apps in founding NomadIQ, Omnisky, 2bAnywhere, he was doing Seven. And so on. Bill has made a LOT more money than I have at this start-up game, but like me still loves it. So he is somewhat of a kindred spirit. OK, now back to our regularly scheduled programming.
In the interview, Bill is asked many questions. But what astonished me was not all the nothing he had to say (after all, there is no traction, no growth, no rave reviews, just a lot of money sunk in). What astonished me are the following:
"There's not much we can do about the money we raised, I'm not giving any of it back."
And then when asked for the "business model" behind Color, he said:
BN: Advertising through the app. We're going to build a intelligent system that allows businesses to participate with their customers. So when you walk into a restaurant and you use Color, and they're also customers through a self-service Web interface -- or actually a self-service iPad interface -- every time you walk into the restaurant, your [first] name will show up with your picture. The maitre d' or receptionist will know who you are, they'll be able to welcome you, they'll know the last time you were here, they'll be able to see pictures if you took them here. They'll be able to provide you better service than they've ever before, that's going to drive up their revenue by increasing repeat business because we always want to go back where we feel welcome.
BI: They would pay you for that capability?
Double wow. He actually said his business model is....someone seeing your picture on an iPad when you walk into a retaurant. And someone paying for that. Heck, I would pay for that not to happen.
I am not going to enter the debate as to whether we are in a bubble or not...for another time, maybe after it bursts (oops, gave myself away there). But regardless this story is fascinating.
On the one hand, I love the fact that serial entrepreneurs can command massive investment on the basis of....whatever Color is, or will be. On the other hand, the VC community has forgotten that they are supposed to be professional investors. How much is Bill himself investing? That's what I want to know. After all, he has a shekel or two. If the answer is zero, than something is very wrong with this situation. Here we have a very wealthy tech guy, being given more money that 40 standard start-ups combined to develop...a photo sharing app that claims it is something else?
This sounds to me like some serious laziness on the part of Seqouia, and their tag along co-investor Bain Capital. At least they should give Bill a slap on the wrist for the line about not giving the money back -- or perhaps this is Bill's twisted way to improve the Palo Alto economy, by robbing from the rich and giving to the...rich?
Anyway, if anyone out there is listening, please help me understand the Color of Money.