Forget about whether this means we're in a bubble or all the talk about whether this was smart or not, but a new application company (social photo sharing) raised $41MM. They spent $500k on the domain names. And they probably could build out a nice new office for $1MM. But what could they possibly do to advance their business with $40MM left over?
I just want to know what purpose they could actually have for this money.
According to The Wall Street Journal :
"They [Sequoia] asked, ‘If you had more capital, could you get to the future faster?’ [Color founder] Nguyen said. “‘Will $25 million help you get five years into one?’ We were enthusiastic out of our mind to say yes.”What probably happened here is that Sequoia needs to put large chunks of money to work at a time, and they're choking their companies with cash because their LPs don't like to see money sit around uninvested. Sequoia could fund more companies but that would take more work. It's easier to just give every company twice the cash.
I'm not sure I understand 100% what Color is about, but they seem to target real life social networks instead of internet based networks. I could be your facebook and twitter friend, even if we've never met in real life.
Color SEEMS to address that by providing geographic based networks. This makes their critical mass of user much harder to obtain since 100 users in 100 cities means nothing to them while 100 users in the same starbucks is what they aim for.
Thus my guess : They will invest massively in end user marketting. Buying every billboard in New York city for a week must be quite expensive.