Why Color’s $41MM funding isn’t crazy.

You may or may not have heard of Color, the photo sharing app based upon location. Either way, it has received $41 Million in venture capital funding and there was a lot of stir in the media saying that it was too much and absurd.

The firm that took the funding to this level was Sequoia Capital, which put $25MM in the company after they met with the founders for 45 minutes. If this bet turns out to be a winner, it will be huge for Sequoia, the downside- they lose $25MM. Significant? The probably lost more in SearchMe.

If you look at things in terms of how investors looked at it, you might be able to now justify the $41MM funding as well. $41MM now means Color might not need to raise money for the next 7 years, or ever. This leads the team to focus on building a rockstar product, and nothing else. No hesitation that money will run out, no worries about raising another round, or two. Just straight focus to the finish line- or at least the ability to focus until it goes “huge” like Twitter did in 2009. Then they might raise another couple hundred million, if needed.

Color spent about $500,000 on buying the domain color.com and colour.com, so they aren’t really wasting the cash, instead investing it in good branding.

Color isn’t an app that I would use. I’m not into sharing my pictures publicly at an event, frankly, I’d like to interact with the people around me at any given event, where I’d be inclined to taking pictures. However, just because I wouldn’t use it, doesn’t mean the “masses” won’t. In fact, I think this could turn into a MySpace type company- in terms of growth. Remember when youngsters flocked to MySpace? It was more of a personality social network, letting you put up music that you like and change the background of your profile, etc. Then people connected with others who liked similar things and had similar interests. Color has the potential to go huge, if the youngsters find it worthwhile. Imagine birthday parties, high school sports events, and concerts.

I don’t think that people’s grandparents or even parents will be on this type of service since it is a very public form of sharing. It feels like more people want private sharing abilities with their friends and family these days, especially with all the social movements going on throughout the internet.

In the end, time will tell if this company will be successful, but it’s hard to say that it will fail just because some tech journalists think so. I personally think Robert Scoble’s rant was a little overboard, but I agree with his point about the app launching at SXSW, it would have been a huge leap towards success, since people at SXSW are there to discover new happenings in tech, and it would be a perfect environment for this particular app to give a user experience for the first time.