Founders: Peter Pham, Bill Nguyen
Industry: Social Networking
Year Founded: 2011
Color Labs was once a red-hot Bay Area startup with whose founders managed to raise $41 million before they even released a product (a situation that sounds similar to music app Crowdmix's failure). Now, the company has become known as a cautious tale of the "tech bubble 2.0". It’s massive pre-product funding came from investor trust in the track record of co-founders Bill Nguyen and Peter Pham. Nguyen was well known around the Valley for previously selling the online music service Lala to Apple for $80 million and a large amount of stock, while Pham was the former CEO of the money-saving website BillShrink.
However, while rival photo-sharing social app Instagram thrived, Color's "$41 million party" came crashing down. What went wrong for Color?
Color essentially embodied the antithesis of the "lean startup". Instead of slowly developing and ramping up their product based on successes, Color was infamous for its fiscal irresponsibility and burn rate. Color started off by spending $425,000 for the domains color.com and colour.com. And before Color launched its app, the New York Times reported, "it (Color) rents a cavernous office in downtown Palo Alto, where 38 employees work in a space with room for 160, amid beanbag chairs, tents for napping and a hand-built half-pipe skateboard ramp."
The company also spent its money on a poor, unproven product that people ended up neither wanting nor using. Since Color was a social app that revolved around users' locations, in order for Color to work, large groups users had to be in the same locations to see photos. However, because Color did not widely seed the app prelaunch or slowly build a user base, upon Color's product launch, initial users arrived to a "ghost town" social network. The app received many poor reviews in the App Store from consumers who were confused by the app. “It would be pointless even if I managed to understand how it works,” one reviewer wrote in the Apple App Store.
Color tried pivoting to a video sharing app with Facebook integration, but the platform never gained the users it needed.
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.: Tear away label
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