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Color’s a Failure But That’s Okay in Silicon Valley

After raising $41-million and then pulling off one of the most inauspicious debuts since the Flock alpha, Color is apparently preparing for a pivot.

Here’s what I say about this “pivot”: When you raise $41-million before you have any users or revenue, you shouldn’t get to pivot because it shows that the original idea was terrible, and who knows if the pivot is going to be any better.

Color entered the ultra-competitive photo-sharing market with a product that wasn’t compelling, interesting or appealing. It generated a lot of “meh”, which is the death knell for any start-up.

How Color managed to raise $41-million let alone $4.1-million is anyone’s guess but strange things happen in Silicon Valley that the rest of us apparently don’t understand. Despite Color’s disastrous debut, there was something under the hood that we explain its ability to raise so much money. So far, we haven’t seen anything other than a new project with super-duper potential (tongue planted firmly in cheek) called Blue.

Color illustrates why Silicon Valley is so fascinating and there are so many successful start-ups: failure is not bad even if means having a $41-million investment blow up. Failure means you get to pivot, learn from your mistakes, and then try again with the same project or another project down the road.

Everywhere else around the world, failure is a terrifying prospect. In Canada, investors are so scared of failure that start-ups struggle to raise even modest amount of seed capital. We look at entrepreneurs who have failed as losers, while Silicon Valley sees unsuccessful entrepreneurs as brave warriors.

In Silicon Valley, it means Color gets an opportunity to pivot. I would be extremely surprised if Color was even modestly successful but at least it gets to try.

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  • http://scottschnaars.com Scott

    Mark, I’d argue that it wasn’t so much the idea of Color that raised the $41M, but the team. 3 senior executives who have all had 8 & 9 figure exits, it was less about betting a boxed trifecta and putting it all on one horse, that has won in the past, to win again. As an investor, it is way easier, usually, to bet on a winning team than on a winning idea. Everyone has good ideas, few people can execute, fewer still have a track record of positive execution.

    When 2/3 of that team leaves (as it has), that is a bit more problematic than the original idea not working out. Also, when 2/3 of an executive team leaves, it requires that the entire business model be redefined – as they are doing now.

    I love that Silicon Valley encourages a swing for the fences mentality. $41M buys a ton of runway and the total team at Color isn’t all that big. Much of that is still sitting in an account somewhere. There are still checks and balances in place. VC’s just don’t write $41M checks lightly. Worst case scenario, the VC’s will get 90 – 95% of that back, but they took a huge swing at the ball in hopes of a big home run. That is something that should be celebrated.

    • http://www.markevanstech.com Mark Evans

      Scott,

      I think one of the mistakes that investors make with successful entrepreneurs is the assumption they will be successful again. Much of it depends on the idea, the team, timing and execution. Color may have had a blue-ribbon team but the idea wasn’t terribly original or compelling. Thanks for the comment. Mark

  • http://www.vestiigo.com Tim

    Mark – I’d have to agree. I would go as far as to say they don’t always recognize how important luck plays too, e.g. market conditions, economic climtate, consumer confidence etc.

    The team and their ability to execute are huge factors, but few will admit the roll luck had when a company takes off. This leads to the sophomore slump when the same team turns around and believe they have that magic formula and look to replicate it (and then don’t).

    The easiest thing for an investor to do is simply follow a “successful” team, they don’t need to worry about the mechanics or understand the business challenge behind the company. It’s definitely a worrying state given the opportunity cost of that capital – where could that $41 million have been deployed instead?