Overview

Product Description

Color Labs' main product was a social application for photos called Color for Facebook. It allowed people to take photos in addition to viewing other photos also taken in the vicinity. The application grouped photos based on a user's friends so that he or she is more likely to see those that are more relevant.

Quick Stats

2010

Started in

Oct, 2012

Closed in

11-50

Employee (s)

$41,000,000

Total Raised

Why did Color labs fail?

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Evan Lee

Updated on 15 Aug, 2017

Poor Product

Burn Rate

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 <a href="https://collapsed.co/startups/crowdmix" style="font-family: Helvetica, sans-serif;"></a><a href="https://collapsed.co/startups/crowdmix" style="font-family: Helvetica, sans-serif;"></a><a href="https://collapsed.co/startups/crowdmix" style="font-family: Helvetica, sans-serif;">Crowdmix's</a>&nbsp;failure). Now, the company has become known as a cautious tale of the "tech bubble 2.0".&nbsp; Color Labs' massive pre-product funding came from investor <a href="http://mashable.com/2012/10/17/color-shuts-down/#LFfelTdFkGqo" style="font-family: Helvetica, sans-serif;">trust</a> 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 "<a href="https://www.fastcompany.com/1784823/bill-nguyen-the-boy-in-the-bubble">ghost town</a>" social network. The app received many poor reviews in the App Store from&nbsp;consumers&nbsp;who were confused by the app.&nbsp;“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.After Color's re-launch failure, Nguyen removed himself from day to day operations in the company and faults in his&nbsp;leadership issues&nbsp;became apparent. As <a href="https://pando.com/2012/09/28/bye-bye-bill-how-nguyen-doomed-color-from-the-start/">Pando</a> explains, Nguyen treated the launch of Color in 2010 the same way he treated the launches of his first companies back in the 1990s. Back in the "Web 1.0" of the 90s, large Series A rounds were king and "winning was seen as a race to get as many resources as possible, buy a pricey domain, do as splashy a launch as possible and do whatever marketing you needed to land-grab users".&nbsp;In 2010's Web 2.0, a lot of that had changed. Lower barriers to entry allowed for more competition and first movers had less of an advantage. Companies succeeded by raising a modest round, getting a MVP, then iterating and growing from there. In&nbsp;the Web 2.0, consumers did not have to be told which products to use– they could, and would, choose the winners themselves.

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