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Hmph. If nothing else, posts like this are terribly offensive to the entrepreneurs that dedicate their lives to products like Color. Did anyone consider that m

by pclark 16y ago

Hmph. If nothing else, posts like this are terribly offensive to the entrepreneurs that dedicate their lives to products like Color. Did anyone consider that maybe Sequoia, who have invested in companies that make up over 10% of the NASDAQ know what they are doing? Companies like Color, AdKeeper and Flipboard have "crazy" valuations based on the founders having ridiculous resumes. They have all created billions of dollars of value for their investors, hell, why wouldn't you invest in that potential again? Rationalising this metaphorical bubble to domain prices is absurd, since domains have always been traded for eyebrow raising prices. You think that the domain color.com or path.com will be worth $10 in 5 years time? Seriously? Color almost certainly didn't require $41M to get to the product you see today, did people ever consider the company is - gasp - launching early and has the capital to iterate and scale for the next few years? I can think of lots of startups that raised $10M - $20M at company formation and has then spent the next few years (or more) iterating. Investors are less interested in where you are today, compared to where you are going

MatthewPhillips 16y ago
41 million for growth for an app before it launches?
- deleted 16y ago
  [deleted]
- blantonl 16y ago
  Color has launched on both iOS and Android. In addition, they didn't spend 41 million, they received funding in the amount of 41 million.
  - MatthewPhillips 16y ago
    I understand that. My comment was why invest in scaling when the need to scale hasn't been established?
    - blantonl 16y ago
      Bain Capital, Sequoia Capital, and Silicon Valley Bank, the ones who are funding this, see great potential in the team that is bringing color to market. They've given a long runway to Color, and if the airplane takes off those investors reap far more rewards then they would have if Color is wildly successful and other investors were able to participate in subsequent rounds of investment. I cannot emphasize enough that this is a strong team (investors and owners). There are almost certainly specific targets and objectives this team needs to meet before they collectively decide to spend the entire 41 million. Which means this thing could crash and burn after spending 3 million, and they unwind from there.
      - 18pfsmt 16y ago
        I believe Silicon Valley Bank does debt financing rather than equity financing. On top of that, I believe all 7 co-founders are worth over $1M each and several are worth multiple $M with multiple startup exits over the last 10 years.
      - moe 16y ago
        They've given a long runway to Color A long runway? Sorry, but I had to chuckle on that. That would be one hell of a runway. More akin to a wormhole.
deleted 16y ago
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kovar 16y ago
- If it is going to take them a few years to get to their eventual, profitable, goal, why invest $41M now? Why not invest $20M now and another $21M when they're on the track that will be truly profitable, once they've demonstrated where they are going? - Is calling the investment "crazy" really offensive to the entrepreneurs? It is more a compliment to them than anything else. The investment may be crazy, but the entrepreneurs managed to get people to shell out $41M. That takes serious talent. - Getting $41M for color is insulting to a lot of other entrepreneurs that have dedicated their lives to products like color and received nothing. Give half of that $41M in $250,000 chunks to 80 other startups and Color would still have $20M to play with. If you know how these large investments work, $41M in Color may seem very sane, but to a large percentage of the population, it does appear crazy, particularly in light of the dot com bubble. Perhaps you could point us to a good article showing why this is a sound investment?
- deleted 16y ago
  [deleted]
- pclark 16y ago
  I cannot point to an article about why this is a sound investment, I guess my entire point was that I do not understand why everyone has to jump all over this as to why it is a bad investment, since you have such a hilariously small data point to base any opinion on.
  - kovar 16y ago
    You assume that we have a small set of data points, which is a really bad assumption, even if you were just making it about me, personally. Assuming that the HN community commenting on this bubble/not bubble doesn't have a lot of experience is a bad idea. Even more so if you cannot point to a single article covering why this investment is sound.
- notahacker 16y ago
  Picking up on your third point, if your investment thesis is that mobile social networks are a huge untapped winner-takes-all market, spreading your cash index-fund-style over the most promising 80 mobile social startups (kids in college dorms without the resume maybe...) and saving the rest of your war chest and partner attention for the ones showing signs of traction would also probably be a safer bet.
tyng 16y ago
"Did anyone consider that maybe Sequoia, who have invested in companies that make up over 10% of the NASDAQ know what they are doing?" Neither Merril Lynch nor Lehman Brother knew what they were doing. "Investors are less interested in where you are today, compared to where you are going" Yes the future is important, but there's the risk-reward trade-off. If a company looks badly risky today, a rational investor will steer away from it. "If nothing else, posts like this are terribly offensive to the entrepreneurs that dedicate their lives to products like Color." And for your first point, a well functioning entrepreneurs ecosystem require both dedicated entrepreneurs AND rational investors. This is not to demean the entrepreneur.
- pclark 16y ago
  So now whenever someone with a successful past history does something moderately contrarian, people are just going to recite the banking collapse? "Rebecca Black signed onto the same record label as Miley Cyrus, I think the label knows what they are doing" ... "We all though Lehman Bros knew what they were doing, dude" Anyway, I like people that stray from the field and do contrarian things that other people think are crazy, if nothing else in 10 years it'll be exceedingly satisfying for these kinds of investors to point at all the haters (and if they fail, well, everyone was right blah blah serves them right for taking risks)
  - tyng 16y ago
    Ok agree the Lehman Brother example was a bit corny, but the point I'm trying to make is that we all make mistakes, including top investors like Sequoia - in fact the business model of a VC fund is to invest in 10 equally promising startups and hope 1 of them will make 100x profit and cover the loss of the other 9, and Color could be one of the 9. Also, being a contrarian investor means you sell in a bubble (when everyone is buying) and buy in a crash (when everyone is selling).
arkitaip 16y ago
I don't agree with your argumentation but I upvoted you because there is something very disgusting when people downvote simply because they disagree with an opinion. Why people cannot reserve their downvotes for factually incorrect, FUD-y, abusive or trollish posts is beyond me.
brown9-2 16y ago
The idea that criticism is insulting, or that we should implicitly trust investors because they have been successful in the past is a bit ludicrous. I'd prefer to see evidence of success before assuming it will happen.
JoeAltmaier 16y ago
The hero worship of folks associated/intrinsic to a previous success has a shakey foundation. A good number of successes were at the right place, at the right time. The details of who was manning the ship were, ok not irrelevant, but not meaningfully correlated with the magnitude of the previous win. Sure they were competent managers, which is required of any company to succeed. But they were not Responsible for the success. So its a little like sympathetic magic - if we get guys who were close to that other success, maybe some of the halo is still stuck to them and voila! investment rationalization. Some of us have seen dozens of sure-fire new companies, staffed with experienced professionals, fall on their faces. Younger, perhaps naieve investors still have some lessons to learn. Admittedly, the article pointed to 6 indicators of a bubble which are probably not quite right; then defended only 1 of them, and waved their hands about the others. That is what I found a little offensive, but to my logical sensibility and not as an entrepreneur. Entrepreneurs have to weather a lot more than link-bait, and need to grow a much thicker skin.

by pclark 16y ago

MatthewPhillips 16y ago

41 million for growth for an app before it launches?

deleted 16y ago
[deleted]
blantonl 16y ago
Color has launched on both iOS and Android. In addition, they didn't spend 41 million, they received funding in the amount of 41 million.
- MatthewPhillips 16y ago
  I understand that. My comment was why invest in scaling when the need to scale hasn't been established?
  - blantonl 16y ago
    Bain Capital, Sequoia Capital, and Silicon Valley Bank, the ones who are funding this, see great potential in the team that is bringing color to market. They've given a long runway to Color, and if the airplane takes off those investors reap far more rewards then they would have if Color is wildly successful and other investors were able to participate in subsequent rounds of investment. I cannot emphasize enough that this is a strong team (investors and owners). There are almost certainly specific targets and objectives this team needs to meet before they collectively decide to spend the entire 41 million. Which means this thing could crash and burn after spending 3 million, and they unwind from there.
    - 18pfsmt 16y ago
      I believe Silicon Valley Bank does debt financing rather than equity financing. On top of that, I believe all 7 co-founders are worth over $1M each and several are worth multiple $M with multiple startup exits over the last 10 years.
    - moe 16y ago
      They've given a long runway to Color A long runway? Sorry, but I had to chuckle on that. That would be one hell of a runway. More akin to a wormhole.

deleted 16y ago

[deleted]

kovar 16y ago

- If it is going to take them a few years to get to their eventual, profitable, goal, why invest $41M now? Why not invest $20M now and another $21M when they're on the track that will be truly profitable, once they've demonstrated where they are going? - Is calling the investment "crazy" really offensive to the entrepreneurs? It is more a compliment to them than anything else. The investment may be crazy, but the entrepreneurs managed to get people to shell out $41M. That takes serious talent. - Getting $41M for color is insulting to a lot of other entrepreneurs that have dedicated their lives to products like color and received nothing. Give half of that $41M in $250,000 chunks to 80 other startups and Color would still have $20M to play with. If you know how these large investments work, $41M in Color may seem very sane, but to a large percentage of the population, it does appear crazy, particularly in light of the dot com bubble. Perhaps you could point us to a good article showing why this is a sound investment?

deleted 16y ago
[deleted]
pclark 16y ago
I cannot point to an article about why this is a sound investment, I guess my entire point was that I do not understand why everyone has to jump all over this as to why it is a bad investment, since you have such a hilariously small data point to base any opinion on.
- kovar 16y ago
  You assume that we have a small set of data points, which is a really bad assumption, even if you were just making it about me, personally. Assuming that the HN community commenting on this bubble/not bubble doesn't have a lot of experience is a bad idea. Even more so if you cannot point to a single article covering why this investment is sound.
notahacker 16y ago
Picking up on your third point, if your investment thesis is that mobile social networks are a huge untapped winner-takes-all market, spreading your cash index-fund-style over the most promising 80 mobile social startups (kids in college dorms without the resume maybe...) and saving the rest of your war chest and partner attention for the ones showing signs of traction would also probably be a safer bet.

tyng 16y ago

"Did anyone consider that maybe Sequoia, who have invested in companies that make up over 10% of the NASDAQ know what they are doing?" Neither Merril Lynch nor Lehman Brother knew what they were doing. "Investors are less interested in where you are today, compared to where you are going" Yes the future is important, but there's the risk-reward trade-off. If a company looks badly risky today, a rational investor will steer away from it. "If nothing else, posts like this are terribly offensive to the entrepreneurs that dedicate their lives to products like Color." And for your first point, a well functioning entrepreneurs ecosystem require both dedicated entrepreneurs AND rational investors. This is not to demean the entrepreneur.

pclark 16y ago
So now whenever someone with a successful past history does something moderately contrarian, people are just going to recite the banking collapse? "Rebecca Black signed onto the same record label as Miley Cyrus, I think the label knows what they are doing" ... "We all though Lehman Bros knew what they were doing, dude" Anyway, I like people that stray from the field and do contrarian things that other people think are crazy, if nothing else in 10 years it'll be exceedingly satisfying for these kinds of investors to point at all the haters (and if they fail, well, everyone was right blah blah serves them right for taking risks)
- tyng 16y ago
  Ok agree the Lehman Brother example was a bit corny, but the point I'm trying to make is that we all make mistakes, including top investors like Sequoia - in fact the business model of a VC fund is to invest in 10 equally promising startups and hope 1 of them will make 100x profit and cover the loss of the other 9, and Color could be one of the 9. Also, being a contrarian investor means you sell in a bubble (when everyone is buying) and buy in a crash (when everyone is selling).

arkitaip 16y ago

I don't agree with your argumentation but I upvoted you because there is something very disgusting when people downvote simply because they disagree with an opinion. Why people cannot reserve their downvotes for factually incorrect, FUD-y, abusive or trollish posts is beyond me.

brown9-2 16y ago

The idea that criticism is insulting, or that we should implicitly trust investors because they have been successful in the past is a bit ludicrous. I'd prefer to see evidence of success before assuming it will happen.

JoeAltmaier 16y ago

The hero worship of folks associated/intrinsic to a previous success has a shakey foundation. A good number of successes were at the right place, at the right time. The details of who was manning the ship were, ok not irrelevant, but not meaningfully correlated with the magnitude of the previous win. Sure they were competent managers, which is required of any company to succeed. But they were not Responsible for the success. So its a little like sympathetic magic - if we get guys who were close to that other success, maybe some of the halo is still stuck to them and voila! investment rationalization. Some of us have seen dozens of sure-fire new companies, staffed with experienced professionals, fall on their faces. Younger, perhaps naieve investors still have some lessons to learn. Admittedly, the article pointed to 6 indicators of a bubble which are probably not quite right; then defended only 1 of them, and waved their hands about the others. That is what I found a little offensive, but to my logical sensibility and not as an entrepreneur. Entrepreneurs have to weather a lot more than link-bait, and need to grow a much thicker skin.