The way I look at the $41m investment is not that Color is worth ~$100m. There's no way it can be, with no users. Rather, I think the investors are betting that in 5 years' time Color will be worth $10b. From the investors' perspectives, they could be 95% sure that Color will flop and the bet would still be worth making.
Of course, you could say this about any "social startup" that thinks it will be "the next Facebook/Twitter". The investors have some reason to suspect that Color's team will be more successful than most, and those reasons include those mentioned in this article (previously successful team, new technology etc.). With the large amount of capital they are even more likely to succeed. But the chance that they will is still small, and yet it doesn't matter.
From this single data point you can't conclude anything about "the bubble". The investors' bet is that Color will be huge, not moderately successful. The chances that it will be "the next facebook" may be small (I won't put a number on it), but the potential ROI reflects it.
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The way I look at the $41m investment is not that Color is worth ~$100m. There's no way it can be, with no users. Rather, I think the investors are betting that in 5 years' time Color will be worth $10b. From the investors' perspectives, they could be 95% sure that Color will flop and the bet would still be worth making.
Of course, you could say this about any "social startup" that thinks it will be "the next Facebook/Twitter". The investors have some reason to suspect that Color's team will be more successful than most, and those reasons include those mentioned in this article (previously successful team, new technology etc.). With the large amount of capital they are even more likely to succeed. But the chance that they will is still small, and yet it doesn't matter.
From this single data point you can't conclude anything about "the bubble". The investors' bet is that Color will be huge, not moderately successful. The chances that it will be "the next facebook" may be small (I won't put a number on it), but the potential ROI reflects it.