Money Rushes Into Social Start-Ups
The Wall Street Journal
Directions:
Please read the following article and answer the following questions in an email to me using complete sentences.
1. How much money did Color Labs secure in investments from venture capitalists? What is Facebook currently valued at based on investors valuation?
2. Do you think "Color" will be successful business? Why or why not? Would you use it?
3. What is something you learned from yesterday's guest speakers?
As Wall Street and other investors clamor for a piece of social-networking giant Facebook Inc., Silicon Valley venture capitalists are betting on a new generation of companies that hope to unshackle social networking from personal computers—and shift it to the cellphone.
On Thursday, Color Labs Inc., a phone-based social network founded by veteran entrepreneur Bill Nguyen, is opening its doors. The Palo Alto, Calif., start-up recently secured $41 million from top venture-capital firms including Sequoia Capital even before the company's iPhone and Android apps were ready to debut.
The idea behind Color is that a phone's location-sensing abilities can build a user's social network for them, allowing users to share photos, video and messages based simply on the people they're physically near. The company's view on privacy is that everything in the service is public—allowing users who don't yet know each other to peer into each other's lives.
Color is just one of a growing number of social start-ups betting on smartphones that are now attracting a venture-funding rush. Many of the companies feature photo taking and sharing at their core, such as Path Inc., founded by former Facebook executive Dave Morin. It received $8.5 million last month from Kleiner Perkins Caufield & Byers and Index Ventures. It has also had conversations with Google Inc. about a buyout, according to a person briefed on the discussions. Google declined to comment.
"We would have people show up at our offices every other day wanting to meet while we were trying to get work done," said Instagram co-founder Kevin Systrom. Since launching in October, the service has nearly three million users, he said.
The flood of venture capital into mobile social start-ups is the latest sign of Silicon Valley's Web-fueled boom. In recent months, investors have driven up the valuation of Facebook above $60 billion and social-gaming company Zynga Inc. to $10 billion.
Behind the spurt of new services is also the idea that the phone, carried by people at all times, can reinvent the notion of a social network by sharing more real-time information about where people are, what they're seeing and even who they're around.
The phone "provides a platform for developers to build experiences that are more personal in nature," said Path's Mr. Morin. What's different now is the ubiquity of smartphones and tablets. "Now you have an opportunity to create these experiences at scale," he said.
In both deals, the purchase price wasn't disclosed.
Last year, Facebook also unveiled a check-in service for its phone apps that allow users to volunteer their location to friends, and also find deals from nearby businesses. The company is now at work on efforts to integrate its capabilities deep into phone operating systems, potentially expanding the sorts of things people can do with their Facebook friends on the go.
Unlike Facebook, Color eliminates the acts of "friending" and selecting privacy settings. That's because when it is turned on, Color collects global positioning, gyroscope, ambient lighting and other data from phones to determine who else is in close proximity.
That means users will temporarily join the group of people at a birthday party or rock concert—even strangers on a train. Phones running the Color app automatically share photos and videos taken with other phones running Color nearby. "Instead of seeing your friends online alone in front of a PC, we allow people to interact with each other in real life," said Mr. Nguyen, who previously founded online music start-up LaLa, which was acquired by Apple Inc. in 2009, among other companies.
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