Liz Gannes and John Paczkowski

Recent Posts by Liz Gannes

What’s Really Going on With Color: A Small Apple Talent Acquisition

You’d be forgiven if you were confused by the swirl of stories around the social video start-up Color in the past 24 hours.

First, a leaked internal memo said the company was winding down. Then we were told that Color was not shutting down (and further, that some at the company had no idea where the memo came from — turned out it was from the VP of finance). Then Color was being bought by Apple for “high double-digits” millions.

Danny Jones

I’ve been reporting alongside these events, and heard all these conflicting tales, too — but while I couldn’t figure out how all of them could possibly be true, I held back from writing my own story. Now, having talked with numerous people about the situation, here is a storyline that actually checks out.

What’s really happening is that Color’s engineering team — about 20 people, comprising almost the entire company — is being “acqhired” by Apple at what’s being called a “nominal” price of something like $2 million to $5 million, according to multiple sources familiar with both sides of the situation. To repeat, there are no “double-digit” millions involved, according to many people familiar with the deal.

Apple is not buying Color’s technology, intellectual property, domain names or liabilities. Those are being left with the company, which still has considerable cash in the bank — something like $25 million — and is going to be wound down.

Apple and Color both declined to comment. Color CEO Bill Nguyen did not reply to a direct query about the talent acquisition.

There seems to be more bad blood than agreement between Color employees, Nguyen, former Color employees, Color investors and Apple, which is why you’re seeing all these conflicting stories.

Color had started out as a social discovery product with $41 million in funding from Sequoia Capital and Bain Capital, then pivoted to a Facebook-connected silent video app, and most recently had scored a deal with Verizon to distribute a live video app on Android phones that launched in May and showed early signs of going well.

The new app has been downloaded between one million and five million times, and has 460,000 monthly actives according to AppData, as well as additional direct usage of the app, which doesn’t require Facebook and so wouldn’t be counted by AppData.

Nguyen, a repeat entrepreneur who had previously sold Lala to Apple, is a great and energetic persuader, but many people are fed up with him and his short attention span inside and outside the company. He had recently been much less involved operationally, but he still controlled the board.

Besides Color’s conflict about products, there had also been accusations internally that Nguyen was using Color money for his personal expenses, such as his children’s ski lessons, but that seems to have never been fully addressed. It may not have happened, but many people thought it did, which gives you a sense of the atmosphere.

Sources said that the Color engineering team is likely to work on cloud technology at Apple. They’re obviously not going to be working on live video apps for Android. As for Nguyen, it’s not clear what’s next.

With reporting by John Paczkowski. 

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Another gadget you don’t really need. Will not work once you get it home. New model out in 4 weeks. Battery life is too short to be of any use.

— From the fact sheet for a fake product entitled Useless Plasticbox 1.2 (an actual empty plastic box) placed in L.A.-area Best Buy stores by an artist called Plastic Jesus