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Photo-Sharing App Color Shutting Down, Sold for $7M After Raising $41M

All good things come to an end. Bad ones do too. After denying rumors last month that it would soon be shutting down, the over-funded photo-sharing app Color has now announced that it will indeed be shuttering its service.

A notice displayed at the top of the Color website states,

Alert: We hope you’ve enjoyed sharing your stories via real-time video. Regretfully, the app will no longer be available after 12/31/2012.

Although it raised a staggering $41 million in funding last year, the app was never very popular among photo sharers, losing out to companies that raised far less but offered far more (Instagram, for example).

Company CEO and serial entrepreneur Bill Nguyen now has a pretty nasty mark on his resume: TechCrunch is reporting that Apple only paid $7 million for Color’s “20 person technology team and some of its key intellectual property assets” — an order of magnitude less than the hundreds of millions (or even billions) that the investors were undoubtedly hoping to see when they pumped $41 million into the pre-launch startup.

It gets worse, though: TechCrunch is also reporting that a former employee is suing Color and Nguyen for “humiliation, mental anguish, and emotional distress.” The lawsuit has some pretty nasty accusations against Nguyen:

In or around late 2011, [then Color CFO Alyssa] Solomon began noticing discrepancies in Color’s finances. Upon information and belief, Defendant Nguyen was spending corporate funds on numerous personal items, such as charging personal items on Color’s American Express card and putting his family’s nanny, Sally Orr, and his family’s Lake Tahoe‐based ski instructor, Hillary Governer, on Color’s payroll.

In retaliation for Solomon’s investigation into his misuse of Color’s corporate funds and other fiduciary misconduct, Defendant Nguyen expressed his intent to fire Solomon in front of Color employees on numerous occasions. Color employees, including Plaintiff Witherspoon, had no doubt that Solomon was on her way out as a direct result of Nguyen’s vindictive threats.

That sounds strangely familiar.