Mobile photo sharing app colour just announced it raised $41 million in funding from marquee investors, Sequoia and Bain.That’s a lot of money for a pre-launch startup.
But actually, the raise makes plenty of sense.
The most important thing to remember is that Sequoia and Bain almost certainly bought preferred shares.
That means they will get the first $41 million dollars back in any sale of colour.
Considering colour has, right now, $41 million cash in the bank, it’s almost a certainty that the startup will sell for at least that much money.
What’s more, the guys behind the app have a strong track record of building and selling companies. They make money for VCs, so from that perspective it’s not a massive risk for the investors.