The social bubble
Back in 1999, it seemed anyone with a daft idea with dotcom attached to its name - say, boo.com - could walk into a venture capitalist's office and walk out with millions of dollars in funding.
Now, in 2011, it seems the same is true - except that you need to utter three words, social, photos, and app.
Overnight yet another hot new smartphone application, Color, has been launched by a Silicon Valley startup. It's a new way of sharing photos online, based on your location.
That's not at all remarkable - from Instagram to Path, sharing pictures in all sorts of different ways is a hot area right now.
What's amazing is that the company behind Color has attracted investment of $41m from some of the biggest names in Silicon Valley's venture capital community.
Now you can build an app in your back bedroom for virtually nothing, so it's not exactly clear what all that money is for, except recruiting lots of staff and opening a big office.
To be fair, one reason that the likes of Sequoia and Baine have been so generous is the quality of the people involved in Color.
They include Bill Nguyen, who created the music-streaming service LaLa and sold it to Apple, and the former chief scientist at LinkedIn, the professional social network which just signed up its 100 millionth member. So people with a track record of turning good ideas into valuable businesses.
How they are going to pull off the same trick with Color is not clear. The app has a new twist on photo-sharing - allowing you to see the photos of people nearby using the app, rather than those uploaded by friends. And everything you do with Color is public.
It’s not an immediately attractive concept - when I tried to explain it someone pretty technically savvy his response was: “So people nearby who are taking pictures can see my pictures whether I want them to or not? Creepy!”
Still, we all thought the same about other social media startups like Twitter which turned out to be huge hits. And I can see that at huge events like Glastonbury it might be fun to see what everyone else around you was posting.
But the problem with arriving on the scene laden with cash and making a big noise is that you need to be an instant hit, especially if your app depends on the network effect to become useful.
When I tried it out, it was difficult to see the point because nobody else nearby was using the application. And with influential bloggers like Robert Scoble already bad-mouthing Color for similar reasons, it is hard to see many deciding that this is something they have to try.
Right now, though, with sky-high valuations on everything “social” - from Facebook to Groupon to Zynga - the venture capital community seems willing to pay any price to get in on something that might be big one day. A few of their bets will pay off - but if the dot com bubble is anything to go by, most of those who invest in the social bubble will lose their shirts.