Color shuts down, assets acquired by Apple, founder Nguyen targeted in lawsuit
A new lawsuit filed against Color Labs and founder Bill Nguyen confirms the embattled video-sharing startup's rumored acquisition by Apple (NASDAQ:AAPL) and paints a disturbing portrait of the company's downfall. Color also has announced it will terminate services at the end of this year.
According to a complaint filed Monday in Santa Clara County Superior Court on behalf of Adam Witherspoon, an early Color Labs staffer and shareholder, "the company failed" and "key assets" were sold to Apple for an undisclosed sum. (Insiders peg the purchase price at $7 million.) Apple has also hired roughly 20 Color Labs technical employees, but not Witherspoon--the suit alleges that Nguyen directly interfered with Witherspoon's efforts to land an Apple position, and it also charges that Nguyen threatened violence against Witherspoon's young son on multiple occasions and once kicked his own son in the stomach "as a show of force to intimidate Witherspoon's son."
Witherspoon alleges that Nguyen "routinely humiliated, harassed, ridiculed, exploited and punished employees" as well. The suit also contends that Nguyen put a nanny and a ski instructor on Color's payroll. The firm's CFO Alyssa Solomon began investigating Nguyen's "financial and other improprieties" in 2011--in February 2012, she sent co-workers an email saying she quit, while Nguyen maintained that he fired her. Solomon nevertheless turned over evidence of Nguyen's alleged misspending to the Color board in June 2012; the following month, Nguyen invited an armed federal agent into the office, calling him "the guy I'm going to use to put Alyssa into federal prison."
Color and Apple have yet to respond to Witherspoon's suit. A notice posted Tuesday to the Color website reads "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." Business Insider adds that Color Labs wire transferred some remaining financial assets to shareholders Monday.
Founded in 2011 by Nguyen (who previously spearheaded cloud music platform Lala, acquired by Apple for $80 million in 2009, and mobile email firm Seven Networks) and Peter Pham, Color Labs raised $41 million from Sequoia Capital and Bain Capital Ventures prior to launch. In May 2012, the company announced a multi-year agreement with Verizon Wireless (NYSE: VZ) to pre-install its video broadcasting service on some of the operator's Android smartphones. The company was also a Fierce 15 award winner this year.
Consumers were slow to embrace the Color app, however, and in September, Nguyen took a sabbatical from his CEO duties, with sources indicating that his relationship with the Color Labs board of directors had grown increasingly strained over the summer months. A month later, VentureBeat reported that shareholders and board members voted to wind down the company, a development seemingly confirmed by an email attributed to Color Labs Vice President of Finance Andrew Urushima. Color Labs quickly denied the report: "Color is not shutting down," a spokesperson told VentureBeat. "The partnership with Verizon is very strong, and they have interesting product ideas." A follow-up story from VentureBeat stated the Urushima email was legitimate but incorrect.
The Next Web added that Nguyen first approached Apple's Senior Vice President Internet Software and Services Eddy Cue about purchasing Color even before his relationship with the board went south. In addition to its video sharing services, Color Labs maintained a patent for recording HD video as well as pending patents related to mobile social networking, GPS location and battery conservation. "It's not much of a stretch to say these patents could be applied to Apple's Photo Stream feature in iOS 6," The Next Web noted.
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