Maybe I'm missing something, but I'd chalk it up to 2 groups with deep, deep pockets making a long shot bet because they can.
Once Sequoia invested, the acquisition was derisked for someone like Google. Then Google just needed to offer a price of some multiple of the investment ("How about 5x? Not bad for 6 months!"). Conversely, Sequoia might have hoped for a flip knowing Google was so aggressive for social startups at the time and invested accordingly. As far as I can tell, the Color leadership were blinded by their own genius and these early "signals" of success and they screwed up their acquisition, launch, and thus far all meaningful execution.
Once Sequoia invested, the acquisition was derisked for someone like Google. Then Google just needed to offer a price of some multiple of the investment ("How about 5x? Not bad for 6 months!"). Conversely, Sequoia might have hoped for a flip knowing Google was so aggressive for social startups at the time and invested accordingly. As far as I can tell, the Color leadership were blinded by their own genius and these early "signals" of success and they screwed up their acquisition, launch, and thus far all meaningful execution.