They got the funding because the investors think there's a small but non-zero chance that Color will become "the next twitter/facebook". The ROI could be 100 fold. This is almost the opposite strategy to Yuri Milner, who is spreading his bets out over many companies. However, this strategy is no less valid. I say almost because the investors can make many (tens of) bets this size and still succeed in making money.
Yes. It's possible that Color could see a 100x return. It's also possible Mitt Romney will be president of the US in 2016. I think the odds are about the same for both. Yuri Milner's strategy makes far more sense. Where is the hedging of risk by putting $40 million in a single company that's still seed stage at best?
As for one strategy making more sense, you cannot simply assert that when you have no numbers to back that up.
You cannot hedge a single bet by definition. Clearly the hedging of risk takes place in the other investments of the companies Bain Capital, Sequoia, and Silicon Valley Bank.
I have no inside knowledge of what Color is doing, nor do I think it's particularly likely that they'll succeed in becoming a multi-billion-dollar industry. But it doesn't have to be likely, when your ROI is potentially so high.