APRIL 23, 2011
Foursquare Seeks Funds
By SPENCER E. ANTE
In the latest sign of the Internet gold rush, location-based service Foursquare Labs Inc. is looking to raise fresh funds at a price that would value the three-year-old start-up at as much as $500 million, people familiar with the matter said. That valuation could be a stretch for Foursquare, which gives users the ability to get deals or connect with friends by "checking in" wherever they are, but so far pulls in little revenue, the people said. Chief Executive Dennis Crowley is leading the effort and would like to raise $20 million to $40 million, a person familiar with the matter said, though the amount could change depending on the ultimate level of interest in the round. The situation remains fluid, but Mr. Crowley raised the issue as he toured Silicon Valley this week and has told investors he hopes to close the financing by early June, the person said. Foursquare last raised funds in the summer of 2010, pulling in $20 million from Andreessen Horowitz and other venture capitalists at a valuation of around $100 million, one person familiar with the matter said. Despite the high level of interest in that deal and the company's fast growth, people familiar with the fund raising say the company's nascent business model and fierce competition among location services will make it a challenge for Mr. Crowley to secure a valuation in the midhundreds of millions of dollars. Foursquare, based in New York City, is a free application that lets users win prizes and meet people by using their mobile phones to check in at their favorite bars, restaurants and stores. The company says it now has 8 million users, up from less than 500,000 about a year ago. This year, the company took its first steps toward commercializing its service by launching a merchant program that allows local businesses to offer coupons and other deals to consumers who check in near their locations. Foursquare says more than 250,000 merchants are using the new service. In March, Foursquare struck a deal with American Express Co. to offer discounts to cardholders. The companies ran the service on a trial basis at the South By Southwest conference in Austin, Texas, and plan to roll it out to more cities. Although Foursquare staked out an early lead in the location services market and has seen impressive growth, the company faces intense competition from a bevy of start-ups such as
Gowalla and Shopkick. Internet giants Google Inc. and Facebook Inc. are both adding location features as well. Since Foursquare entered the market for local merchant discounts, it is also competing against daily coupon websites Groupon Inc., LivingSocial and hundreds of other local commerce clones. A large slug of new money could help Foursquare to build out a local sales force to compete more aggressively against Groupon and its ilk. Right now, Foursquare has about 60 employees, while Groupon and LivingSocial have thousands, many of whom are salespeople.
In the latest sign of the Internet gold rush, location-based service Foursquare Labs Inc. is looking to raise fresh funds at a price that would value the three-year-old start-up at as much as $500 million.
A large slug of new money could help Foursquare to build out a local sales force to compete more aggressively against Groupon and its ilk. Right now, Foursquare has about 60 employees, while Groupon and LivingSocial have thousands, many of whom are salespeople.