[avimeir]

I don't see the logic of raising $41M for a company that doesn't need it to buy equipment, raw material, real estate or physical stock of something.

Unless your revenue model is to do 5 rounds of financing and then move on to the next startup.

[davidu]

Some business models only work at scale. Scale can be users, data, traffic, partnerships, distribution or a variety of things.

This is a bet that Foursquare will find a business model as they become the location service everything builds on, or something else, that only works at scale.

In the scheme of private equity financings, this is a rather small deal and makes perfect sense for Foursquare.

And in fact, buying equipment is one of the worst things to do with cash. If you have the cash, then you should leverage that to finance or lease the equipment. :-)

[avimeir]

My issue with this is that history teaches us that you don't need big money to reach scale, you only need the cash to support scaling up from a technical POV. Look at FB early days, Twitter, etc.

Unless they're going to pay users to join them, I don't see how raising so much money is going to solve their problems.

[davidu]

Your examples are not just wrong, but the opposite is true. Twitter and FB needed crazy cash early on, and twitter still might. FB has a business model now, but they didn't for a long time. But they went from low millions to nearly a billion "over night" long after they had spent hundreds of millions of dollars.

Twitter is just now building a revenue business but has raised nearly a billion dollars.

Google is a decent exception to that rule, but only because they turned their revenue engine on just in time and it was an oil well of cash. Otherwise they would have had major cash issues as they scaled their infrastructure.