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by patrickambron
4812 days ago
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You might be right. I don't really know people who use foursquare, and it's use cases from a consumer standpoint are really limited to people who live in cities (forget middle america) That said, this round does make a lot of sense for investors and management. If they didn't raise a round they would have run out of cash. That's over 5 years and $100M down the drain today. Rather than write the entire thing off, they're giving the company another 2 years to create something worth more than bankruptcy. There is still a lot to bet on. I'm not sure where they'll concentrate, but there is something valuable in being the location based layer of the internet, or being in a position to make cities more searchable on the go. Notice it's a debt round (w no valuation). They aren't trying to value the company higher, they're just trying to keep it alive as cheaply as possible |
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I'm not questioning the decision on the Foursquare side anyway, although they are clearly avoiding releasing any data that would give people an understanding of the current state of the company. I question the decision on the part of the investors. This is a lot of money to put in, and for what? The best case might be a 2x-3x return, but in my opinion the median return on this is $0, all the money spent and virtually no value in the end.
I would imagine it's very hard for the management of FourSquare to let go emotionally, especially after hopes ran high in 2009/2010 and they had huge growth. It's clear that that growth has ended, and that they are now in a period of declining use. Combine that with an inability to monazite the existing user base and I see absolutely no hope of success.
I suppose they could pivot the company, but why would they do that? It would make far more sense to leave FourSquare and build a new company that didn't have all of FourSquare's baggage and dilution from investments in the old model.