
Foursquare's Valuation Is Getting Chopped in Half - dannylandau
http://www.inc.com/jeff-bercovici/foursquare-down-round.html
======
danr4
It will be a huge loss (not monetary) for a lot of people if foursquare closed
the shop.

Their database is pretty much unbeatable when you want to search for
meaningful places - a.k.a places people actually go to.

In addition, that database can be used for accurate analysis of different
vectors, like product sales predictions[1].

It really seems like they waited too long to monetize, and unfortunately
decided to go all-in on the social & gamified route. The problem is that even
some Xcorp buys them, it's only a matter of (short) time until all that data
will be practically stale, and getting people into the check-in frenzy will be
difficult.

EDIT: With that being said, I'm glad they're at least taking a down-round
since it means them, and investors, actually believe they can turn things
around.

[1] [https://medium.com/foursquare-direct/right-on-target-
foursqu...](https://medium.com/foursquare-direct/right-on-target-foursquare-
accurately-predicts-iphone-sales-4140c450a396)

~~~
tedmiston
> Their database is pretty much unbeatable when you want to search for
> meaningful places - a.k.a places people actually go to.

For points of interest, Foursquare varies heavily by city.

It's fantastic in NYC, but in Ohio, Yelp, Foursquare, and Google Maps' place
databases are all nearly equivalent.

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OoTheNigerian
As a keyboard analyst and former Foursquare user, I believe it was a mistake
to remove the "chekin" from the Foursquare app.

The new app (cannot recollect the name) would have been ideal for pushing
their new focus of review while Foursquare remained and did what it was meant
known for - checking in and providing data.

By creating a new feature/ direction for an old brand and moving the old
feature to a new brand, it caused a lot of confusion.

People simply decided to move on

~~~
rockshassa
I remember being dumbfounded when they announced they were removing check-in
functionality. It was the main thing I associated with the Foursquare "brand"
and I was a heavy check-in user at the time (the game mechanics were great).

They must have known everyone was there for the check-ins, and it seemed
arrogant of them to believe they could force all their users to migrate to
some other app. (talk about shooting yourself in the foot)

I never downloaded Swarm on principle (i can check in with the Facebook app if
i really want to). Foursquare did this to themselves.

~~~
sjwright
> I never downloaded Swarm on principle

On what principle?

~~~
rm_-rf_slash
Presumably the same principle of not letting ones self be jerked around by
companies who don't give a rat's ass about the consumer experience, like the
bizarre Netflix/Quickster fiasco from a few years back.

~~~
sjwright
The Netflix/Quickster fiasco changed the value equation for customers.

All that happened with Foursquare/Swarm was that the user had to press a
button to download another free app. I agree it was a silly decision, but was
ultimately just a 40 second inconvenience.

~~~
adventured
> ultimately just a 40 second inconvenience

Unless you're offering a large value proposition that the consumer finds it
difficult to say no to, you just elaborated one of the biggest challenges
companies face.

Whether one regards it as absurd or not, that 40 seconds makes a big
difference (not to mention people don't like change very much once they're
comfortable with a thing they use). It's in that 40 seconds that the consumer
shrugs and says to their self: meh, I don't feel like it, I don't want to deal
with this new app that I don't understand, my phone is already cluttered with
apps I don't use.

Shopping cart abandonment due to second thoughts on purchases. Drawn out
check-out processes. Long sign-up forms. Slightly slow web page load times.
Waiting in lines. Every study comes back with the same conclusion on consumer
behavior: those seconds matter _a lot_.

~~~
sjwright
I agree completely, I just wouldn't consider disinterest and dissatisfaction
as being synonyms for 'principle'.

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dangrover
I got a low-ish offer from them four years ago, and the HR person tried to
talk up the value of the equity, saying "Right now, this equity grant is worth
$XXX, assuming our valuation doubles in the next year, your equity will be
worth $YYY!

For what it's worth, also included in the list of perks was an Rdio
membership.

In spite of this, I actually wish I hadn't turned them down, since everyone
I'd met interviewing was awesome.

~~~
Disruptive_Dave
Don't know why, but I got a particularly special giggle from the Rdio mention.
Thanks :)

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empressplay
...and they won't be the last, as more and more later-stage "startups" begin
to show they won't ever make the returns their valuations would suggest, and
start begging for cash as they burn through their existing investments and
meagre revenue.

~~~
frik
Could this lead to an domino effect?

~~~
rm_-rf_slash
Tech investment crashed in the 90s because billions were poured into companies
that didn't make money, there's no reason to believe it couldn't happen again.

I still have absolutely no idea how Foursquare makes money.

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danieltillett
I'm impressed that it is only half. Most of the time once the illusion is
broken you are in a 90 degree down decline.

~~~
grizzles
Agreed. Maybe the existing investors are refinancing it. In that case they
could be in the weird situation of having the perverse incentive (compared to
a new investor) of trying to salvage the valuation by throwing more bad money
at it. Sunken costs fallacy in action.

~~~
sjwright
Except that Foursquare/Swarm isn't entirely valueless. Depending where you are
on the planet, there can be a lot of great data in there — some of it
particularly invaluable for not being intensely gamed like TripAdvisor/Expedia
are.

When I was traveling around Europe this year, in many places Foursquare
recommendations were consistently accurate and of good quality. (My one wish:
integrate Google Translate for tips! The locals' tips would surely be the most
worthwhile to read.)

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tedmiston
> Down rounds are typically punishing for founders, reducing both the value
> and the size of their stakes in concert. Frequently, doing one triggers
> "anti-dilution" mechanisms designed to protect early investors by carving up
> founders' equity still more.

In practice, how do these anti-dilution clauses play out?

Do those protected previous investors get issued more shares to hold their
same percentage post-money?

Are full-ratchet anti-dilution provisions common?

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SEJeff
I just wonder when the same will happen to Groupon, a former VC darling that
has seriously floundered the past few years.

~~~
replicatorblog
It's already happened. Groupon is a public company and we got to watch it go
from ~$26/share to ~$3/share in real time!
[https://www.google.com/finance?cid=10792264](https://www.google.com/finance?cid=10792264)

~~~
pwm
According to wikipedia it was valued at $13B when floated. Then lost ~90% of
its value. That means $11.7B. Wow. ELI5: did anyone profit from this other
than the founders?

~~~
AznHisoka
Yep, people who knew a lot about their business model and shorted it. Just
like the ones who shorted zynga and demand media.

