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Venture Capitalists Explain Foursquare's Juiciness, Join Sharing Revolution They've Funded

4sq funding

Foursquare has, as rumored, raised a chunk of venture cash that'll let it expand its business significantly, and fast too. But what exactly is so hot about this hot-topic location-based game tech? Unusually we have VC insight on the matter.

We'd heard about the rumors last week, and they were immediately interesting as Foursquare seems to be busily rocketing to success in the location-based "check in" game that's got many a smartphone-owner playing along. Foursquare's business model is a treat all by itself, as the company is pursuing high-profile advertising partners to try to build its game into a more involving "user experience" via ads, rather than opting for the simpler Google-like system of merely maximizing ad exposure.

Foursquare's own co-founder and CEO Denis Crowley blogged about the news and revealed some interesting stuff, charting Foursquare's meteoric rise from a kitchen-table business start just a year ago. "Today we closed on a $20m Series B round with Union Square Ventures, O'Reilly AlphaTech Ventures and our newest partner, Andreessen Horowitz," Crowley wrote, before concentrating on talking about AH. Andressen and Horowitz themselves "know better than anyone how to transform startups into successful organizations. As we continue to rapidly expand to take advantage of the opportunities in front of us, Ben and Marc's expertise in growing companies will be invaluable." The emphasis on developing Foursquare is obviously going to be in two directions: Building its team so that it can support its expanding infrastructural needs, and then gaining fresh coder and business talent to innovate the business model.

What is unusual is that Ben Horowitz himself has blogged on the funding—in the tight-lipped world of VC cash, it's pretty rare to get info from the horse's mouth. Horowitz reveals his firm prefers "founding CEOs" as it means the "keeper of the vision" is deeply involved in developing the business from its initial seed. According to Ben the reasons for investing in Foursquare should be clear for all to see:

  • "When you look at the numbers [it's] growing faster than Twitter did at this stage.
  • It reminds him of the clever way Zynga leveraged a friendship network to make a success of a gaming system, and Zynga's success is evident.
  • "At a macro level, over 4.6 billion people have mobile phones" and while Foursquare won't win the "entire" market, it's so very vast that it presents serious opportunities for earning cash.

That's all very insightful, and the original post is worth a read. But we have yet another VC insight on the matter, from Union Square's principal Fred Wilson. Wilson also praises Foursquare's potential for success, but he spends more time trying to defuse some Net commentary, from Kara Swisher and others, that Foursquare's funding efforts have been unusual or controversial, stemming from missteps by management. Far from it, according to Wilson: Foursquare's "founders were wise to take their time" due to the way they'd carefully planned the business's early growth.

He even closes with some advice: "The moral of this story, if you will, is don't let conventional wisdom force you into making decisions you don't need to make and you aren't ready to make, particularly about very big decisions that you will be living with the rest of your life."

What can we learn from this data? A number of things, it would seem. Firstly, the young smartphone market is so very ripe for exploitation that if you have a good business idea, and carefully prepared plans, you can actually attract VC funding—the VC recession is definitely over. Secondly, and unlike the first dotcom Net boom, one path to success may not be running at the business development at maximum devil-may-care pace. This time the mobile dotcom boom may be all about crafting sustainable growth models. Having a charismatic and visionary business leader, may be a massive boost though—that situation hasn't changed.

To keep up with this news, follow me, Kit Eaton, on Twitter.