The announcement of Satya Nadella as Microsoft’s new CEO isn’t the only big news out of the company this week.
Today, the company announced a $15 million strategic investment in Foursquare, the New York-based startup focused on developing location-based services. What’s more, Microsoft has struck a commercial licensing deal with Foursquare that will allow it to work Foursquare’s data into its products. The two-part partnership not only gives Foursquare more breathing room, it also serves as a model for how the startup could strike similar revenue-generating licensing agreements with other technology companies. “This is a big deal for us,” says Foursquare CEO Dennis Crowley.
The $15 million capital injection will be added to the company’s previous $35 million Series D haul, raised in December, bringing the round total to $50 million. Crowley says the deal has been in the works for some time, delayed only due to the “tricky” nature of doing the deal in two parts. (Reports began surfacing in late summer that Microsoft and American Express were bidding for a stake in Foursquare.) So while it would likely be wrong to say this is the first decision of Nadella’s tenure, it’s not such a stretch to assume Microsoft wanted to follow the momentum of the announcement by making an even larger splash on Techmeme with its investment in Foursquare–a sign of Microsoft’s next chapter.
“It started off as partnership talks, but those conversations ended up leading to strategic investment conversations,” Crowley says. “It’s great, because they now have skin in the game–they are excited about making sure [our] company succeeds.”
On the commercial side, Microsoft inked a multi-year data-licensing agreement with Foursquare. As Fast Company outlined in our recent profile of the startup, Foursquare’s dataset is one of its most valuable (and often misunderstood) assets, powering a range of location services on popular apps, including Uber, Instagram, and Pinterest. These services tap into Foursquare’s free API to enable their users to tag locations, whether that means pegging an Instagram photo to a restaurant or helping an Uber driver find the exact spot for a pickup.
Foursquare’s deal with Microsoft, however, will give the company access to more potent location data. “They’re not just paying for the same API integration,” Crowley says. He points to Foursquare’s passive, real-time recommendations feature, which can deliver fun things for users to do when, say, venturing into a new neighborhood, based on their personal tastes and location. In other words, Foursquare is now smart enough to sense where you are without you having to “check in” to a venue. “There is no API for that [yet],” Crowley says. “So we’ll be doing a lot of interesting, special stuff with Microsoft. They see [our data] as something that can really fuel a lot of their product roadmap.”
Crowley is mum on specifics, but hints that Foursquare’s data could find its way into Windows-based mobile products, as well as Bing search and local services. Every tech giant, from Apple to Google to Facebook, is betting big on location, and it’s clear Microsoft is looking for an edge in Foursquare.
However, it’s also important to note that Foursquare’s deal with Redmond is non-exclusive, meaning it could partner with one of Microsoft’s competitors down the road. According to Crowley, data licensing deals are becoming a strong part of the company’s revenue stream.
“We think about it like, with the best stuff we’re working on, how do we make it more accessible to other companies?” Crowley says. “If anything, this [deal with Microsoft] will illustrate how companies can improve existing products with Foursquare data. It’s a starting point.”