Photo: Taken by Mari Sheibley, provided by Foursquare
PrivCo, a research company, claims Foursquare will “fail by the end of 2013” and sell for “less than $50 million.”
While that prediction seems like a stretch, Foursquare is clearly in a heap of trouble.
What’s worse, CEO Dennis Crowley had multiple opportunities to cash-in on the app back when things looked brighter.
Yahoo reportedly offered Foursquare $100-120 million during the spring of 2010. Then, the company had only raised $1.35 million but it was in final discussions on a larger round of financing. Crowley owned at least one-third of the company, which means he could have had $30 million in his pocket.
Then, Facebook came into the mix. It reportedly offered Foursquare $120 million. Foursquare pushed for $150 million and Facebook walked away. It acquired its much cheaper competitor, Hot Potato, for $10 million instead. When Facebook filed to go public, the shares it offered HotPotato were worth about $17 million; CEO Justin Shaffer went on to run Places and Groups for Facebook.
Crowley went on to raise $20 million from Andreessen Horowitz. He kept about $5 million in cash for himself and that was prior to raising $50 million at a $550 valuation. So even if Foursquare fails, Crowley won’t be poor, but a few million won’t be much comfort.
Why didn’t Crowley accept Yahoo’s or Facebook’s offer?
We asked him that last year. While Crowley never commented on the buyout offer rumours, he did tell us this:
“We talked to a couple different companies about acquisitions — it comes up anytime you do a fundraising. Of course it’s a tough decision because you’re trying to figure out what’s the best thing to do for your company. Your company is your baby at that point…You have to make a call and weigh the pros and cons. If we bring in someone else, are they going to help us build our vision? Or does that mean some of the roadmap gets chopped off because it has to fit into someone else’s roadmap?”
In addition, Crowley’s first startup, Dodgeball, left a bad taste in his mouth. Google acquired it for a small chunk of change but soon shut the company down; Crowley considers the whole thing a failure.
“Going through that makes us want to hold onto this company a little longer and make sure we’re actually able to build and execute all the things we want to do while maintaining control over all of it,” Crowley said.