Should You Talk Publicly About Potential Investments?

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The Foursquare “Crush”
Yesterday evening the news leaked out about Foursquare‘s first round financing which our firm is thrilled to be involved in. The company had hoped to announce the financing next week and still plans to post a long post on Tuesday talking about ” what this means for foursquare and the things we’ll be building / fixing for our users”. If you are into Foursquare, keep an eye out for that.

In the Business Insider’s post about the Foursquare financing, Dan Frommer writes:

It became fairly obvious that USV would lead Foursquare’s round when partner Fred Wilson revealed his crush on the service several weeks ago.
To be honest this transaction tested my belief that blogging about stuff you are interested in is a good thing. I first wrote that I was playing foursquare in mid July and since then I’ve blogged about Foursquare, twittered it, and flickr’d it more than few times. Our entire firm was pretty public about our interest in Foursquare.

The Foursquare financing was among the most competitive early round financings I’ve seen in a long time with a bunch of term sheets offered and even more people trying to get into it once the deal was cooked. Dan’s use of the word crush could be also used to describe the pressure on Dennis and Naveen to sort through all of their different options. And in the midst of all of that, our firm was publicly on record that we liked the service and were using it actively.

There are many people in the investment business that believe you have to play your cards close to your vest or you’ll get burned. And I understand that approach. And there were certainly a few times during this transaction when I regretted how public we were with our interest in Foursquare.

But as my partner Albert reminded me during one of those “head in hand” moments, we did a lot more good than harm by doing that. First we put our investment thesis out there and got feedback from a lot of people on it. Second, the company appreciated our strong early endorsement of their service long before we had even offered to invest. Third, we saw the market develop around the deal as most interested parties contacted us at one time or another. And most importantly, now that we are investors we have a good sense of what the company is doing, what they need to do, and how we can help.

So I come out of this situation with my resolve to continue to play the venture capital business with an open hand firmer than ever. I’d suggest that other firms give it a try. I think it’s a great approach, particularly in consumer web services.

Fred Wilson is a partner at Union Square Ventures. He writes the influential

, where this post was originally published.


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