Yahoo Dead Set On Buying Foursquare (Or A Clone)

Yahoo is most definitely looking to buy a location-based startup like Foursquare, a CEO at one of Foursquare‘s many rivals tells us. He knows, because Yahoo (YHOO) approached his startup for acquisition too.

A source close to Yahoo confirms — kind of — telling us: “We talk to everybody.”

Our startup source says Yahoo has made it clear that acquiring a company in this space was a top strategic priority.

He says that he’s reached out to other executives in the space, and learned that Yahoo has been talking to everyone in the space for the past few months. If Yahoo can’t get Foursquare, he expects them to pay ~$25 million for a smaller player.

But startups aren’t biting because Yahoo has a reputation for killing small companies it acquires. He says that startups in discussions with Yahoo learn that they’ll be slotted into Yahoo! Local, but still walk away confused about how their business would fit into the organisation. In talks, he said “seven different people claimed” he would report to them.

Our source close to Yahoo objects, telling us,  “The perception that small company can’t survive at Yahoo is hogwash.”

This source pointed to Yahoo acquisition success stories Four11, which became Yahoo Mail, Flickr, which developed into a very popular photo-sharing service under Yahoo, and last year’s buy Xoopit, which improves photo-sharing in Yahoo Mail.

Our startup exec also said one big roadblock for a lot of startups talking to Big Purple is that Yahoo refuses to promise CEOs full control over their businesses.

The industry gossip is that this concern is a particular one for Foursquare CEO and cofounder Dennis Crowley. He sold his first startup, Dodgeball, to Google and he hated it. When he quit, he wrote on his personal blog: “It’s no real secret that Google wasn’t supporting dodgeball the way we expected.”

“The whole experience was incredibly frustrating for us – especially as we couldn’t convince them that Dodgeball was worth engineering resources, leaving us to watch as other startups got to innovate in the mobile + social space.”

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