Start-up-of-the-moment Foursquare has lots of buzz, a rapidly growing user base and a triumphant tour of South by Southwest under its belt. Next task: Raising a pile of money.
Sources tell me that the mobile social network, which lets you tell your friends where you are, is lining up a new round of financing to bolster the $1.35 million it raised last August. CEO Dennis Crowley declined to comment.
I don’t know how much the year-old company intends to raise or the valuation it’s looking for. But speculating about both is a fun pastime for venture capitalists, who agree on one thing: The company won’t have any problem attracting suitors.
“Everybody and their mother is humping their leg,” says a VC who readily admits to Foursquare infatuation. So many investors are besotted that the chatter can get feverish. Another VC passes along a rumor that an investor offered to buy into the company at a $100 million valuation.
A more reasonable guess: New York-based Foursquare will wind up bringing in a West Coast-based VC, who will lead a round in the $10 million range that will value the company at something like $40 million. Foursquare’s first round valued the company at more than $6 million.
So what’s the appeal? Like plenty of other social media start-ups, Foursquare has minimal revenue. But it has a great story, which contains plenty of allusions to Twitter.
Like Twitter, Foursquare was founded by an entrepreneur who already built a start-up and sold it to Google (GOOG). And like Twitter, Foursquare launched at South by Southwest to some fanfare, and has seen its user base increase at breathtaking velocity.
When Crowley raised his first round of financing from O’Reilly AlphaTech Ventures and Union Square Ventures in August, Foursquare had some 50,000 users. That total is now approaching 600,000, boosted by a burst of 100,000 sign-ups over the last 10 days.
And while Foursquare, like Twitter, doesn’t have real revenue to speak of, it does have a notion of how to get some. It is working on tie-ups with local merchants, who can reward users who “check in” at restaurants, bars, etc.–and by doing so, provide free advertising for those establishments.
Foursquare still doesn’t do anything for me, but the service is doing just fine without buy-in from a middle-aged dude who doesn’t go out at night. And because Foursquare is a fun, buzzy story to write about, it gets written about a lot.
The real question for Foursquare: How will the start-up keep Twitter and Facebook from rolling over it? Twitter added its location feature this month, and Facebook is reportedly adding its own in April.
Both these companies have plenty on their plate, so it’s possible they won’t spend much effort chasing Foursquare’s niche. Still, it’s hard to see room for three social networks that let you broadcast your whereabouts to your pals. But that’s not dissuading guys who can write big checks.