Foursquare, a location-based social networking website for mobile devices, received an injection of $35 million venture capital on December 19. It is a sign that investors have confidence in Foursquare’s prospects. The Series D ushered in two new investors, Draper Fisher Jurvetson (DFJ), a Silicon Valley VC firm and Capital Group Companies, Inc.
DFJ would also be contributing a board member, Barry Schuler, former AOL (NYSE: AOL) CEO. The new injection of funds would help fine tune and hopefully monetize a new automatic recommendation system, which offers tips to help people find new places to eat or shop nearby.
A valuable commodity, Foursquare is rich in geo-specific data based on 40 million tips and 5 billion check-ins. The funding will ensure that Foursquare’s location tracking services can compete with tech giants like Apple (NASDAQ: APPL), Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), and Google (NASDAQ: GOOG).
Foursquare encourages its users to be hyper-local and hyper-specific. Ad sales are targeted toward local businesses. “Specials,” discount offers by businesses are also incentives for Foursquare users to check-in. As of April 2012, it has 20 million active users, a smaller user base than Instagram, Twitter (NYSE: TWTR), and Tumblr. Foursquare does not have a specific revenue model in place. It is unclear where Foursquare will go from here. For the moment, it is surviving.
Foursquare has evolved from a “gamified” approach in which users can win badges and Mayor titles to one that is more about exploration and discovery.
In April 2013, it received $41 million from its longest-running investors, Union Square Ventures, O’Reilly AlphaTech Ventures, and Andreessen Horowitz. It came not as straight investment but as convertible debt.