Los Angeles: After holding acquisition talks with Facebook Incorporated and Yahoo Incorporated, one of the internet's most talked-about start-ups, Foursquare, has decided to remain independent and has raised a big chunk of cash from a prominent Silicon Valley venture capital firm.
The New York company, which lets people "check in" at bars, restaurants and other hangouts via their smart phones, raised $20 million (Dh73.44 million) in a second round of funding led by Andreessen Horowitz that valued the company at $95 million, general partner Ben Horowitz said in an interview. Foursquare's previous investors also participated in the new funding round.
Foursquare will use the money to fuel its expansion as it faces rising competition from social networking sites and other new players staking out the red-hot location-based services business.
Foursquare is approaching 1.8 million users, adding about 15,000 users a day. That rate mirrors that of Facebook and Twitter Incorporated in similar stages of their growth, Horowitz said.
Silicon Valley is looking to capitalise on Foursquare and services like it that help advertisers reach consumers wherever they are. Foursquare's search for funding spurred a frenzy in Silicon Valley. Major companies including Facebook, Yahoo and Microsoft Corporation kicked the tyres, and venture capitalists including Khosla Ventures, Accel Partners and Institutional Venture Partners jockeyed to invest.
Internet guru Marc Andreessen and his longtime partner Horowitz walked away from funding talks in April. Negotiations resumed a few weeks ago when Foursquare Chief Executive Dennis Crowley decided he wanted to build rather than sell the company.
"Dennis and a lot of other people feel that Foursquare can develop into a major player in the social media space," Forrester Research analyst Augie Ray said. "But it is going to face a lot of competition in trying to do that. Foursquare is very popular now. We will have to watch to see what's going to happen in the next year or two."
Foursquare launched in March 2009, picking up where Crowley's previous start-up, Dodgeball, left off, making it easy for users to let their friends know what they are doing and where they are doing it by checking in online via their cellphones.
Crowley sold Dodgeball to Google Incorporated in 2005. Google later shut it down. Although its business concept was not new, Foursquare provided rewards for frequent users.
Not yet profitable, Foursquare is still trying to figure out how to turn its legions of rabid users into a viable business model as competition mounts. Twitter recently added a location feature. And Facebook is on the verge of adding one. Archrival Gowalla Inc. has a similar check-in site.
