Kara Swisher at All Things Digital reports that Foursquare's Dennis Crowley inked a deal with VC firm Andreesen Horowitz on a $20 million second round, valuing the company at upwards of $95 million.
Can Foursquare really be worth $95 million at this point? Maybe so. Valley Wag's Ryan Tate laid it out back in April that Yahoo! was chasing Foursquare with a $100 million cash deal. Mr. Tate suggested that Mr. Crowley was taking his time to pick the best deal. Ms. Swisher called the process "a very long and decidedly strange funding journey."
Either way, Messrs Andreesen and Horowitz have committed a big chuck of their fund to Foursquare, supposedly on the insistence by Mr. Tate that the firm is not for sale and will be grown organically. As Mr. Horowitz said to Ms. Swisher, they were sold once management committed to growing Foursquare into a "significant, independent business."
That's got to be a PR firm talking. No VC in his right mind would ever say, "I"m investing because the management team has ruled out a potentially lucrative exit vehicle."
Practically speaking, how does a dedicated location-based service compete in a space that's growing more crowded every day, armed with only a $20 million secondary? All those tie-in deals they're chasing burn cash. A stand-along play like Foursquare is a prime candidate for an over-priced buyout from one of the social aggregators like Facebook or (gasp) Google.
Isn't Foursquare just a technology play? There's no brand affinity that ties Foursquare to its customers. (Okay, they have badges, and those cute window clings at Whole Foods)
Facebook, on the other hand, has tremendous brand affinity. They've built an ecosystem with about 200 times more users than Foursquare. Facebook will add a legitimate location-based offering soon enough. It makes sense that they'd buy it instead of build it, and while their first attempt to buy Foursquare was unsuccessful, the possibility is not dead.
Which leads us back where we started: How can Foursquare be worth $95 million if Mr. Tate is committed to going it alone?
What am I missing?