Investments

Foursquare’s Valuation Halved In Latest Funding Round

It would be fair to say that 2015 was a tough year for Foursquare, and so far, it looks like 2016 is definitely going to be tougher, since its valuation is now approximately half of what it once was.

The firm announced on Thursday (Jan. 14) that it raised $45 million in its latest round of VC funding — a figure that drops Foursquare’s estimated valuation to around $325 million. And while, in most circumstances, a $325 million valuation would not be considered bad news, its last funding round in 2013 valued the firm at $650 million. Not quite a unicorn but definitely a firm eyeing the pasture, though these days from twice the distance.

Foursquare is the year’s first big and public down round, but few expect it to be the last. Investor funding for private firms was down 30 percent in the last quarter of 2015 from the third quarter, according to a report from research firm CB Insights. 

“The short of it is: expect more down rounds,” said Anand Sanwal, chief executive of CB Insights. “You might be able to raise but not at the valuation you might have gotten even just a year ago.”

“Everyone thought we were going to be the company that toppled Facebook, which is crazy talk,” Founder, departing CEO and Executive Chairman Dennis Crowley noted in an interview with The New York Times. Still, he added, “we’re building a really amazing, very scalable business around the many successful products we’ve built that people love.”

“To raise $45 million in this environment, and on very employee-friendly terms, is a testament to the real business we have,” said Jeff Glueck, Foursquare’s chief operating officer, who is being promoted to chief executive. Chief Revenue Officer Steven Rosenblatt will also shift roles to become president.

Foursquare’s problems have come about as it has tried to evolve its platform away from the location check-ins which put it on the map (and which, eventually, were widely imitated by social media competitors) and toward a discovery platform that guides its still fairly large user base toward various commercial endeavors.

And while the new capital indicates some degree of investor confidence in the proposed pivot, the down round is a new burden for young startups to carry.

“In a down round, there are a few folks who can suffer,” said Sanwal.

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