6 ms·

Foursquare's Valuation Is Getting Chopped in Half

53 points by dannylandau 11y ago

empressplay 11y ago
...and they won't be the last, as more and more later-stage "startups" begin to show they won't ever make the returns their valuations would suggest, and start begging for cash as they burn through their existing investments and meagre revenue.
- frik 11y ago
  Could this lead to an domino effect?
  - rm_-rf_slash 11y ago
    Tech investment crashed in the 90s because billions were poured into companies that didn't make money, there's no reason to believe it couldn't happen again. I still have absolutely no idea how Foursquare makes money.
OoTheNigerian 11y ago
As a keyboard analyst and former Foursquare user, I believe it was a mistake to remove the "chekin" from the Foursquare app. The new app (cannot recollect the name) would have been ideal for pushing their new focus of review while Foursquare remained and did what it was meant known for - checking in and providing data. By creating a new feature/ direction for an old brand and moving the old feature to a new brand, it caused a lot of confusion. People simply decided to move on
- sideproject 11y ago
  what's a keyboard analyst btw? :)
  - danpalmer 11y ago
    Often called an "armchair" analyst/psychologist/whatever the relevant term would be... - someone who has no qualification, but enjoys speculating and analysing anyway, typically from their armchair in front of the TV, or their keyboard in front of the computer.
    - eddieroger 11y ago
      See also: Monday Morning Quarterback. It's easy to know what to do after something has happened (like, on Monday morning), but much harder in the moment (like, Sunday afternoon).
      - AznHisoka 11y ago
        What if you're analyzing a Monday night game?
- sjwright 11y ago
  My problem is that they didn't explain with sufficient clarity and succinctness why the split was performed. It was eventually clear that the intent was to delineate between community recommendations and social sharing. (No doubt this made overwhelming logical sense in their strategy meetings, but reality always ends up being messier.) All the arguable benefits of breaking out Swarm could could have been achieved with some considered use of interface design within a single Foursquare app. Instead they confused new users and triggered irrational yet predictable anger within a portion of their user base.
- rockshassa 11y ago
  I remember being dumbfounded when they announced they were removing check-in functionality. It was the main thing I associated with the Foursquare "brand" and I was a heavy check-in user at the time (the game mechanics were great). They must have known everyone was there for the check-ins, and it seemed arrogant of them to believe they could force all their users to migrate to some other app. (talk about shooting yourself in the foot) I never downloaded Swarm on principle (i can check in with the Facebook app if i really want to). Foursquare did this to themselves.
  - sjwright 11y ago
    > I never downloaded Swarm on principle On what principle?
    - rm_-rf_slash 11y ago
      Presumably the same principle of not letting ones self be jerked around by companies who don't give a rat's ass about the consumer experience, like the bizarre Netflix/Quickster fiasco from a few years back.
      - sjwright 11y ago
        The Netflix/Quickster fiasco changed the value equation for customers. All that happened with Foursquare/Swarm was that the user had to press a button to download another free app. I agree it was a silly decision, but was ultimately just a 40 second inconvenience.
        rm_-rf_slash 11y ago
        As far as a researched opinion can tell. I recall not knowing what differences would be and if it would be more inconvenient or demand other changes in my interaction in the future. I ultimately decided it wasn't worth it, and an app experience I used occasionally became never.
        adventured 11y ago
danieltillett 11y ago
I'm impressed that it is only half. Most of the time once the illusion is broken you are in a 90 degree down decline.
- grizzles 11y ago
  Agreed. Maybe the existing investors are refinancing it. In that case they could be in the weird situation of having the perverse incentive (compared to a new investor) of trying to salvage the valuation by throwing more bad money at it. Sunken costs fallacy in action.
  - sjwright 11y ago
    Except that Foursquare/Swarm isn't entirely valueless. Depending where you are on the planet, there can be a lot of great data in there — some of it particularly invaluable for not being intensely gamed like TripAdvisor/Expedia are. When I was traveling around Europe this year, in many places Foursquare recommendations were consistently accurate and of good quality. (My one wish: integrate Google Translate for tips! The locals' tips would surely be the most worthwhile to read.)
- Grue3 11y ago
  Yeah, I was under the impression that nobody liked the Swarm app and they basically did a Digg. It's surprising that it still valued at half of what it used to be (when it was everywhere).
  - mathgeek 11y ago
    It's valued there because they have a somewhat unique data set, considering the scope and magnitude. The only companies that can compare their data sets are much larger ones.
SEJeff 11y ago
I just wonder when the same will happen to Groupon, a former VC darling that has seriously floundered the past few years.
- replicatorblog 11y ago
  It's already happened. Groupon is a public company and we got to watch it go from ~$26/share to ~$3/share in real time! https://www.google.com/finance?cid=10792264 https://www.google.com/finance?cid=10792264
  - pwm 11y ago
    According to wikipedia it was valued at $13B when floated. Then lost ~90% of its value. That means $11.7B. Wow. ELI5: did anyone profit from this other than the founders?
    - AznHisoka 11y ago
      Yep, people who knew a lot about their business model and shorted it. Just like the ones who shorted zynga and demand media.
    - argonaut 11y ago
      Groupon is still a two billion dollar company. It's still by any measure a huge success. I personally know many non-techies (normal people) that use Groupon and actually do go back as repeat customers for the places they buy Groupons for.
    - deleted 11y ago
      [deleted]
dangrover 11y ago
I got a low-ish offer from them four years ago, and the HR person tried to talk up the value of the equity, saying "Right now, this equity grant is worth $XXX, assuming our valuation doubles in the next year, your equity will be worth $YYY! For what it's worth, also included in the list of perks was an Rdio membership. In spite of this, I actually wish I hadn't turned them down, since everyone I'd met interviewing was awesome.
- Disruptive_Dave 11y ago
  Don't know why, but I got a particularly special giggle from the Rdio mention. Thanks :)
danr4 11y ago
It will be a huge loss (not monetary) for a lot of people if foursquare closed the shop. Their database is pretty much unbeatable when you want to search for meaningful places - a.k.a places people actually go to. In addition, that database can be used for accurate analysis of different vectors, like product sales predictions[1]. It really seems like they waited too long to monetize, and unfortunately decided to go all-in on the social & gamified route. The problem is that even some Xcorp buys them, it's only a matter of (short) time until all that data will be practically stale, and getting people into the check-in frenzy will be difficult. EDIT: With that being said, I'm glad they're at least taking a down-round since it means them, and investors, actually believe they can turn things around. [1] https://medium.com/foursquare-direct/right-on-target-foursquare-accurately-predicts-iphone-sales-4140c450a396 https://medium.com/foursquare-direct/right-on-target-foursqu...
- tedmiston 11y ago
  > Their database is pretty much unbeatable when you want to search for meaningful places - a.k.a places people actually go to. For points of interest, Foursquare varies heavily by city. It's fantastic in NYC, but in Ohio, Yelp, Foursquare, and Google Maps' place databases are all nearly equivalent.
tedmiston 11y ago
> Down rounds are typically punishing for founders, reducing both the value and the size of their stakes in concert. Frequently, doing one triggers "anti-dilution" mechanisms designed to protect early investors by carving up founders' equity still more. In practice, how do these anti-dilution clauses play out? Do those protected previous investors get issued more shares to hold their same percentage post-money? Are full-ratchet anti-dilution provisions common?

53 points by dannylandau 11y ago

...and they won't be the last, as more and more later-stage "startups" begin to show they won't ever make the returns their valuations would suggest, and start begging for cash as they burn through their existing investments and meagre revenue.

frik 11y ago
Could this lead to an domino effect?
- rm_-rf_slash 11y ago
  Tech investment crashed in the 90s because billions were poured into companies that didn't make money, there's no reason to believe it couldn't happen again. I still have absolutely no idea how Foursquare makes money.

OoTheNigerian 11y ago

As a keyboard analyst and former Foursquare user, I believe it was a mistake to remove the "chekin" from the Foursquare app. The new app (cannot recollect the name) would have been ideal for pushing their new focus of review while Foursquare remained and did what it was meant known for - checking in and providing data. By creating a new feature/ direction for an old brand and moving the old feature to a new brand, it caused a lot of confusion. People simply decided to move on

sideproject 11y ago
what's a keyboard analyst btw? :)
- danpalmer 11y ago
  Often called an "armchair" analyst/psychologist/whatever the relevant term would be... - someone who has no qualification, but enjoys speculating and analysing anyway, typically from their armchair in front of the TV, or their keyboard in front of the computer.
  - eddieroger 11y ago
    See also: Monday Morning Quarterback. It's easy to know what to do after something has happened (like, on Monday morning), but much harder in the moment (like, Sunday afternoon).
    - AznHisoka 11y ago
      What if you're analyzing a Monday night game?
sjwright 11y ago
My problem is that they didn't explain with sufficient clarity and succinctness why the split was performed. It was eventually clear that the intent was to delineate between community recommendations and social sharing. (No doubt this made overwhelming logical sense in their strategy meetings, but reality always ends up being messier.) All the arguable benefits of breaking out Swarm could could have been achieved with some considered use of interface design within a single Foursquare app. Instead they confused new users and triggered irrational yet predictable anger within a portion of their user base.
rockshassa 11y ago
I remember being dumbfounded when they announced they were removing check-in functionality. It was the main thing I associated with the Foursquare "brand" and I was a heavy check-in user at the time (the game mechanics were great). They must have known everyone was there for the check-ins, and it seemed arrogant of them to believe they could force all their users to migrate to some other app. (talk about shooting yourself in the foot) I never downloaded Swarm on principle (i can check in with the Facebook app if i really want to). Foursquare did this to themselves.
- sjwright 11y ago
  > I never downloaded Swarm on principle On what principle?
  - rm_-rf_slash 11y ago
    Presumably the same principle of not letting ones self be jerked around by companies who don't give a rat's ass about the consumer experience, like the bizarre Netflix/Quickster fiasco from a few years back.
    - sjwright 11y ago
      The Netflix/Quickster fiasco changed the value equation for customers. All that happened with Foursquare/Swarm was that the user had to press a button to download another free app. I agree it was a silly decision, but was ultimately just a 40 second inconvenience.
      - rm_-rf_slash 11y ago
        As far as a researched opinion can tell. I recall not knowing what differences would be and if it would be more inconvenient or demand other changes in my interaction in the future. I ultimately decided it wasn't worth it, and an app experience I used occasionally became never.
      - adventured 11y ago

danieltillett 11y ago

I'm impressed that it is only half. Most of the time once the illusion is broken you are in a 90 degree down decline.

grizzles 11y ago
Agreed. Maybe the existing investors are refinancing it. In that case they could be in the weird situation of having the perverse incentive (compared to a new investor) of trying to salvage the valuation by throwing more bad money at it. Sunken costs fallacy in action.
- sjwright 11y ago
  Except that Foursquare/Swarm isn't entirely valueless. Depending where you are on the planet, there can be a lot of great data in there — some of it particularly invaluable for not being intensely gamed like TripAdvisor/Expedia are. When I was traveling around Europe this year, in many places Foursquare recommendations were consistently accurate and of good quality. (My one wish: integrate Google Translate for tips! The locals' tips would surely be the most worthwhile to read.)
Grue3 11y ago
Yeah, I was under the impression that nobody liked the Swarm app and they basically did a Digg. It's surprising that it still valued at half of what it used to be (when it was everywhere).
- mathgeek 11y ago
  It's valued there because they have a somewhat unique data set, considering the scope and magnitude. The only companies that can compare their data sets are much larger ones.

SEJeff 11y ago

I just wonder when the same will happen to Groupon, a former VC darling that has seriously floundered the past few years.

replicatorblog 11y ago
It's already happened. Groupon is a public company and we got to watch it go from ~$26/share to ~$3/share in real time! https://www.google.com/finance?cid=10792264 https://www.google.com/finance?cid=10792264
- pwm 11y ago
  According to wikipedia it was valued at $13B when floated. Then lost ~90% of its value. That means $11.7B. Wow. ELI5: did anyone profit from this other than the founders?
  - AznHisoka 11y ago
    Yep, people who knew a lot about their business model and shorted it. Just like the ones who shorted zynga and demand media.
  - argonaut 11y ago
    Groupon is still a two billion dollar company. It's still by any measure a huge success. I personally know many non-techies (normal people) that use Groupon and actually do go back as repeat customers for the places they buy Groupons for.
  - deleted 11y ago
    [deleted]

dangrover 11y ago

I got a low-ish offer from them four years ago, and the HR person tried to talk up the value of the equity, saying "Right now, this equity grant is worth $XXX, assuming our valuation doubles in the next year, your equity will be worth $YYY! For what it's worth, also included in the list of perks was an Rdio membership. In spite of this, I actually wish I hadn't turned them down, since everyone I'd met interviewing was awesome.

Disruptive_Dave 11y ago
Don't know why, but I got a particularly special giggle from the Rdio mention. Thanks :)

danr4 11y ago

It will be a huge loss (not monetary) for a lot of people if foursquare closed the shop. Their database is pretty much unbeatable when you want to search for meaningful places - a.k.a places people actually go to. In addition, that database can be used for accurate analysis of different vectors, like product sales predictions[1]. It really seems like they waited too long to monetize, and unfortunately decided to go all-in on the social & gamified route. The problem is that even some Xcorp buys them, it's only a matter of (short) time until all that data will be practically stale, and getting people into the check-in frenzy will be difficult. EDIT: With that being said, I'm glad they're at least taking a down-round since it means them, and investors, actually believe they can turn things around. [1] https://medium.com/foursquare-direct/right-on-target-foursquare-accurately-predicts-iphone-sales-4140c450a396 https://medium.com/foursquare-direct/right-on-target-foursqu...

tedmiston 11y ago
> Their database is pretty much unbeatable when you want to search for meaningful places - a.k.a places people actually go to. For points of interest, Foursquare varies heavily by city. It's fantastic in NYC, but in Ohio, Yelp, Foursquare, and Google Maps' place databases are all nearly equivalent.

tedmiston 11y ago

> Down rounds are typically punishing for founders, reducing both the value and the size of their stakes in concert. Frequently, doing one triggers "anti-dilution" mechanisms designed to protect early investors by carving up founders' equity still more. In practice, how do these anti-dilution clauses play out? Do those protected previous investors get issued more shares to hold their same percentage post-money? Are full-ratchet anti-dilution provisions common?