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If they're going to pay back in cash, I don't understand how they do that at $2MM/year in revenue. Essentially all of their revenue would go to payments on the
by minimax 14y ago
If they're going to pay back in cash, I don't understand how they do that at $2MM/year in revenue. Essentially all of their revenue would go to payments on the debt. I suppose they could be planning to IPO in which case they could use some of the cash raised in the IPO to pay back the loan, but it isn't clear who would be interested in buying Foursquare, especially after the Facebook IPO.
- awaxman11 14y agoFrom what I understand, it wasn't all pure venture debt, but a split between convertible debt from insiders and venture debt from silver lake. Given silver lake's place in the capital structure and likely covenants, if foursquare is still burning a ton of money with minimal revenue in 6-12 months they probably can be paid with the new money from USV / Spark / a16z. And in order for this deal to work out for anyone, the $2MM/year figure is going to have to be much larger. With 6.0 you can already see Twitter and Facebook esque promoted ads, which are going to make that figure grow a fair amount in my opinion.