Foursquare Turns Down $100M

theodp writes "Valleywag is stupefied that 'an annoying, unprofitable social network like Foursquare would turn down $100 million,' a move inspired in part by Twitter's 2008 rejection of a $500 million offer from Facebook, which in turn once rejected a $900 million bid from Yahoo. Time will tell whether the move by Foursquare was a prescient one, but it's certainly gutsy. After all, today's $850 million company can prove to be tomorrow's worthless one, right AOL?"

Comments

WTF?

[Jaysyn]

Christ, I don't think I've ever even heard of these guys. They should have took the money & ran.

Re:WTF?

[eldavojohn]

Christ, I don't think I've ever even heard of these guys. They should have took the money & ran.

Agreed. With that kind of money you could almost afford your own US Senator ... or US Representative at the least. With one of those they could start pushing their pro-Square agenda. For far too long the Mods and the Rockers have enjoyed an unquestioned two party system ...

Re:WTF?

[ircmaxell]

Unless this is a marketing ploy (Have a friend "offer" $100 Million, just so you can turn it down publicly)... After all, news that a social site turns down huge money would likely generate publicity...

Re:WTF?

[bFusion]

I don't think Yahoo has any friends.

Re:WTF?

[reverseengineer]

Apparently, this same guy had a similar project called "Dodgeball" which Google bought out in 2005- and then killed in 2009 to replace with Google Latitude. I don't know how much he got for Dodgeball, but it may be that he really can afford to walk away from offers now. Both Dodgeball and "Foursquare" are/were location-based social networking services for mobile devices- Foursquare appears to tweak the concept by turning it into a sort of Zynga-style game where you earn awards for using the service. 100 million bucks for that.

Re:WTF?

[AvitarX]

Seriously,

I went to the site to see what it is. They have no explanation of why i would want it on the front page, except for a link about us.

A 2 minute long video, that's a howto.

30 seconds in I got bored.

even with this publicity, I think it is unlikely to take off. There does appear to be links for developers trying to leveragge the site into money though.

Re:WTF?

[FreeUser]

A 2 minute long video, that's a howto.
30 seconds in I got bored.
even with this publicity, I think it is unlikely to take off.

Besides, losers who use foursquare are just begging to be stalked. It makes Facebook's abysmal privacy look positively friendly by comparison.

In fact, stalking foursquare losers ("fourstalking") has become quite the pastime, so much so that this attention junkie quit the service, despite craving the attention. A part of me feels sympathy...while another part can't help but feel these narcissists are getting exactly what they deserve.

Re:WTF?

[Opportunist]

Yup, you never heard of them. Now, though, you did. They were the loonies that turned down 100m for a name nobody knew about.

I think the price just hit the 200m range.

Re:WTF?

[Monkeedude1212]

Christ, anyone who hasn't heard of Foursquare isn't really keen on the social networking scene. It's the latest buzz. HA, get it? Google Buzz? Alright I'll stop with stupid puns.

The general Idea is either
A) They make enough money already (I believe another project of theirs was bought out by Google some time ago)
B) They don't want their project to die, they want it to become worldchanging
C) They are holding out for more, because its worth more.

Or any combination of those.Yes, well, you can say A and C don't go together but just look at Wall Street.

Re:WTF?

[syrinx]

"I invited your best friend Geocities, only he couldn't come, because you murdered him."

Re:WTF?

[Orange Crush]

I wouldn't compare Foursquare to Zynga . . . there's a game aspect, but it isn't ad-scam laden like Zynga's properties. Foursquare is broadly very similar to services like Loopt and Google Latitude, but with a few enhancements. Each time you "check in" to a location, you earn points. Whoever has the highest score is declared "Mayor" of that particular venue. Venues are also tagged to classify what sort of place they are, and you earn badges based on your check-in habits. For instance, three times in one week at venues tagged as being gyms will earn you the "Gym Rat" badge; go to a certain number of places tagged as having karaoke nights in a certain amount of time and you get the "Don't stop believin" badge, etc.

There are more aspects too--you can set up "to dos" to suggest certain activities at certain venues, and people can add them to their to-do list, etc. It's basically just another "I am here / what are my friends doing / what's a popular place to go tonight" app with some game aspects.

Re:WTF?

[lunasee]

But apparently not Ubuntu.

Re:WTF?

[iamhassi]

"Why should the most innovative companies get swallowed by bigger fish? "

because we can only have so many "innovative" companies. A dozen facebooks wouldn't work, a dozen twitters won't work. No one wants to log into a dozen different twitter clones and update their status. You have big sharks, and you have the guppies nipping at their heels. The tiny bit of innovation that Foursquare adds could be added to Facebook tomorrow and Foursquare would vanish into oblivion.

Re:WTF?

[Zencyde]

You're looking for "Canonical".
Sieg heil!
Carry on.

Re:WTF?

[Plaid Phantom]

In an economy where people get rich by betting that other people can get rich placing the right bets on what companies will be profitable, "worth" and "value" have somewhat arbitrary meanings.

Well..

[ZeroExistenZ]

Why would one offer them 100 mio for it if it's so worthless, for one.

For two, why is money such a big deal? If you love what you do and can provide for yourself with it, why whore yourselves out? It's not about being filthy rich, but doing what you love, right?

Re:Well..

[Anonymous Coward]

It is easier to do what you love when you are filthy rich.

Re:Well..

[mcgrew]

For two, why is money such a big deal? If you love what you do and can provide for yourself with it, why whore yourselves out? It's not about being filthy rich, but doing what you love, right?

Some people collect stamps, some people collect coins, some people collect butterflies, and some people collect obscenely huge amounts of money.

Some people worship God, some people worship life, some people worship nature, some people worship money.

Some people love their god above all else, some people love their spouse above all else, some people love their children above all else, and some people love money above all else.

It's all about what you love and what your personal value system is. Personally, I pity anyone who thinks a thing that lacks a price is worthless.

Re:Well..

[A Name Similar to Di]

I logged in for the first time in a year just to agree with you. There was a survey a few years back (sorry I couldn't find the link) suggesting that many business owners regret going public and losing control of their company, despite the cash they made.

I realize Four Square's case isn't the same as going public, but it's similar. If you love what you do and already make good money, why ruin it? And for the record, you can pay everyone's salary and still make zero profit, so "unprofitable" doesn't mean that the people working there aren't making good money.

Re:Well..

[RyuuzakiTetsuya]

Because 4square's not making any money *now*.

I've seen it posted here somewhere, but it's been said that money can't buy happiness but the lack of money can buy a whole lot of misery.

Re:Well..

[Angst Badger]

For two, why is money such a big deal? If you love what you do and can provide for yourself with it, why whore yourselves out? It's not about being filthy rich, but doing what you love, right?

We live in a culture where profit is the ultimate good, transcending all other considerations, including individual and even species survival. For someone to refuse profit -- or, as is more likely in this case, to defer profit now in hopes of greater profits later -- is literally beyond comprehension for most people. And then they get angry because they're envious of all that money. To be fair, people spend their entire lives bombarded daily with the message that wealth and possessions are the only things that matter, so it's not surprising they end up with deeply conditioned tunnel vision.

Re:Well..

[plover]

Turning down the money is irresponsible (unless it's truly vastly undervalued, which is possible.)

The only reason not to sell it for a price like that is if he already has enough money and is running it as a hobby. If that's the case, it can make or lose some amount of money without it really affecting him. But just because Top Honcho has $XM in the bank already doesn't mean his employees have equal resources. If it starts losing money and he gets bored, who is going to keep all those employees in paychecks?

Worse, what if his current employees are working for options? "Hey, everybody, guess what? Yahoo would have made you all millionaires, except I turned them down. Back to work!"

Re:Well..

[Anonymous Coward]

It is easier to do who you love when you are filthy rich.

Re:Well..

[kidgenius]

Ah, it may be irresponsible to you but the owner of that company owes no one anything. That's right, not even his workers. If the workers wouldn't have been made millionaires, that's not his problem. They should then go out, start a company, and get bought out and do it themselves. Yeah, if he wants to be a nice guy, he can throw stuff their way, but that's his prerogative.

Re:Well..

[MikeBabcock]

I've heard this comment before and its moronic.

You're not just turning down money, you're also maintaining control.

Many many more businesses have done better or worse for their employees and customers based on management and control at the top than by getting huge influxes of cash.

Think Netscape, AOL, or all the little companies Microsoft and Intel have bought up and quashed over the years.

Taking the money typically means losing control of the business. That's one of the things Google's founders refused to do and a lot of investment columnists and advisors had a hard time with it because its so rare to ask for money without handing over control.

If anything, its irresponsible to run your business focused only on the bottom line. You'll end up doing a lot of really stupid things.

Re:Well..

[Trepidity]

Generally even early employees won't become millionaires in these sorts of deals.

Typically, VCs get paid back all their initial investment right off the top (usually part of a "liquidation preference"). In Foursquare's case, that's about $12 million, leaving an $88 million pot. Of the rest, typically VCs plus founders own almost all of it. A very early employee, if lucky, might own up to 0.5% or so of the company. That would give them $440,000 in this scenario. But that's something of a best case, too, because employees often own common stock, while investors and founders own preferred shares, and there are sometimes liquidation preferences for those payouts too.

It's on the outside realm of possibility that there exists an early Foursquare employees with the requisite ~1.2% or so of equity to actually make one million dollars from an exit like this. But there wouldn't be many, and it's quite possible there are none.

Oh, and unlike the VCs and founders, employees typically have a 2-to-4-year vesting period, so they don't get any of their money unless they stay with the post-acquisition company for multiple years, even if they hate their new boss.

Re:Well..

[ultranova]

Ah, it may be irresponsible to you but the owner of that company owes no one anything.

I'm pretty sure that stock options come with the expectation that the company will be managed in such a way that their value will be greatest possible. It's certainly implied in the option system, howeve I'm unfamiliar with the laws surrounding this issue. Could someone confirm this either way?

That's right, not even his workers.

I have noticed a disturbing tendency of corporations demanding loyalty from their workers yet giving none in return. This, in turn, breeds cynicism in said workers and makes things like stealing company assets seem more acceptable to them, perhaps even desirable.

There's a reason why humans developed empathy: it makes groups far more efficient, since their members don't have to waste their energy worrying about getting a dagger in their back. But I guess the psychopaths who lead most corporations aren't capable of understanding that.

If the workers wouldn't have been made millionaires, that's not his problem.

Actually, I'm pretty sure that it is; if not legally, then simply because options are going to be completely useless as motivators from now on (and also because he runs a serious risk of bodily harm - there are limits to what you can do to someone you see daily and not suffer consequences).

idiots

[electrosoccertux]

These guys turning down the money are idiots, all idiots. Twitter cannot create the revenue to generate the profit to pay back $500m. Or $900m in the case of Facebook. They [owners] all should have sold it, they're never going to get that kind of money anywhere else. Have you seek Zuckerberg give presentations? The goofball can't even give a proper PR announcement, let alone get people excited about anything Facebook is doing.
This goes doubly so when the buyer will let the owner retain control.

Already rich and still driven

[wombatmobile]

Dennis Crowley learned two things from his earlier experience of selling Dodgeball to Google. 1. A big company like Google can destroy a little company. 2. When your bank account is 8 digits big, 9 digits is not as important as following your passion.

Fuck Everything

[jayhawk88]

We're going Fivesquare

Upstarts.

[MaWeiTao]

These start-ups love to pass themselves off as scrappy little guys nipping at the heels of giants. In my experience these companies, the vast majority of the time, are backed by investors with very deep pockets. These guys are undoubtedly banking on the hope that this investment will pay off in a big way. There's this infatuation investors have with these social sites and it's easy to see why. Minimal investment, little substance, but the pay offs can be huge if people get hooked. Why spend a fortune building a company that actually makes product, with the expense and work that comes with it, when you can just do this? And given that development can easily be outsourced to India these ventures even more attractive.

Right now they're at the hype generating phase. By turning down this offer they have garnered media attention. And amongst the ignorant masses people will believe that these guys are principled. I think they're waiting to hit critical mass with users. Their hope is that they become the next Twitter. Then they'll sell especially if they haven't figured out a way to make money on something that seems completely pointless.

Re:Upstarts.

[Trepidity]

Yeah, I'd be willing to bet the investors had a big part in turning this down, too. (Actually, they probably had to; VC firms usually demand a say in these sorts of decisions.)

A bunch of major VCs bought in to Foursquare about a week or two ago at prices that value the company at $80 million on paper. Given those valuations at the buy-in, an $100m exit is simply not enough for the VCs to get the sort of return on their investment they have in mind.

hey, here's a radical notion

[sammy baby]

Maybe they turned down the bid because they wanted to stay independent and liked what they did?

Jesus, it drives me crazy listening to people go "what morons, they should have taken the money and ran." Why? What if they really like what they do?

Disclaimer: I'm not familiar with Foursquare's product or management, and I have this crazy notion that there are things that are worth more than money.

Inaccurate title and summary

[noahm]

Foursquare hasn't turned down anything, as far as anybody knows. In fact, the Yahoo! buyout is still only rumor. The article is basically representing the opinion of some analyst entrepreneur. Quoting from the article:

Sometimes making a fortune is dumb, writes entrepreneur Charlie O'Donnell—which is why, O'Donnell adds, Foursquare will wisely walk away from a rumored $100 million offer from Yahoo.

Who's Charlie O'Donnell? What's his role in Foursquare? Is he really making statements on their behalf? I doubt it. Quoting from the photo caption later on,

[Photo: Laughing Squid's pic of Foursquare CEO Dennis Crowley who, to be fair, may not have turned down anything yet.]

So, wtf? There's no story here, it's just some random dude repeating what some other random dude said would be a wise move.

not really a security risk

[SethJohnson]

A lot of people believe this to be the security risk. That a criminal will monitor a Loopt or Foursquare account to figure out when a house is unoccupied. In the real world, that's a far more sophisticated approach than what house burglars use.

Instead, they knock on the door of a house that appears unoccupied. If someone answers, they say, "Oh, I'm looking for my friend, Sally. Does she still live here?" If no one answers, then they proceed with the burglary. Finding empty houses does not require internet technology.

Seth

Re:not really a security risk

[Deosyne]

So most burglers prefer to show their faces and announce their arrivals at prospective locations of their crimes rather than looking for victims that will conveniently let the burgler know remotely when a good time would be to swing by. They really do deserve to get busted.

Re:not really a security risk

[cusco]

You're all giving burglers too much credit. Most of them rob their neighbors, sometimes repeatedly. They don't become thieves because they're either smart or hardworking. They turn to theft because they're lazy and stupid.

Of course there's the small minority who really do their research, learn to pick locks rather than smash a window, learn to bypass an alarm system, etc. They're so few and far between that it's easier to get hit by lightning.

Flatland

[javalizard]

I, for one, welcome our new square overlords. It'll give the "religious circles" a run for their money. I can see how the religious circles would be irked by the homo-erotic behavior of four squares vs a normal single square married to a traditional acute triangle. Then again, it's also much less dangerous as the known dangers of being stabbed to death on a daily basis don't exist. /flatland-humor