15 Jan Foursquare Raises $45 Million, Cutting Its Valuation Nearly in Half
When Dennis Crowley helped found Foursquare in 2009, he was ahead of the pack in creating a social app that used location technology. Now Foursquare may be at the front of another coming wave: tech start-ups that are raising money at lower valuations than before.
On Thursday, Foursquare said it had raised $45 million in a new round of venture funding, as it tries to bolster its location data-based advertising and developer businesses. The financing pegs Foursquare’s valuation at roughly half of the approximately $650 million that it was valued at in its last round in 2013, according to three people with knowledge of the deal’s terms, who spoke on the condition of anonymity.
Foursquare, which is based in New York, is likely to be joined by other start-ups this year in doing what is known in investing circles as “down rounds,” in which companies that once raised money at soaring valuations are forced to accept funding at lower values. While tech start-ups boomed in recent years — with many easily attracting investors and big sums — that environment has now turned on fears that many of these young companies got ahead of themselves.
Investors have grown more cautious; the amount of money funding private companies has fallen 30 percent, to $27.3 billion, in the last quarter of 2015 from the previous quarter, according to a report from the research firm CB Insights. Mutual fund investors have also recently marked down valuations of some of the most prominent private companies, such as Snapchat, the messaging start-up, and Dropbox, the file storage service.
“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.”
Foursquare’s valuation plunge reflects how the buzz around the company — which was once the talk of the start-up scene — has faded, something that Mr. Crowley, who is stepping down as chief executive to be executive chairman, acknowledges.
“Everyone thought we were going to be the company that toppled Facebook, which is crazy talk,” Mr. Crowley, 39, said in an interview. Still, he added, “we’re building a really amazing, very scalable business around the many successful products we’ve built that people love.”