I see FourSquare akin to FarmVille: a distracting non-skill based game designed to get users addicted. It's not going to be that fulfilling project where you improve the world, so take the money while location-based is still a buzzword and move on to something else.
Foursquare opens a whole spectrum of indirect interaction between business owners and their clientèle. The game mechanics are little more than a usability technique.
Exactly. The problem with location-based advertising etc. has always been that you need users to willingly give up their location. The genius behind Foursquare (and the other services like it) is that giving up your location is the whole point of the "game" - it's not a step required before you can get value from the service, it's the core action that the service rewards you for.
And really, this is the not-so-secret behind most privacy-threatening trends and technologies: most people will gladly give up their privacy for a [ sense of safety, comment from a friend, virtual badge ].
And if that is the value that most of the world places on their privacy, maybe there's nothing wrong with losing it.
Is your physical location really part of your privacy if you're in a public place?
I can understand that if you're at home on the toilet or something you'd want to keep that private. But when you're walking around the city, or going to a shop, those are public spaces. Therefore it's not private information that you would be divulging, as anyone in that location would have that same information.
Then if you didn't want people to know where you are online you would change the settings, or just not use the application. This is just another example of Clay Shirky's idea of Filter Failure.
It's easy to call the shots from the audience. TechCrunch is judging this by Disney over-romanticized standards - self fulfillment et al.
TechCrunch does not have access to the founders' cockpit view. What if the founders decide the company is about to become stagnated, overrun or just boring? If they can get a good price it's not worth the stay.
The funny thing is that the final paragraph could just as easily be interpreted as solid arguments for selling:
Facebook and Twitter hitting the geo space... real momentum and that intangible buzz...
So two juggernauts are entering the space, and they have a rare opportunity to actually monetize "intangible buzz" while people still don't know what FB and Twitter will do.
We're definitely in the realm of wild speculation, since it's impossible to judge accurately from out here. But I do agree that the whole notion of "destiny" isn't a good metric, regardless of the actual situation.
Maybe. My concern is, who knows how long it would take Yahoo to absorb Foursquare, how much Foursquare code would need to be refactored in order to play nice with Yahoo's, how long it'd take to sort out personnel issues, and so forth. It's easy to envision not hearing from the Foursquare team for a good 6-9 months post-acquisition, by which time they really would have lost ground to their bigger rivals purely from an innovation standpoint.
I think that that is proof that Foursquare should sell... to Facebook. Their valuation is still stomach-able enough if Facebook wants to use their current operating profit and cash reserves. It would immediately make Facebook the mobile leader, and take Foursquare to millions of users.
What's in it for Facebook? Foursquare functionality is easily copied. The brand isn't terribly strong. $100M+ is hard to stomach when I don't see any clear benefit to Facebook.
Yahoo! is another story, as they've taken a portfolio approach. I imagine Foursquare looks pretty good as a member of that portfolio.
Michael is certainly entitled to his opinion, but it would be rather nice if people stopped criticizing founders for "selling out" instead of "going for it".
I don't think that's what Arrington is doing here at all.
He's criticizing them for selling out to Yahoo.
The point is not that "selling out" is bad, it's that you need to sell to someone who is committed to continuing the project in a meaningful way, and who has something to bring to the table besides money.
Speaking as a founder who has cashed out, I can tell you that the choice of buyer matters immensely, and that there are more important things in life than the amount of money in your pocket.
You would/did regret sacrificing a year or two of good work, in return for working on anything you care to for the rest of your life? Was that one project really more important than anything else you could ever do?
In my case, it was 8 years of my good work. And, 30 of my employees, who are now in a very different situation. (I'm contractually prohibited from discussing the matter, so you'll understand my being a bit oblique.)
In answer to your last question: no, it's not that that one project was really more important than anything else I could ever do; but it took a few years to get past the bitterness to be able to focus, and find the right "next step"-- which could have been avoided, if I had sold to the right people at the right time (instead of the wrong people at the wrong time).
So: "selling out" can be a great thing, if done well. Or, a really soul-searing thing, if done poorly. Choose wisely. Here endeth the lesson.
You know, somewhat I expect that startups heavily financed by VC sell out, while bootstrapped companies go for it. So I do not agree with techcruch. But this is probably my european bias that kicks in...
I would take the money and run. 120M now is a big exit for them. If they wait they might not that lucky next time, and even if they are, there are going to be 10M or more in funding while now it's just 1.35M.
But honestly I don't care, I had a terrible experience with them as developer (we built SquarePik, an iPhone client for Foursquare). Twitter became the Twitter we know cause they built their product on top of their API and supporting third party developers. Foursquare is mainly focus on their own clients from day one.
Michael Arrington is so anti-yahoo that I find it difficult to read his articles about yahoo without wondering how much of that is just personal animosity.
Foursquare SHOULD sell. 4sq is going to become the friendster of the space. All these early starter companies get out-innovated, and it will happen very soon.
Couldn't agree more. Why would facebook buy them? For their < 1million users that are already on facebook? The engineering could also be done internally for far cheaper.
Foursquare etc. find themselves in this position: the game mechanics they used led to explosive growth but also left them with a really low glass ceiling (think people don't get Twitter? ha.) They may have had a crazy hockey stick recently, but there is simply no way they will go main stream. It's got too MUCH personality: being mayor and getting badges will either REALLY resonate with someone or not at all.
I think the founders see $80mm+ valuations on a product with a very small, homogeneous demographic of users as far greater than they could ever dream of with their current stats, and they know FB could relatively easily enter the space with a far bigger and international crowd, as well as a household name that already does biz with f500 companies, and just crush them.
I think foursquare dies no matter what, if I were the founders I'd sell to the highest bidder and run.
I think Foursquare's value is more likely in their relationships with businesses than the user base. As many have said, the userbase isn't that large yet, maybe a million people. But they're right on the verge of kicking in to the awareness of businesses, which is after all where their revenue is.
I was at the buffet at the Las Vegas Hilton a couple of weeks ago, and they have the little internal advertising cards on the table. You know, visit our nightclub, see our show, that kind of thing. But one of the items was a "Check in with Foursquare, get rewards" card. That changed my perception of where Foursquare is with things. And what they really are.
The casino sees them as another customer loyalty program. If they're providing customer loyalty programs to every business in the world...well. That's a market. And that's where they seem to be making the most inroads, moreso than with users so far. But if the businesses start helping them advertise, ala the casino...
Foursquare is on the verge of being MUCH bigger in very short order. That's why the feeding frenzy is happening right NOW.
You completely ignored the part of my comment where I mentioned that fb already has much better brand relationships and is already a household name.
if facebook does NOTHING, yes foursquare could go somewhere. but the bottom line is they already releasing privacy settings with location awareness in them, it's only a matter of time before they have their own LBS. and for $125mm trust me, they will develop in house thank you.
I guess it all depends on how emotionally connected you are to your company. Some people see their companies as their almost literal babies and get very emotionally attached to them. Others just see it as a thing they built to make money. Depending where you fall in this spectrum will greatly affect how you'll react to such a deal, and trying to judge people on other end of the spectrum by your standards is basically pointless.
That's like saying a stomach flu isn't that bad, you're alive before and after. It says something about yahoo if the record by which their acquisitions are judged begins with 'didn't ruin X'.
Flickr was good before, but they didn't make anything more valuable after. I've been using flickr since 05 and I didn't perceived anything valuable in the product after the yahoo deal.
Did Yahoo ever integrate anything with Flickr in a way that justified the acquisition? I realize they have a little Flickr widget on their homepage, but man they have the world's catalogue of amazing images and they really haven't done anything with it other than just keep it the same as it was, for the most part.
I think I understand how M&A teams at places like Yahoo! work. It's all about what's "hot" with maybe some fanciful vision of integration into Yahoo! in a way that will never happen. The M&A team is drinking the same koolaid they're selling to top level execs, founders and VC's of companies they're looking at, bringing a gigantic checkbook with them.
Zimbra was actually a good kind of acquisition, because they did a good job integrating it with Yahoo! Mail right away, and what you see today is derivative of that purchase. It made a lot of sense for Yahoo! to buy a fancy webmail interface since most people using Yahoo! use it for their email. Some other good examples of acquisitions are Google buying Android and Apple buying the chip manufacturer that led to the A4 for the iPad. Bad acquisitions are when it seems like it's about the buzz and it's hard to visualize how the purchase can help the bigger company. Those acquisitions go the way of Dodgeball and Jaiku.
Foursquare is a mobile company and Yahoo!'s (lousy) presence on mobile phones is restricted to un-installable bundled software deals like with AT&T on the Backflip. Yahoo! is not a mobile company, it's not the first, second, or even in the top ten or possibly not even in the top fifty companies you'll think of when someone asks you to name companies that are movers in the mobile space.
Foursquare isn't going to do well at Yahoo! because it doesn't make sense.
I usually don't like Arrington's rants, but this one was inspired.
You can ask your VCs to redo their term sheets and double the amount raised. Take half off the table and you, your children and their children will never want for anything material in their lives, even if Foursquare goes south right afterwards.
He says the Wordpress guys did it but how common is it? I wonder how cashing out before making a successful company affects the chances of getting there.
This is why VCs should put some money into the pockets of the founders when they fund a company.
There may be good reasons, as far as the future of the company goes, why they shouldn't sell out to Yahoo or someone else. But, we are talking about a lot of money here. And if the founders aren't already independent, money-wise, can you really fault them for looking out for themselves, for their families?
I know money isn't supposed to be everything, but come on.
Selling out to Yahoo has one huge advantage. They'll run your brainchild in to the ground so quickly that your non-compete clause probably amounts to nothing.
Kidding aside, Yahoo is a 'mixed bag', they've done some good acquisitions and made some headway, but they also literally killed a bunch of companies they took over through a combination of neglect and budgetary constraints.
If you sell out to Yahoo you know that that's the risk.
I would say that Techcrunch and the like have more to lose from Foursquare selling to Yahoo!. They were probably counting on three more years of extensive "Twitter" like coverage to fill their pages.
Once Yahoo! or another big company buys them they will be forced to move on and find something new :(
Hmmm... Arrington having a very strong opinion about Foursquare selling to Yahoo. Too bad he didn't back it up with more facts and references instead of those few shallow examples of people selling to Yahoo and being unhappy with it afterwards.
If you are conflicted about selling a dream to Yahoo for 80+ million you have too much careerism. Startups aren't children, it's either they die or you do.
Acquisitions are often the triumph of hope over experience. But maybe Yahoo has learned from its prior misfires, and the Foursquare folks have learned from the Dodgeball experience, and the threat of Facebook/Twitter will be ominous enough, such that Foursquare could thrive inside Yahoo.
You can ask your VCs to redo their term sheets and double
the amount raised. Take half off the table and you, your
children and their children will never want for anything
material in their lives, even if Foursquare goes south right
afterwards.
He should have led off with this, point no. 5. Who cares that "Yahoo kills startups" (even tho PG's still isn't dead), as a founder my goal is to maximize my profit and my well being. I don't give a fuck about Yahoo if I'm getting $20 million out of the deal.
Perhaps you should keep in perspective that people didn't give you all that money for YOUR well being. They gave it to you because they believed you would be able to generate large returns for them. As such, it's your duty to maximize their investments as well as your own. Of course, if you believe what you're creating is changing the world and cannot detach, you shouldn't be selling.
Of course, if you believe what you're creating is changing the world and cannot detach, you shouldn't be selling.
It's rarely so black and white. I'm suggesting that if you are selling, you should make sure that either a) the buyer's vision coincides reasonably well with your own, or b) you're sure you'll be satisfied walking away (or getting pushed out).
Interesting to hear that from someone who has sold a company.
I find it really sad and ironic that although the YC mantra is "Make something people want", some founders think nothing of selling to a big corporation even if it means screwing their users.
Because Arrington has successfully built and sold many companies, therefore enterpeneurs should really take his advice.. I mean he was really successful with .. Uhm .. oh and there was also .. uhm ....
This the "journalists" who tried extorting monies out of Twitter in exchange for not publishing illegally obtained material .. This is the guy who comments on others selling out? Really?
Perhaps there is something to be said for his intuition, for he spends nearly all of his time evaluating startups. He successfully predicted the success of Mint. Also, Arrington co-founded Achex, sold for 32mm USD, as well as TechCrunch, which is one of the world's premiere news sites for technology.
I don't mean to discount it, but I find it really hard to give weight to the bad companies that got bought out for inflated prices during the dot-com boom. I worked for enough of them to know how much luck and a gold-rush mentality was involed.
As for Mint .. I predicted it when I first got a beta invite, because it was awesome.
I predict that tomorrow the sky will be blue! Bow down before me when I am right!
