FourSquare, a mobile app that turns the act of divulging one’s location into a game, announced $20 million in venture funding on Tuesday. The 27-person, New York-based company plans to use the funds to expand its engineering department to develop new features, in a new office (above right).
Foursquare CEO Dennis Crowley sold his similar Dodgeball service to Google five years ago for around $10 million, only to see it go practically forgotten within that organization. Perhaps once bitten, twice shy, this time Crowley plans to keep expanding the company himself.
Despite Google’s inability to do anything significant with Dodgeball so far, Foursquare’s investors — which now include Netscape founder Marc Andreessen’s firm Andreesen Horowitz — see big things ahead for the company. It already has nearly 2 million users and, according to Andreesen Horowitz, is growing faster than Twitter was at the same stage, adding about 15,000 users each day.
The investment firm cited three key factors in its decision to invest in an app that awards virtual badges for displaying certain geographical habits and appoints the most-frequent visitors to a location as its “mayor.”
First, Crowley’s staying.
Second, it’s “a killer product,” comparable to Zynga, whose successful Farmville and Mafia Wars games on Facebook also “mastered the art of connecting friends via games,” in the words of Andreesen Horowitz co-founder Ben Horowitz. Third, the firm sees “a gigantic market” for the app, considering that more than 4.6 billion people have mobile phones, and more than 200 million of those are smartphones — a number he says is “headed north fast.” “We’re hoping to build a world-class engineering organization, based primarily in our headquarters in the New York City to help us develop the next generation of mobile + social + local products that will excite our users and provide unique value for local merchants,” wrote Crowley in his announcement of the $20 million cash infusion. “It’s been a crazy year for us and we’re expecting the next 12 months to be even more of an adventure. Look forward to more great product from us soon … we’re really just getting started.”
As with Twitter, there’s no obvious way for FourSquare to make money, although the fact that its app monitors users’ locations to provide a “beneficial” service, in the words of Apple, means that it will be able to advertise based on a user’s location on the company’s iOS platform, as well as the other smartphone platforms on which it runs (Android, Blackberry, Palm, and anything else with a mobile browser).
In addition, the company already offers ways for local businesses to reward FourSquare users for checking in at those businesses, where they presumably buy something in addition to advertising the business to all of their FourSquare friends. In Crowley’s own words, the company’s goal now is to create “the next generation” of such products, balancing the needs of local businesses with those of the users on whose enthusiasm for location-sharing the service depends.
Ironically, the same day FourSquare announced this funding, Wired.com reported a privacy issue with the service that allowed a white-hat hacker to scrape up 875,000 or so check-ins in the San Francisco area, causing FourSquare to remove a feature that displayed recently checked-in users on venue pages, even if those users had specified that their locations not be shared publicly.
Crowley didn’t mention security as one of the company’s chief priorities going forward, but given users’ fickle attitudes towards social networking technologies — remember Friendster? — Foursquare would be wise to practice vigilance in that area as it attempts to spin its popularity into gold for investors.
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