Foursquare's New $20 Million Means More Hiring, New Offices and Much Investor Confidence

NEW YORK (AdAge.com) -- The $20 million of second-round financing secured by the mobile networking service Foursquare will go toward staffing up on engineers, getting offices that can accommodate expanding staff and supporting its rapidly expanding audience of users. Oh yeah, and it's got a revenue model to work out too. Companies such as PepsiCo and Starbucks have enthusiastically engaged the service. "From a broad strategy point of view, there's a huge potential with the ability to connect people to promotional experiences," Bonin Bough, PepsiCo's global director of digital and social media, told Ad Age in February. "We know where people are and can talk to them from a geo-located perspective -- that's a huge opportunity." But despite markerters' keen interest in Foursquare, it's not entirely clear how the company plans on generating significant revenue. As on Twitter, any company can sign up on Foursquare and start promoting its products and stores without buying an ad. Foursquare has said that it has plans to offer paid services for three tiers of businesses: small, privately owned stores and restaurants; brands with retail chains, such as Tasti D-Lite; and huge multinational marketers such as Pepsi. The new round of funding was led by venture fund Andreesen Horowitz and includes O' Reilly AlphaTech and Union Square Ventures, both of which were part of Foursquare's initial $1.35 million investment. In general, first round investors shy away from contributing to subsequent outlays as that potentially devalues their original stake. Reports indicate that the company was valued at $95 million prior to this funding. "The two big names behind Andreessen Horowitz -- Marc Andreessen and Ben Horowitz -- are each legends in Silicon Valley," CEO Dennis Crowley wrote on his company's blog. "They know better than anyone how to transform start-ups into successful organizations." Mr. Crowley said the money would be used to expand the company by hiring more engineers and moving into new offices. The company had reportedly been a potential acquisition target for Yahoo and Facebook but a deal never emerged. Yahoo and Facebook declined to comment. Writing on his blog, Andreesen Horowitz principal Ben Horowitz stated: "We are very excited about Foursquare's ability to make money in a way where all parties win: users, merchants, venue owners, brand advertisers, and more."

Foursquare's New $20 Million Means More Hiring, New Offices and Much Investor Confidence

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