DISQUS

kidmercury · 3 months ago

great investment, foursquare is another company i am envious of and wish i had thought of that idea.

however if i was to have one beef with the company it is with their lack of focus. if they focused just on new york city, i think the service would be so much better in so many different ways. the new york city game is going to need to be very different than the miami game. can they satisfy both? maybe, although the angle for disruption is set -- someone can just focus on one city, and when everyone does that, poof! opportunity gone, faster than it came. this is why i think companies like foursquare would be better positioned not as a consumer-facing destination but rather as a B2B company that lets others build their own niche/local game -- a platform for launching placebloggers, so to speak. i like the steps that outside.in is taking in this regard too, although i think to really play the game you need to give the placebloggers the CMS they'll need, not just the APIs.

but lack of niche focus is my beef with pretty much every web service that gets VC recognition, largely because those that are truly niche-oriented will not have the potential profitability/scalability that VC investments are typically associated with. however i think this ties into the pending disruption in VC, in which microfinance will enable smaller investments with a smaller payout. the microfinance revolution goes hand in hand with the niche revolution, in my opinion.

but with all that said, mad props to foursquare. i am still green with envy at the awesomeness of their potential. hope you make a killing on it boss and then rub it in and laugh at the suckers who didn't get a piece.

David Noël · 3 months ago

Good point about the focus, I'd let local communities tap in and help out using the API. Foursquare offers the basic layer, locals build on top.

I want to help getting the Berlin version started and have talked to several people about adding a Berlin touch to it. I see a high potential for it to be popular within the tech scene over here. For instance Berlin (actually a lot like any other major cities for that matter) lives a lot from the different neighborhoods and the type of people that live there.

Local developers could add a local touch to the whole game using a Foursquare API "Mitteschnitte hipster" badge, the "Kreuzbergpunk" badge or the "Burgermeister" badge (Burgermeister is a popular burger joint in Kreuzberg and Bürgermeister actually means mayor in German), etc. Plus, the St. Oberholz is *the* geek cafe in Berlin and the motivation for all geeks to become (and stay) mayor of the Oberholz would give the game a huge boost.

Be quick, Foursquare, Germans like doing copycats :)

fredwilson · 3 months ago

you are on to something with your beef
that is why i encourage every web service to have an API and allow niche
communities to develop on them

stocktwits is an example of that on top of twitter

http://www.socialgreat.com/ is an example of what can be built on top of
foursquare's API today

so i agree with your beef but don't worry about it so much if the platform
is truly open

chris dixon · 3 months ago

I've been watching this little drama unfold from various sides. Fred - The thing is that your influence especially around consumer internet has gotten to be such that your liking something creates a bit of a self-propelling investor frenzy. This not only creates a more competitive deal dynamic but also risks clouding people's judgments. I think Dennis is great, and the product is really cool, but a lot of investors I know who desperately wanted to do the deal hadn't even tried the app. Their entire thesis was "Fred Wilson likes it."

Mark Essel · 3 months ago

Haha, the Fred Wilson effect in action. And I thought Stephen Fry or Oprah had cornered that market.

fredwilson · 3 months ago

i told dennis that he had an easy filter - "check their checkins"

chris dixon · 3 months ago

maybe he should add a badge for whether you can invest.

fredwilson · 3 months ago

turns out he was already using that filter
ev and jack did the same thing at twitter

it's smart

David Semeria · 3 months ago

With all due respect Fred, your analysis must surely be biased by the fact that USV managed to get in. If your public interest had played a role in someone else beating you to the deal, perhaps your opinion would now be different.

fredwilson · 3 months ago

surely it would
hasn't happened to us yet though

Mark Essel · 3 months ago

I promote other people's blog posts all the time, and I don't get anything for it. Worst case it passes some noise to folks that subscribe to my twitter or friendfeed stream. I'd imagine Fred would still be foursquaring away whether or not he got in this round. But you can bet he'd squeeze in the next round if he still liked the product.

David Semeria · 3 months ago

Hi Mark. As Fred said above, it hasn't yet happened. So it remains a hypothetical question. I'm not arguing against the approach, I'm just saying that until it does, it may be too soon to draw any general conclusions.

Mark Essel · 3 months ago

I'm an expert at jumping to conclusions, it's landing I haven't quite got the knack of.

David Semeria · 3 months ago

:-)

GlennKelman · 3 months ago

Agreed that, for an entrepreneur, usage is the sincerest form of flattery. When Redfin has raised money, almost all the people who invested have been active users of the website and ultimately of the home-buying service. Within limits, we're more usage-sensitive than valuation-sensitive; if a potential investor views our company purely as a big pile of money, we will view the investor purely as a big pile of money, focusing only on price. But if someone understands what we're trying to do, we think of the investor as a strategic partner, and focus less on price. For an engineer, product usage = relationship = rationality around price...

fredwilson · 3 months ago

That's a great way to put it Glenn

LIAD · 3 months ago

The main consequences of you "coming out" about your liking of foursquare prior to concluding the investment were:

1. You once again showed that you and USV are at the forefront of consumer web investments and are bleeding-edge when it comes to your industry knowlege and having your finger on the pulse.

2. You may have ended up paying a tad more for the equity you purchased due to the "added heat" your public interest in the company bought about in terms of other potential investors

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Long term - consequence 1 hugely outweighs consequence 2

fredwilson · 3 months ago

i guess i could have just said that

Dan Lewis · 3 months ago

By having your investment strategy public -- and not in one post, but in a steady stream of daily thought-sharing -- you also make yourself a more valuable investor. I'm not speaking directly to your obvious crush on Foursquare specifically, but on maintaining the blog generally. I know of another VC's blog which I originally subscribed to (via RSS) because he basically outlined his theory in one post, and I was hoping for more. He's had ten posts since -- and I subscribed almost two and a half years ago.

I think the tradeoff you make, by increasing your volume of posts so dramatically, is that we -- your readers, and maybe your future investees -- (perhaps wrongly) expect a lot of honestly and transparency from you. If you are posting once or twice a day on consumer internet startups and *don't* tell us you love foursquare, (a) it'll be an empty omission as we'll figure it out anyway and (b) your blog will lose some value. On the other hand, the guy who posts once every 3 months can't really be a pre-investor fanboy of a would-be investment without being written off as a preening fanboy.

And for what it's worth, your style is much better than the other guy's, for a lot of reasons both obvious and otherwise.

fredwilson · 3 months ago

investment theses are a moving target. within months, it will be outdated
unless it is a stream of consciousness

Dan Lewis · 3 months ago

Right -- which is why I subscribed to his RSS feed. He posted his thoughts on what categories consumer internet startups needed to fit into (e.g. "SEO traps") and I figured he'd flesh out and modify those requirements over time. Oh well.

Mark Essel · 3 months ago

Amen to that Dan, great sentiments.

Pascal-Emmanuel Gobry · 3 months ago

I thought along the same lines as I saw the public courtship take place, as in "Damn, he must be getting crushed in these negotiations because everyone knows how badly he wants in" and "I hope he doesn't stop being so open about it; I hope he realizes in the long run, he wins more than he loses." Good to see you have.

I think this is a great investment (had a discussion on Twitter with Ouriel Ohayon about it this morning), so congratulations. But most of all, congratulations for understanding and embracing openness. We're all the better for it.

Michael Fidler · 3 months ago

Nice move! I'm really enjoying Foursquare so far. From the get go it was clear to me that they could have a bright future ahead of them, but with the support of USV that future is looking even brighter now.

DGentry · 3 months ago

When I read your earlier foursquare postings I assumed you were already an investor. Had I checked the financing history it would have been clear that foursquare was still operating on seed/angel money, but I didn't check.

This is a corollary to your second point, I suppose: the company appreciates your endorsement and publicity, and on the flipside you also create an association in the minds of the public between the company and your firm.

K. Warman Kern · 3 months ago

Hmm. Wonder what people would pay to see and participate in the investment decision-making process, in real time? I mean literally "putting their 2 cents in" in return for a share of the back-end.

OurielOhayon · 3 months ago

Fred, i assume "coming out" publicly with an investment is possible only when you have a public window, which you do with your blog. Do you see other options for doing that otherwise? other of course than just dropping the name of your target investment in a conversation or a public appearance?

dlifson · 3 months ago

It seems like there is a first mover advantage to being open. If you are the third or fourth VC to say "We love foursquare, here's our investment thesis", are you still seeing the benefits you outlined in your post?

Saying "me too" publicly would hurt more than help, I would guess.

fredwilson · 3 months ago

i'm not sure I was the first
Bryce at OATV was pimping foursquare on twitter at SXSW

bfeld · 3 months ago

I so completely agree with this philosophy. It's so hard to see the actual downside of this approach to investing / life in the private company / startup domain.

fredwilson · 3 months ago

well one downside is the price gets bid up

bfeld · 3 months ago

Yeah, I suppose. But my experience is that there is a natural set point to the price (e.g. maybe I was too low) and give my belief that if the entrepreneur is ONLY focused on price in the early round I'm probably not the right investor for them I'd rather have to deal with this while letting them know me better. And - if it's something amazing, I'll meet whatever the clearing price is anyway without regret.

fredwilson · 3 months ago

that is exactly how it played out Brad

bijan · 3 months ago

it's a great way to do it. i remember the same thing happened at boxee. we were using the product and blogging about it months before we actually made our initial investment

(actually I think we first blogged about it after we turned it down for the second time together :)

I wouldn't want to do it any other way.

fredwilson · 3 months ago

that's true about boxee
it's also true that when you invested in twitter, your twitter usage was a
clear sign that you were an active and engaged user

Josh Morgan · 3 months ago

Fred,
I'll take the bait.

One can assume that even though you made it in the deal you had to give more favorable terms than you would have liked (because of being so open). So, essentially, the deal was more expensive because of your openness.

By the sound of your post, the benefit of being open in your mind is still greater than the higher cost you paid. We'll see how it plays out.

I still think all the benefits you mention could have been had without being open about FourSquare at all. Sure, play with it, talk to people personally about it, but broadcast it on twitter and your blog to hundreds of thousands of people? I couldn't bring myself to do it.

If it works out for you, maybe I will be a "fast-follower" to this approach. Good luck.

pbreit · 3 months ago

Would you rather have slightly better terms or not be in the deal at all? That's the difference. And how bad could the terms be on a $1.4m round for a service that is already hockey-sticking and has clear revenue potential?

Mark Essel · 3 months ago

Wow, great deal Fred. As a huge fan of the open business approach you've taken, I'm glad to see it pay off. I hope foursquare infects us all and your venture firm takes in a nice profit.

zerobeta · 3 months ago

It also gives you more credibility in "talking your book" after the deal is done. Your blog reaches a lot of people and thus you have the ability to be one of the most effective salespeople for the companies you invest in. The fact that you were genuinely interested in a company before you were financially interested in it goes a long way in estabilishing rapport with your readers.

Now when you blog about Foursquare or any of your portfolio companies, I don't think "Fred is just talking his book" but rather "Fred is genuinely interested in this new technology, I should check it out."

You openness beforehand lends a credible voice to your investments after the fact and thus adds value to the money that you invested.

William Mougayar · 3 months ago

Congratulations.
We're waiting for them to add Toronto to the list of cities covered.

fredwilson · 3 months ago

i love it when Business Insider puts the disqus comment thread at the end of these posts. well done. this post is now running on two blogs, but we get to have one conversation about it. well done.

micah · 3 months ago

Yesterday morning, I had a friend ask me about what I thought about publicly providing a product roadmap. My reaction is that openness is never a bad thing. Of course, there are always pieces of information or strategies that should be kept under lock and key, but if you treat your users and potential users as thinking adults, there is almost never a downside.

I imagine to a certain degree that concept is similar in the investment space. Watching how you and Feld operate over the past couple of years, I have yet to be surprised in the investments you choose.

After all, if you cant grow to "crush" on something before investing, whats the fun in investing in the first place?

As one of the first people to use Foursquare and really help promote it at SXSW08, I am excited and proud of Dennis and Naveen. They are amazing people, with an innovative product. Cant' wait to see whats next.

fredwilson · 3 months ago

i love your emphasis on the "fun" of investing
it is important to have fun doing what you do

JacopoGio · 3 months ago

From what you write here on your blog, Fred, I would tell that more than an Investor you are acting as a Partner in your ventures.
And, as a Partner, you are not looking just for your own best deal (price, conditions) but you focus also on the long term interests of the Invested company. So you are a Partner for the founders of any start-up you funded, right ?

fredwilson · 3 months ago

That's most certainly the goal

micah · 3 months ago

I can't imagine a job, other than teaching, that has such a high "fun"
potential as investing. Helping people achieve their visions while
making several constituencies money, must be satisfying on multiple
levels.

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Sent wirelessly

ErikSchwartz · 3 months ago

I doubt any of your regulars were surprised by this investment. I think what's really exciting about it is training a behavior that can be leveraged in lots of different kinds of games. I assume the API will allow groups to invent new games that get played on the 4^2 platform?

I'd like to use it but the Android version seems not to work well. Whenever I try to check in it gives me an error.

fredwilson · 3 months ago

ugh
i'll let them know although they did not build the android app

ErikSchwartz · 3 months ago

'Error invalid input syntax for integer "null" '

I'm running 1.5 cupcake on one of the google developers conference give away phones. The only other anomaly is that while I signed up and said I was in Boston, I have actually been in Menlo Park CA trying to check in here.

The more I think about it the more you can do with this. Restaurant chains can build their own loyalty programs on the cheap. They could run contests (whoever goes to the most Starbucks in Manhattan in September wins). You can integrate the rewards side of loyalty right into the app with online or SMS coupons). It's great for the restaurants because of the twitter promotion (coming not from the restaurants, but the users peer group).

There could be a lot here.

jayfallon · 3 months ago

I see no problem with endorsing Foursquare prior to closing an investment with them. It's a good game with a lot of upside potential and at the end of the day, you let the money do the talking. The fact that you were open and honest about your usage probably helped Foursquare attract more followers and may have hurt you financially in the short term, but the long term effect will be positive for both you and the companies you choose to endorse. Face it, you picked a winner.

Now if someone could just convince @bijan that Arctic Monkeys are not the greatest band in the world, everything would even out.

fredwilson · 3 months ago

That honor goes to the rolling stones. But the arctic monkeys are the closest thing to the stones we've got in this generation of rock bands

I used to think that badge of honor goes to Kings Of Leon but they've morphed their sound and are now in U2 land