Foursquare in talks about strategic investment

Foursquare Labs Inc. has been reported to be holding multiple talks with big technological companies about a probable strategic investment. This is according to some people who have knowledge about the discussions.  People who requested anonymity because the information was not public said that the social media company, which allows the users to check in so as to show that they are touring a location, has also been discussing with business enterprise capitalists with convertible debt regarding the issue of turning their assets into equity. The said discussion suggests that the possible investors are more optimistic of the prospects of Foursquare, after the company began harvesting the benefits of the latest advertising approach that allows the brands to target the users after they have checked into the location.

In the month of April, the company raised 41 million dollars in debt, a move that left it fidgeting with a business model that was unproven and at the same time delaying the debate about the true worth of the company. Steven Rosenblatt, the Chief Revenue Officer, said in an interview that the company is on the course of beating its sales objective for the year. He added that from last month, Foursquare had started allowing brands to target their users after they checked into a location and that the advertisements were bringing them revenue three times more than they had expected. Rosenblatt however declined to comment on Foursquare’s targets and so did the marketing vice president, Jon Steinback, on the issue of the company’s talks with the investors.

The recent results from the company are an encouraging sign to the investors who had placed the value of the company in 2011 at $600 million then waited for its promises to be delivered. Foursquare, which raked in $2 million in terms of sales last year, has brought in more products for advertising in the last few months in an attempt to make money from its applications. Rosenblatt said that the users saved or clicked on ads brought after they checked in at an average rate of more than 15%, which beats the engagement rate of less than 1% on a usual mobile ad.

Earlier on in the year, at a time when the company needed money for its operations to continue, it made predictions for the investors on how triumphant its products would be. However, the investors did not agree with it on the worth of the company as the prediction methods it used had not been tested. The company thus decided not to raise equity or debate on the $600 million valuation that the investors placed on it, and took loans from two sources: one from the debt fund of Silver Lake Management LLC and the other convertible notes that could later be turned into shares from investors who already owned shares at Foursquare.

Foursquare has been putting this money into use and it recently hired an additional 20 people for the sales and engineering team. The company has also opened up the advertisings platforms for the businesses that are interested in creating their own promotions. Rosenblatt has said that the first global customers of the company are in the midst of those already using their services.