This page has been archived and commenting is disabled.
Foursquare Is Now Twosquare: Latest Tech Bubble Casualty Has Valuation Slashed By 60%
First it was Dropbox.
In late October ago we reported that one of the numerous "unicorns" prancing around Silicon Valley was about to have a very rude wake up call when Dropbox was warned by its investment bankers that it would be unable to go public at a valuation anywhere near close to what its last private round (which had most recently risen to $10 billion from $4 billion a year ago) valued it at.
Than it was Jack Dorsey's "other" company, Square (which soon may have a higher valuation than Twitter).
In early November we wrote that "another company realized just how big the second "private" tech bubble, one we profiled first in January of 2014, truly is. That company is Jack Dorsey's Square, which earlier today filed a prospectus in which it said that the "initial public offering price per share of Class A common stock will be between $11.00 and $13.00." Assuming a mid-point price of $12 and applying the 322.9 million shares outstanding after the offering, it means a valuation of $3.9 billion. The problem is that in its last private fundraising round, Square was valued at about $6 billion..."
Then, one month ago it was the turn of Snapchat, the fifth most highly valued private tech start up.
According to FT, "Snapchat has been marked down by one of its most high-profile investors, raising further questions about the soaring valuations of private technology companies. Fidelity, the only fund manager to have invested in the four-year-old company best known for disappearing photos, wrote down the value of its stake by 25 per cent in the third quarter. It had valued each share at $30.72 at the end of June but dropped the valuation to $22.91 by the end of September."
Fast forward to today, when the latest semi-unicorn to drop like a fly was none other than Foursquare, a company which makes apps that do something that most other apps already do as well if not better.
Actually make that Twosquare, or rather Oneandathirdsquare, because according to ReCode, the company is close to finalizing a funding round that will see the company's value plunge to $250 million, almost two-thirds less than the $650 million it was "valued" at two years ago.
ReCode, which explains that the startup "makes apps that let you find local restaurants and stores and “check in” to them" adds that the company has also talked to potential buyers. So it could still conceivably sell instead of finishing up the funding, which should raise at least $20 million and as much as $40 million. Or, conceivably, it may do neither if investors realize that now that the tech bubble has burst the only way they "get out" is without another down round in 6-9 months, because unfortunately just like virtually all other tech bubble 2.0 names, this one has zero hope of ever generating a profit either.
According to ReCode, at least one new investor will participate in this round; previous investors include DFJ Growth, Microsoft, Silver Lake Partners, Spark Capital, Union Square Ventures and Andreessen Horowitz.
Most importantly, in 2013, Foursquare raised $35 million in a round that valued the company at about $650 million. We can't wait to see if after the 2017 valuation round, the company will have a "zero dot" prefix ahead of the number of pro forma "corners."
The good news for the late stage investing idiots who inflated this particular tech bubble in hopes even greater idiots will emerge, is that unlike "luxury online retailer" Gilt Group which is trying to go public at a quarter of its recent private round valuation, Foursquare has raised less, or $121 million, than its so-called valuation. Then again, throw in one more downround, and 4Square will also have raised more in cash than it has in equity value.
How did this collapse happen? ReCode tells the story:
Foursquare, which used to be one of New York’s buzziest startups, launched in 2009 as a social service that let you tell friends what bar or restaurant you were hanging out at — the same concept as Dodgeball, Foursquare CEO Dennis Crowley’s previous company. Foursquare eventually evolved into an ad-supported service that was meant to help you find places to eat, drink or shop, and last summer Crowley said the company had 50 million active users.
But while Crowley has said Foursquare could make real money from advertising, its growth has never matched its valuation, a reality the company and its backers are now tacitly conceding.
Crowley has also spent the past few years talking up the company’s data assets, accumulated via its users’ travels. That data could theoretically be valuable to a big platform company like Microsoft, which has already invested in Foursquare, or Twitter, which is already using Foursquare to power its location function.
But we thought Twitter was hoping that Four Square (or Microsoft) would buy it? This second tech bubble sure is getting confusing.
Luckily, even if Foursquare meets an untimely demise sooner rather than later (and considering its "cash flow", make that sooner) when its potential investors finally realize they are throwing lots of good money after even more bad money, the entrepreneurial spirit will be alive and well, concocting of the next great idea such as this one:
The good news, sarcastically of course, is that as the WSJ reminds us, there is a whole lot of this kind of "greater idiocy" still to go.
And then there's this
»
- 235 reads
- Printer-friendly version
- Send to friend
- advertisements -
TFB.
Too Fucking Bad.
When you buy paper pet rocks, and paper bagged up unicorn farts, you are asking the investment world to bend you over, and take everything.
This is just the beginning, the markets will tank and there will be a breakout of global civil unrest as we embark on a clash of civilizations and a fight for survival in the new year, as it has just been reported that German Chancellor Angela Merkel is allegedly ‘Hitler’s Daughter’ and the Fourth Reich is about to become a reality......
http://beforeitsnews.com/conspiracy-theories/2015/12/the-fix-is-in-franc...
"Hey, I've got a website and phone app that lets you play fantasy football! I must be worth BILLIONS!!!"
Pfffftt.
You want a start-up? Try some serious sci-fi tech like Axonics Modulation Technologies!
What the fuck are these ponzis? I've never heard of most of them and I used to be a techie.
What? A loose block in the Ponzi Pyramid?
Say it ain't so!
Soon to be "One Square"
and then 1/4
Four Square...
what the MSFT logo again?
http://www.wsj.com/articles/how-jack-dorsey-runs-both-twitter-square-145...
I saw that today and laughed. WTF does it really take to run Twitter? 2HR lunches M-F?
Shouldn't the headline be "Foursquare now 8"?
Dividing by 2 is not the same as taking the root, Tyler...
If you own a house in Silicon Valley, sell it immediately and rent. The pain has only begun, and this kind of bubble probably won't be coming back.
BOOM
Peak App...lol.
Issue unbelievable amount of shares, collect fat salary riding a wave of bullshit, loan shares out & short them at peak bullshit, cash out on the fall, buy the dead cat bounce, then sell it all again when everyone notices the cat is nekid.
It's the Silicon Valley Way of being looooooooooooong!
4 square..
2 square..
90 degree angle
Reach around...
I think that's next.
I can't understand why it's worth anything. Who uses foursquare?
OK, so I'm a couple drinks in and definitely thinking "outside the box" here.
Let's try to connect a few dots in non-conventional ways:
1. The idea of knowing a bunch of data about people equaling a sky-high company valuation and eventual profit nirvana has now gone TWO rounds in the internet community without success (.com bubble 1 and .com bubble 2).
2. The internet was invented by the government (the defense department, actually- DARPA).
3. Where did all these entrepreneurs all get the same idea that amassing huge amounts of data on people would generate commercial viability when it's only worth exists in attracting advertising dollars? It's a big pot of money but not gigantic (compared to, say, healthcare) and it's not really a pot of money that is growing all that quickly. With lemming-like blindness they cling to that story and attract stupid investors who have now fallen for it TWICE.
4. NO WAY could a bunch of people that smart believe that story not just once but twice.
5. What is the TRUE VALUE of knowing everything about people and what they're doing if it's commercial applications (advertising) have known limits? And to whom is that data valuable?
6. Governments don't give a rats ass about commercial viability or ROI. But their lust for knowing everything (control) is definitely at the "insatiable" level. Ruining political opponents, discrediting anyone who disagrees with them.... THAT is real value. POLITICAL VALUE. CONTROL VALUE.
7. I'm not the sharpest bowling ball in the shed but is for sure looks to me like the government has done an excellent job leveraging the best technical talents available in the country to build their front line surveillance structure for them. And they spent relative peanuts to do it compared to a drirect government-funded project.
FaceBook gets a little government gravy (profitability, though not enough to justify their sky high valuations). Google and Microsoft get a LOT of gravy. It's all about the government and your relationship to it at this point.
The real value of all this data exists ONLY at the governmental/political level.
As long as you aren't thinking "outside the Franzia box" No Debt.
Good thing is the trolls agree with us on the existing/coming collapse. They are now seemingly shifting away from the financial posts, en mass , to the geopolitical posts, unable to put up realistic argument or cover up the plethora of in your face, dead in the water, reality check FUBAR crackMarket.
Go show this list to 10 people at random. Ask them to put a check mark next to the names of companies they have actually heard of on that list. Any of them they're unsure of ask them what the company does before allowing the check mark. I bet that list is pretty small. That's all you need to know about what is coming.
Good point - I know quite a few of them just from ZH and my other reading.
But I only have used 2 of them - Eventbright and DropBox neither I have ever spent a buck on.
Pets.com here we come - only this time with billion dollar valuations that go 'poof'
I'm having a hard time getting my head around the staggering amount of committed equity funding...these #'s are off the charts. Is there really this much cash floating around looking for a return?
Eliminate the competition....
Foursquare - checking in was something fresh when it came out. But this app started to become irrelevant. Especially when Facebook also had the check in feature, and practically all of the people who mattered to an individual are on FB and not Foursquare. I uninstalled the latter two years ago. Don't think I've been missing much.
We can all thank the Fed and especially the Bernank for all these loser companies. With trillions in essentially zero-interest, free money floating around seeking yield, and the obvious need of VC companies to invest, there was little doubt that a boom and bust scenario would develop and here we are.
This won't go all at once, of course. There will be some notable failures, some missed opportunities to do an IPO (that time passed in 2014), and some companies that go public at reduced valuations.
The tipping point is when one of these IPOs is undersubscribed and the issuers have to hold the shares at staggering losses.
Just a guess, but I'd think that the first quarter of 2016 won't be much of anything, but by the second and third quarters markets are going to get hit, and hit hard. Expecting a full-blown crash before the election.
Just look at 2000 and 2008 if you don't think it's all pre-planned and arranged for the MOST IMPORTANT ELECTION OF YOUR LIFE... AGAIN!