If Instgram is ‘worth’ $1,000,000,000, what is Foursquare itself worth? It’s not too idle a question; Instagram set in motion a pricing-recap in the market, effectively putting a marker in the sand as to what a high-growth startup might command in terms of ‘value’ to a scared giant, such as Facebook.
Here’s a fact that you might have forgotten: Foursquare’s last round was $50 million in capital at a $600 million valuation. Sound familiar? It should. Instagram’s last round, days before Zuck snapped it up, was about $50 million at a valuation of $500 million.
There are more parallels. Foursquare was also briefly once the hottest company in tech (in our estimation). I recall blogging about the service entering new territory, and being greeted by readers as if I had led them to the promised land. Everywhere you looked, there was Foursquare. Now, it’s Instagram.
What is interesting, though, is what Foursquare has become. A deal with Amex, and a merchant setup that could be monetized overnight give Foursquare exceptional revenue potential, especially given the density of its userbase in certain locales; in those place, it is part of the fabric of life.
However, Foursquare has a problem: user growth. While Instagram is adding 10 million users in 10 days, Foursquare had a total of 15 million users as of Janurary of this year. It was at 10 million in June of 2011. That’s 50% growth in about half a year. Not bad, but nothing crazy, especially as smartphones have become even more common; the pool of potential Foursquare users is only growing.
There have been endless numbers of the value Facebook paid for each Instagram user bandied over the past few days. Certainly, that per user cost has dropped, as Instagram has exploded since the sale. However, numbers around $30 have been the most common, so we’ll employ that figure.
Now, 15 million users in January is our most recent data point. Let’s be very generous, and assume that Foursquare has accecerlated its growth rates, and has, as of today, hit the 20 million user mark. With me? Alright. At Instagram’s $30 per user metric, Foursquare is now worth $600 million! But wait, that’s what it was valued at during its last round of funding.
What’s going on here? It’s difficult to say. Foursquare appears to be trying to become a real, functional business, and is not positioning itself as flipmeat. But the company does have troves of data. That is worth plenty, I would presume.
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