Foursquare is not a consumer social app business, it’s a data company. And only when it admitted that to itself and revalued as such was it able to pull in more capital and keep chugging. Today at LA’s Upfront Summit, Foursquare’s lead investor from Union Square Ventures Fred Wilson stuck up for the startup while trying to make people understand how it’s changed.
“Think of it more like comScore than Instagram” Wilson insisted.
Essentially, it’s a data provider for the real world the way comScore is a data provider about web traffic. It gives businesses reliable databases of real world points of interests, foot traffic trends, location-based ad targeting and measurement, and more.
That’s critical because Foursquare had lost its edge with consumers. Your location became something easily baked into Facebook posts, Instagrams, and tweets, rather than something you posted on its own.
Then in 2014, Foursquare split its app in two, dividing the local tips in Foursquare from the checkins on Swarm. Foursquare stripped out some of the best-loved features like Mayorship, only to bring them back later. And some loyal users felt slighted by being told to download a second app to do what they were already doing.
But while that might have hurt the Foursquare’s consumer growth prospects, it still had enough existing data and faithful users to generate the data necessary.
In a fireside chat with Fortune’s Dan Primack, Wilson explained why that’s important:
“Foursquare has become a data company. They have two popular mobile apps…that are used by over 10 million people a month around the world. But really what this business is is taking the data from the tech platform that they built, the user data, and all the venue data that is created and edited…by their user base, and offering it as a freemium API to developers. A lot of big companies pay a lot of money for that API. They also have a bunch of other data products. You don’t need 500 million people giving you data to get a representative sample.”
Still, Foursquare had trouble adjusting perceptions, and wasn’t able to raise money on the idea that its social app would become ubiquitous and monetize directly. Executives were fleeing.
But Wilson talked some sense into the startup. “We’ve been telling the company for years that the reason they haven’t been able to raise money is they didn’t value themselves properly. Finally, we convinced them to value themselves properly and they promptly raised $50M.”
Announced last month, this Series E round led by Union Square Ventures reportedly valued Foursquare at about half its previous $650 million valuation. That might sound bad, but it’s better than vaporizing.
The cash breathes new life into the dilapidated company. While it might never ascend to become a cultural institution or trend with teens, Foursquare can still be a healthy business. This readjustment of ambitions and acceptance of its natural aptitude could be a good lesson for ailing unicorns to consider.