Much to the chagrin of valuation-hyping Silicon Valley VCs, Yahoo is still in the running to acquire Foursquare, the hot social geolocation start-up, much longer than expected.
Foursquare’s board met last week about the possible acquisition deal. But, so far, it’s turned it down flat.
Nonetheless, (YHOO) is still interested, sources said.
Yahoo declined to comment, and I have an email into Foursquare, which has yet to respond.
But sources close to the situation said that Foursquare CEO Dennis Crowley is holding his cards very close to the vest about whether Foursquare will reconsider the offer–which could reportedly go up to $125 million to $150 million in cash–from the Internet giant.
Crowley’s alternatives are two powerful venture firms–Andreessen Horowitz and Khosla Ventures–which had put lucrative funding deals on the table, trying to entice Foursquare to remain independent and turbocharge its fast-growing status-update service.
Other big firms have dropped out of the race, although sources said more are now sniffing around, including free-spending Russian moneybags, Digital Sky Technologies. It has already sunk copious funds into social networking giant Facebook, game powerhouse Zynga and, today, social buying site Groupon.
The VC selling point is freedom, the ability to sell for more later and perhaps a more modest payout for talent, including Crowley, by buying some of their common shares. Their valuation is hovering around $80 million.
Crowley (pictured here) controls a large chunk of the shares of the start-up and has so far turned down the $100 million offer from Yahoo, despite the fact that Foursquare is still small (about one million users) and unprofitable.
But it has grown dramatically and raised $1.35 million last August, valuing it at $6 million. Funds came from O’Reilly AlphaTech Ventures and Union Square Ventures, as well as a spate of well-known angel investors.
Yahoo CEO Carol Bartz hopes to best all VC offers after having recently made some significant noise about starting to engage in aggressive M&A to attract talent and inject innovation into the company.
She has mentioned mobile start-ups specifically, and Foursquare is indeed among the hottest in the space, offering its growing base of users an ability to “check in” from a variety of places.
But the location-based services arena is heating up, with multiple competitors to Foursquare, such as Gowalla, as well as recent efforts by Facebook and Twitter to enter the space in a big way.
In fact, Wednesday at its F8 developers event, some expect Facebook to talk about its own version of Foursquare.
Still, Crowley may welcome the challenge after selling a similar location service called Dodgeball to Google (GOOG) in 2005 and ending up with very little. He left the search giant on bad terms two years later, and Dodgeball was closed down by Google in early 2009.
At the time, Crowley called the experience of being at a large company “incredibly frustrating.”
Which is why it will be interesting to see the choice he makes in what one person close to the situation called: “A very deft Hamlet act.”
