Foursquare Raises $41 Million from Silver Lake and Existing Investors

Yesterday, foursquare released a major update to its app with version 6.0 and today the company has announced they have raised an additional $41 million from Silver Lake and their existing investors (Andreessen Horowitz, O’Reilly AlphaTech Ventures, Spark Capital, and Union Square Ventures).  The money raised from Silver Lake came in the form of debt, as opposed to venture capital, and the money from the existing investors came in the form of convertible debt (meaning it can be converted to equity in the company if the investors chose to).

While I’m not familiar with the specifics of the deal, the difference between debt and venture capital is that debt has to be paid back with interest, while venture capital doesn’t.  Raising money through debt is very common in most industries, however, the tech startup industry typically has avoided debt as a source of capital (mostly due to lack of revenue streams in many startups).  The fact that foursquare is raising money via debt means they must have some money coming in already which is good.  In fact, it was reported that the company had reportedly pulled in about $2 million of revenue last year.

According to the blog post, founder and CEO Dennis Crowley, said that foursquare now has over 3.5 billion check-ins and that they plan to use the money to further develop their business tools, “We’re building tools for local businesses to connect with their customers. We’re making search better, every single day. We’re building that location layer for the internet – the platform that all other companies use to power location in their apps.” he said.

The company apparently plans to also use the money to increase its sales team from 10 to 40 people by this summer.  Obviously, a bigger sales team will allow foursquare to handle more deals and partnerships, something they really need to do in order to generate more revenue.

I’m excited to see where foursquare goes from here.