PrivCo, a company that supplies financial research into private companies, is predicting that Foursquare will fail in 2013, likely by being sold for a price lower than total $71.3 million in funding the company has raised.
The social network boasts 20 million members and 5 million daily check-ins, but, according to a PrivCo report, is failing to meet investors’ or internal projections “quarter after quarter.”
The report suggests that Foursquare has been grossly overvalued by venture capitalists. Had it not had such “nosebleed” valuations, perhaps it, instead of competitor Gowalla, would have been acquired for Facebook to build out its check-in features. Just before Facebook’s IPO, Foursquare was valued at $760 million. In the immediate aftermath of the lackluster IPO, that value fell as much as half.
Foursquare’s last funding round was a year and a half ago. Investors have told Foursquare management that they won’t throw in any more money, the PrivCo report says. PrivCo further alleges that Foursquare brought in just $2 million in revenue in 2012.
PrivCo has made waves in the past with highly negative reports about Facebook and Groupon, both of which have disappointed investors after going public.
The report also suggests that the June 2012 departures of co-founder Naveen Selvadurai, Tristan Walker, the head of business development, and Morgan Missen, theead of talent recruitment, point to trouble for the company.
But since then, Foursquare has systematically made its platform more conducive to local business searches. It has said that it will eventually charge merchants for its services, but hasn’t released any specifics.
Brian Blau, an analyst at Gartner who watches Foursquare, said the PrivCo report struck him as “a bit hyped up” but not totally off the mark.
“There is some good brand value in Foursquare, and their growth and engagement seems to be going up, but if that growth does not match investor expectations then something internally is not working correctly,” he said.
But, “getting acquired, even at a discount, isn’t always a bad thing. They would have new backers/partners who could help them in ways they may not be able to do themselves,” Blau said.
Foursquare did not immediately respond to a request for comment.