Foursquare Labs Inc., the mobile-application developer that lets users check in when visiting a place, raised $35 million, led by Barry Schuler’s investment vehicle, DFJ Growth.
The funding round values the company at a little more than $600 million, according to a person with direct knowledge of the matter. Capital Group’s Smallcap World Fund also participated, making an exception to its normal strategy of investing in public companies, Foursquare said today.
Foursquare has spent the year adding products for businesses to advertise to its users, and it said today the process is finally paying off. Investors who acquired convertible debt in a $41 million fundraising deal earlier this year have now switched their stakes to equity, signaling confidence in the business model, the company said.
“Earlier in the year, people were more skeptical about our prospects because we weren’t able to prove all the things we had set out to do,” Foursquare Chief Executive Officer Dennis Crowley said in an interview. “The big difference is we went from two revenue-generating products to six of them. One of those was a major technical achievement that people didn’t think it was possible to do.”
That advance was in instantaneous recommendations for people when they’re near something that might interest them. Foursquare has also expanded into location-based advertising, sending ads after a user checks into a place.
Proceeds from the latest funding round will help improve technology and expand the user base of 45 million people, compared with Twitter Inc.’s more than 230 million users and Facebook Inc.’s more than 1 billion.
Schuler, the former chairman and CEO of AOL Inc., will join the board of New York-based Foursquare. AllThingsD reported the funding round earlier today.
Foursquare, one of the hottest applications when it was introduced at the South by Southwest technology conference in 2009, has faced years of doubt as the company tinkered with ways to make money on the service. The $600 million valuation is just slightly higher than what Foursquare was worth when it raised money in 2011.
“We got beat up a little bit last year, got beat up a little bit this year,” Crowley said. “But that’s starting to change for us, and you can feel that in our conversations with the investment community.”
Foursquare had been entertaining other options to raise money. In August, people with knowledge of the matter said Microsoft Corp. and American Express Co. were looking into an equity stake in the company.