Foursquare is one of the hottest startups in Silicon Valley at the moment and tech-savvy users and blogs are gushing with praise for the service/game/mobile app. The rumor is that the company is looking for investment, at a rather inflated valuation, but it now looks like it may also be interested in selling or is, at least, discussing the possibility. Yahoo is said to be prepared to pay $100 million for the company, a number that isn't too far away from the more recent valuation numbers.
The rumor, uncovered by Business Insider, says that Yahoo is in talks with Foursquare over a possible acquisition. A source close to the bankers handling Foursquare's latest fund-raising round says that the people managing acquisitions at Yahoo are now deciding on the move. Another source at Yahoo says there have been talks with Foursquare, but that this shouldn't be read too much into.
The move would make some sense for Yahoo, which would want to show that it's still interested in exploring new markets and innovating. $100 million also wouldn't be too much of a burden for the company, despite it having seen somewhat of a rough patch lately.
However, it's probably not the preferred option for Foursquare, as Yahoo doesn't really have a great track record when it comes to the companies it has acquired over the years. Dennis Crowley, cofounder and CEO of Foursquare, knows first-hand how it is to deal with the big companies. His previous venture, Dodgeball, was acquired by Google, but nothing really came out of it after that. Foursquare also has venture capital firms lining up to invest in it at a very solid valuation of $80 million.
On the other hand, Foursquare's entire business is sitting on a rather flimsy basis at the moment. For one, the market is brimming with competitors, Gowalla to name one. But the elephant in the room is none other than Facebook, which will be adding a location feature very soon. Six months from now, Foursquare's founders may be regretting the fact that they didn't sell when they had the chance.