Foursquare nabs $41m in loans and convertible debt ahead of its big ads push

Foursquare has reeled in a whopping $41m from private equity fund Silver Lake Partners, as well as venture capital firms Andreessen Horowitz, Union Square Ventures, O’Reilly AlphaTech Ventures – all of whom participated in a $20m Series B round back in 2010 – and Spark Capital, which joined the aforementioned firms in its $50m Series C round a year later.

The news initially came courtesy of Businessweek but has since been ratified by Foursquare itself. The company says the majority of the cash infusion constitutes a multiyear loan from Silver Lake, with the remaining balance taking the form of a convertible debt that can be switched for shares in Foursquare.

It’s interesting to note here that Foursquare is taking on debt with this latest cash influx, via firms that are looking for a return on their previous investments without taking on more equity. And crucially, it gives Dennis Crowley more time to build a more profitable business.

“This allows us to get closer to being able to prove that there’s a real business here,” he says.

Indeed, Foursquare will start allowing merchants to buy ads later this year, and with its latest funding will specifically grow its sales team to “about forty people,” up from the current ten. By the end of 2013, users will likely be served with ads related to their check-in location, which would obviously open a much bigger monetization conduit to the company.

Just yesterday, Foursquare launched version 6.0 of its iOS app, with improved search and recommendation features – you can read our review here. Crowley says that search was buried in prior incarnations of the app, and yesterday’s launch mirrored the recent Android update.

So, despite ongoing concerns about whether Foursquare could offer a genuine return for its investors, it seems there’s still confidence that the app will follow Twitter’s example by building-out an ad-supported service related to its core service offering. “This will be a very important public company one day,” says Bijan Sabet, a general partner at Spark Capital. “And I am in no rush.”

But Crowley also compares its continued growth to another Internet giant you may have heard of before.

“We have to crunch your 3,500,000,000 check-ins, layer your social data over it, semantically analyze our tens of millions of tips, and take a look at real-time activity around you,” he says. “We do all that in under a second, all to recommend two or three places that are perfect for you.

“To us, this is like when Google came and revolutionized web search,” he continues. “Suddenly, you could find things on the internet. The real world is the same way. Four years ago when we started Foursquare, it was really hard to discover a new retro arcade that opened up on a side street, or to make sure you weren’t overlooking the best dish on the menu, or to know a good friend was just around the corner. Sometimes, we think of Foursquare as having the ability to give people superpowers for exploring the real world.”

Foursquare says there are now 1,300,000 businesses using Foursquare, and 33,000,000 individuals who have ‘given it a try’.

Feature Image Credit – Getty