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Summary:

Investor Fred Wilson says it was worth it for Foursquare to take its time to figure out whether to raise another round of financing or be acquired, and also suggests that Facebook will be partnering with the company rather than launching its own competing location features.

Union Square Ventures partner Fred Wilson has written a blog post about the somewhat convoluted path that led to the recent closing of a Series B financing round for Foursquare, in which USV has an investment. It was smart of Foursquare to take its time and think about the right path, he argues, as opposed to jumping into a financing or a takeover offer right away. But the VC also said something that has implications for Foursquare’s future growth, in particular its relationship with Facebook, which was rumored to be in talks to acquire the company.

Wilson says that the discussions Foursquare’s founders had with potential acquirers helped the company understand the risks of going it alone vs. those of selling the company outright (which founder Dennis Crowley did with his previous company, Dodgeball, to Google). The Union Square VC adds that discussions with potential acquirers also:

…allowed the founders to develop close working relationships with some of the most important Internet companies who can not only be acquirers but also distribution partners and monetization partners.

Without reading too much into that statement, it sounds like Wilson is saying Foursquare will be counting on Facebook (and possibly Yahoo and Microsoft, which were also rumored to be looking at an acquisition of the company) to be partners rather than competitors in the location-based services game — in particular, distribution and monetization partners. This adds some fuel to the theory that Facebook will use its social networking clout to become an aggregator of location-based services such as Foursquare and Gowalla, rather than launching its own competing service or trying to acquire one.

There was much speculation leading up to the F8 conference in April that Facebook would launch its own location services, including a piece in the New York Times that quoted sources close to the company. But nothing along those lines was unveiled at the conference, or even discussed (although there have been reports that Facebook has been experimenting with location features for advertisers like McDonald’s (d mcd)). While many observers have assumed that Facebook would inevitably crush Foursquare and Gowalla with its own location offering, Wilson’s post suggests that it’s far more likely the giant social network will wind up working with them rather than against them.

In any case, as Om noted, now that it’s closed its financing round Foursquare has to make the transition from being the cool new social service to being an actual operating company, with all that entails.

Related content from GigaOM Pro (sub req’d): Location: The Epicenter of Mobile Innovation

Post and thumbnail photos courtesy of Flickr user Dunechaser

  1. I think this is a very good decision that Facebook has made

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  2. All the comments Facebook has made about location were about when it might launch, not if. They said more than once that something was coming, but the product wasn’t done yet. In retrospect it seems like they were scoping out the Foursquare option and can now get back to their own path.

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    1. I agree, Liz — that is what it sort of feels like, and I think that is a smart move on Facebook’s part.

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  3. The partnership betwen FB and Four Square makes sense, Four Sqaure now has a head start in transitioning into a operating company with a focus on profitability. I see a lot of thing sthey can leverage out of the partnership with FB. Good to see two great services partner up

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  4. [...] it hoped would increase its appeal. Meanwhile, Facebook is also working on location features, which may include a partnership with Foursquare and other [...]

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  5. [...] around places and events). Facebook will likely allow Foursquare and other location services to feed data from their platforms and users into the social network, provided they want to abide by the terms of the API and the open-graph protocol. But it’s [...]

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