What Foursquare needs to do to become huge
Here are the four hottest tech startups around, it seems.*
- Foursquare. See: Your Official Permission to Believe the Foursquare Hype.
- Twitter. I mean, c’mon. See: Obama: Diplomacy With Russia Will Be Conducted Via Twitter DMs.
- Groupon. See: From zero to more than $1 billion in 18 months.
- Gilt Groupe. The “hottest startup in New York”.
(I couldn’t even think of a fifth I would put in the same category – sorry, ChatRoulette. Maybe others can?)
*Facebook is too established for this exercise. I’ll err on the side of the new and exclude Hulu as well.
I think it’s valuable to look at each of them and ask:
What makes people believe they’ll be big? Is this really the next big thing? Are they big enough to signal the start of a big trend? Be era-defining?
These are fundamental questions for entrepreneurs and VCs. After all, we want our time, money, and effort to be well-placed. We’re in the business of asking: What are the next billion dollar businesses, the next 10 billion dollar markets?
So, I’ll “check in” on Foursquare today (ahem, gag), and the others in a later post.
Why is Foursquare hot? Location + Social.
I think Foursquare is hogging headlines and prompting people to pile on for three reasons:
- It is the first location-based social networking service to really capture the public’s imagination – something folks have been excited about for years. (Sorry Dodgeball and Loopt)
- People think it could be the next Twitter, the little single-function engine that could become so much more.
- Like Twitter, it’s real-time and mobile – established big-time trends. And the old maxim is that ventures is as much about picking markets/ trends as companies.
For Foursquare to get huge, it needs to define the location-based social networking space.
Is Foursquare going to become really big? Dennis Crowley, their CEO, has already said that check-in functionality will be a commodity feature. So what would it take for them to make it big? Robert Scoble has some great tactical tips for features to build. At a higher level, Foursquare needs to define what it means to be a location-based social networking service. What do I mean by this? From a consumer’s point of view, they need to come up with compelling answers to these questions:
- What does location bring to social networking? How do we make it acceptable enough for the non-early adopters to embrace it?
- How do people use location? What value does location bring beyond social networking?
More value from location, deeper social import.
Foursquare itself has already admitted they need to reinvent themselves and build Foursquare 2.0. Here’s my shortlist for what they need to do to go from a $100mm valuation to a $10bn valuation:
1. Make location pay.
If people can get more value from checking in, more of them are likely to do it more often. And nothing says value like a good old-fashioned deal. Foursquare has already started down this road with some of the partnerships they’ve been forging. There’s tremendous potential in tying in to businesses both big and small – the Targets and the neighborhood café.
2. Leverage the location graph.
Foursquare needs to use the data they collect about location, cross it with the data they have about users, and create Netflix-style collaboratively filtered place recommendations.
3. Deepen the social + location engagement.
Right now, the link between location and social is vague. That makes sense in the early going – not least of which because some of the ideas for more closely linking the two are heavy-handed and creepy. But soon Foursquare will need to figure out how to really connect people based on location – for networking, for recommendations, and for meeting up with friends.
Don’t lose sight of the big picture.
More and more, startups are adhering to the launch-and-learn, app-based, minimal-viable-product mindset. That’s great, and we have a ton of fantastic single-purpose first products to show for it. But to become a defining startup, to go from TwitPic to Twitter, companies need to make sure they have a larger vision for growth. They still need a roadmap and plan to go from first product to portfolio of offerings, and a strategy for growing beyond early adopters.