Is Foursquare Really Worth Half A Billion Dollars?

Will the company's next check-in be worth $40 million? It might not be as easy as it was last time ...

Guess which social media company is about to check in on Sand Hill Road? Okay, the question is a dead giveaway. Foursquare, which is still a bit thin on its business model, is on the prowl for a new round of financing. The company, based near Union Square in Manhattan, is looking for somewhere between $20 million and $40 million, according to the Wall Street Journal. If it scores, the company could be valued as high as half a billion dollars.

Seriously. This isn’t a joke.

This would represent a whopping 5X surge since the company’s last round of funding. Last summer, foursquare raked in a round worth $20 million, which included Andreessen Horowitz … and hit a valuation of $100 million.

The location-based social network game something-as-yet-undefined might not have an easy time pulling in a hefty round this time, the Wall Street Journal reports. Even though it has 8 million users, up 16X in less than a year, competition in its sector is stiff, and the company’s business model is still week.

There have been some efforts at commercialization, though:

This year, the company took its first steps toward commercializing its service by launching a merchant program that allows local businesses to offer coupons and other deals to consumers who check in near their locations. Foursquare says more than 250,000 merchants are using the new service.

In March, Foursquare struck a deal with American Express Co. to offer discounts to cardholders. The companies ran the service on a trial basis at the South By Southwest conference in Austin, Texas, and plan to roll it out to more cities.

A new round could give foursquare what it needs to develop its sales force and make it a viable competitor to sites like Groupon, but it seems to me that strategy should come before capital.

What are your thoughts on this? Leave a comment below!