What's your evidence for that? I could entirely believe they thought it through very carefully, knew that this was a likely outcome, and did it anyhow because it was the best chance they saw for success.
Remember, this is the third checkin app in this series. It started life as a student project. The first commercial version was Dodgeball [1], which was created, grown, and purchased by Google before the iPhone even existed. Google wasted the opportunity, so Crowley started Foursquare and did it again.
Personally, I suspect they discovered that the whole check-in dynamic was fading. E.g., it's something people did for a while out of novelty and they expected its true long-term audience to be small.
Once you take VC money, it's "go big or go home". A small, modestly profitable company is not something your investors are interested in; they would rather you gamble and lose. And Foursquare took $162 million [2] so they had to go very big indeed. The "success" period of the article's graph looks like VC-failure to me.