

Groupon Authorizes $950 Million Series G - jasonlbaptiste
http://vcexperts.com/vce/news/buzz/archive_view.asp?id=996

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trotsky
A billion in VC? Or could that just be the high end of a range that they're
preparing for? I'd never heard of a round done for that much so I went
looking.

Only clear has ever taken on more VC than that _in total_ after combining all
their rounds... but apparently much of that was from industry partners, and
they had a lot of spectrum to buy in small chunks. The second highest company
in terms of total raised comes in just below the size of this round alone,
with $949.85M.

In googling to find that list I came across another fact... 1 Billion more or
less matches the total amount of foreign VC expected to flow into all of India
in 2011.

    
    
      Clearwire			$1,299.50
      Solyndra			$949.85
      Western Integrated Networks	$889.00	
      MetroPCS Communications	$733.10	
      Facebook			$677.70	
      Reliant Pharmaceuticals	$574.15	
      WildBlue Communications	$557.99	
      Force10 Networks		$553.42	
      Better Place			$550.00	
      Grande Communications Netw.	$507.40
    

[http://blogs.wsj.com/venturecapital/2010/06/01/the-
top-10-ri...](http://blogs.wsj.com/venturecapital/2010/06/01/the-
top-10-richest-venture-backed-companies-of-all-time/)

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ghshephard
Two Anecdotes:

1) I'm hanging out with Family in Abbotsford, British Columbia, and wherever I
go browsing, I'm getting Groupon Ads for interesting things to buy in
Abbotsoford. I've been half tempted (for the first time in a long time) to
click on these ads. There is 0% chance I would have considered going to these
places without those ads. If I find something new and interesting, there is a
very good chance that I (or my family) will return as repeat customers.

2) My mother, is trying to figure out how to attract new business into her
Coffee Shop for a new line - just to let people know it exists, and is
considering a groupon deal.

If, in fact, groupon has a sustainable profitable model in their existing
markets, and the $950mm Series G is there to expand the same model into other
markets, and, if they have no entrenched competition in those markets - then
this move makes absolute sense.

Time will tell if all of these conditions hold true.

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henry81
I have yet to buy a groupon, but I keep looking daily - I got some groupon
gift cards.

There seems to be way too many ads for spas, salons and the like, which do not
interest me, yet they seem to attract tons of buyers..

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ShabbyDoo
The expected lifetime value of a custom acquisition is so high for these
services that Groupon makes sense even if the conversion rate is < 5%. And,
since most salon owners can push the risk downward to their commissioned (paid
by the job, really) staff, there's even less disincentive. Only the staffers
still trying to build a book of business will accept Groupon customers, and
those employees' opportunity losses are low because they end-up sitting around
between clients anyway. So, the risk/reward trade-off of using Grupon in these
industries is quite good.

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c2
Of course we don't have all the variables here, but this doesn't seem like a
very good move from an outside observer. If groupon is making hand over fist
in cash, and has a healthy cash flow, part of me is wondering why they
couldn't use that to steadily finance overseas expansion?

I understand VC's desire to get in on the ground floor of GroupOn's meteoritic
growth, but giving them a billion dollars of cash right now doesn't seem like
right play here.

Get big fast might of worked for a select few dot coms, but it certainly
didn't work as a general rule.

~~~
tomerico
I can give you an anecdote as an answer

Here in Israel, there are dozens of Groupon clones, which are extremely
popular. But Groupon isn't here yet.

It's a land grab game, and in this business, growing fast matters.

~~~
c2
Good point.

I guess the thing I would caution about is expanding fast vs. executing well.
Hopefully they learn the lessons in the Yandex vs. Google and Amazon/Ebay vs.
Tao Bao fights.

Facebook did execute on a very successful international strategy - but from my
understanding they didn't need a billion dollars to do it. GroupOn's economics
might be different - time will tell.

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ShabbyDoo
The guy who owns the salon where I get my hair cut probably wouldn't do a
Groupon deal because of adverse selection effects -- he would be worried about
attracting a bunch of cheap people who wouldn't pay full price for his
premium-ish services and, by virtue of buying into a Groupon, don't have
loyalty to their stylists. However, he is willing to discount services to
customers who are likely shopping for a new salon. A few years ago, he signed-
up for a service which would send an elaborate snail mail invitation for a set
of heavily discounted salon services to people who recently bought homes in
certain high income zip codes around his business. He owns some pretty
sophisticated salon management software which can track conversion rates (and
therefore lifetime customer value). I think he wasn't getting enough
conversions to justify the price (a few dollars/invite), but he'd be
interested in other such services with the proper selection biases.

Could someone compete with Groupon by offering very selective discount offers?
How much would it be worth for Grocery Store A to target those who shop
primarily at Grocery Stores B? Could Visa use its credit card data to build-up
such a list? Could it legally use that list to drive such marketing endeavors?
Would consumers opt into having their purchasing data used in that way if it
meant being offered amazing deals from time to time? How else could one offer
up to businesses highly selective campaigns? The problem with Groupon is that
it attracts customers who aren't especially valuable, and businesses have to
hope to pick up the minority of those who represent profitable new business.

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Eliezer
Senior in liquidation preference to all other shares? They can _do_ that?

~~~
joezydeco
So does that kind of confirm that the founders are already cashed out?

~~~
SpikeGronim
Nope. From what I've heard it is standard practice for later rounds to dilute
the investors from previous rounds.

~~~
joezydeco
Well, it looks like they cashed out.

[http://techcrunch.com/2010/12/30/groupon-
insiders-345-millio...](http://techcrunch.com/2010/12/30/groupon-
insiders-345-million/)

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aditya
Local advertising will be as big (if not bigger) than AdWords, ergo Groupon is
the new Google. No wonder they turned them down.

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nhangen
Google isn't AdWords, Google is search (and now, the web). Search > Coupons.
Google > Groupon

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ryanwaggoner
No, Google is an advertising company, pure and simple. Virtually all of their
products are a means to aggregate an audience that they can sell to
advertisers. Search is just another way that they do this.

Groupon could definitely end up being bigger than Google.

~~~
axod
If there was ever a sign of a bubble, it's this comment.

Some local coupon startup thingy bigger than Google? u-huh.

People have been saying 'local is gonna be big' for years. I don't see why.
Why do they think more money will be spent locally than people already spend
other places?

~~~
ryanwaggoner
Yeah, cause everyone knew Google was going to be worth 200 billion or whatever
after they were 18 months in.

And the amount people spend on local commerce absolutely dwarfs all online
spending, let alone online advertising.

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ShabbyDoo
How defensible is Groupon's position? I buy wine online, and I'm happy to
sign-up for multiple email wine offers. My Dad would sign-up for multiple
Groupons if he observed any evidence of value from copycat competitors. People
here have compared Groupon to Facebook, but I don't think the network effects
are nearly as strong for Groupon. I don't doubt the first mover advantage, but
I don't think it's as strong as some would claim. We should also note that
Facebook was not the first social networking site out there.

Edit: With this last sentence, I made a poor attempt to imply that, even with
incredibly strong network effects, Friendster and MySpace were displaced even
after many thought they had attained critical mass.

~~~
pchristensen
The network effects aren't a defense. The main defensible advantage is the
customer brand. That's what the money is for - making sure it beats
competitors to scale in every city in every country in the world.

~~~
ShabbyDoo
I get that Groupon wants to be a strong brand, and it is probably rational to
grow big quickly before other competitors establish themselves. However, I
don't see how its valuation is defensible given how relatively defenseless it
is against competition. It enjoys much weaker network effects than Facebook,
and consumers' cost of using multiple services is much lower than, say, using
both Google and Bing for every search. Also, how will they maintain high
margins when competitors will likely offer up their services to businesses for
a fraction of the margin?

~~~
pchristensen
The reason the brand matters is that merchants will only use a competitor if
it can drive a meaningful number of customers. As long as Groupon is
synonymous with daily deals for both merchants and consumers, it will be
difficult for any large scale competitor to emerge.

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lotusleaf1987
This is Bubblicious.

~~~
pchristensen
[Groupon employee speaking]

It might seem so based on publicly available numbers. The publicly available
numbers are outdated.

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thinkcomp
We integrated coupons into FaceCash just last week. I wonder how much our
valuation just went up?

