The Future of Groupon

After a $950 million round of financing, where's the coupon company headed?

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After spurning Google's $6 billion offer, the online coupon site Groupon is now raising its own wad of cash--$950 million worth. Depending on how the round closes, this could be the largest equity financing round since Pixar in 1995. VC Experts, a website that provides data on private companies, estimates that this values Groupon at a towering $6.4 billion. TechCrunch puts it at $4.75 billion. In any case, the Chicago-based start-up is clearly looking to expand aggressively into more local markets. Here's what tech bloggers are saying:

  • This Is Big, writes Lucian Parfeni at Softpedia: "It is the largest funding round ever approved. Depending on how it closes, it may be the largest venture capital funding round to date, shadowing Pixar's $500 million round of 1995."
  • The Money Will Fund Groupon's Expansion Overseas, writes Erin Griffith at VC Experts: "Groupon CEO Andrew Mason has tamped down speculation over IPO plans, emphasizing overseas expansion instead. And now we know how they plan to finance that expansion."
  • What's Next for Groupon?  "Groupon will make a decision next year on whether and how soon to proceed with an IPO, a person familiar with the company said earlier this month," reports Adam Satariano at Bloomberg. "Groupon is trying to get a bigger piece of the U.S. local-advertising market, which may reach $133 billion this year, according to consulting firm BIA/Kelsey in Chantilly, Virginia."
  • Only $950 Million? asks Pascal-Emmanuel Gobry at Business Insider. "The valuation seems low," he explains:
Groupon recently hit a whopping $2 billion run-rate in gross merchandise sales, which probably means around $1 billion in revenue. For a high-growth, profitable startup like that, you would be talking about 10X revenue, at least. Facebook is trading in private markets at more than 20X revenue and has less user growth upside left -- these are very different businesses of course (Facebook has network effects, for starters) but 4/5X revenue for a startup with Groupon's growth and profits seems low.
  • These New Investors Got a Good Deal, observes Owen Thomas at Venture Beat:
Interestingly, Groupon’s new investors appear to be getting better terms than DST, the Russian Internet holding company that invested $135 million in Groupon in April. DST’s investment was junior to other previous investors, meaning that in a sale, DST would be last in line to recoup its investment. The new investors would be senior to earlier investors, a more usual arrangement, but DST has become well-known in the industry for its willingness to invest in Internet companies like Facebook and Groupon on liberal terms.
  • Media Companies Should Invest in Groupon, writes Tricia Duryee at All Things Digital: "Newspapers, specifically, have been hard hit by a shift in local advertising and classifieds. A Groupon partnership could make it less appalling that they’ve missed yet another trend."
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