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January 11, 2011 1:25 am
Groupon has completed a $950m round of financing with investments from a number of venture firms, giving the online discounter a multibillion-dollar valuation and setting the stage for a likely public stock offering this year.
The money will help fund expansion at the fast-growing Chicago company, which said on Monday that it had attracted 50m subscribers, up from 2m at the end of 2009. Employees and early investors will also take some of the cash.
Last month, the company broke off the discussions with Google, but one of the investors said the offer allowed it to claim a higher valuation.
The total amount is one of the largest ever private stock deals and it closes just after news broke of a Facebook investment round that will bring it as much as $2bn , including $1.5bn from Goldman Sachs’ clients.
Groupon is likely to be first with an initial public offering. Professional networking site LinkedIn is also planning an IPO , and Silicon Valley expects more to take advantage of investor enthusiasm for internet companies and build war chests to compete for talent and acquisitions.
Among the new funders for Groupon are Kleiner Perkins Caufield & Byers, Greylock Partners and Andreessen Horowitz. Russian internet investment company Digital Sky Technologies participated in both an earlier round and the current one.
Investors said they were attracted by Groupon’s rapid adoption, commitment to international growth and willingness to invest in data management and technology. They also said that most advertising spending in the US is for local business, but that those ads for the most part remain inefficient even online.
“We think this is a market that is winner-take-most”, akin to Google’s dominance in search advertising, said Greylock partner James Slavet. He said Groupon could do more to tailor its offers to customers with demographic information and buying histories.
Andreessen partner Marc Andreessen said that Groupon could go public in the near term, but that his fund would be happy either way. “We’re focused on the opportunity to help build a long-term franchise,” he said.
More than $300m of the new funding will buy back shares from Groupon’s nine board members and entities they are affiliated with, including Andrew Mason, chief executive. No new directors are being named.
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