December 30, 2010 7:54 pm

Groupon raises $500m in financing

Groupon, the US online coupon company, has raised more than half of the $950m it has been seeking since acquisition talks with Google fell apart this month, in what amounts to one of the largest private financings ever undertaken by an internet group.

The Chicago-based company revealed in a regulatory filing it had raised $500m, confirming the high level of interest stirred up by its rapid growth. It had disclosed it was hoping to raise $950m in all through its latest round of preferred stock, potentially taking the total amount of cash contributed to the upstart online marketing company to more than $1.1bn.

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Set up in early 2008, Groupon is generating revenues at an annualised rate of $2bn, according to some reports, making it one of the hottest among a new group of start-ups that have built their business plans around the rise of online social networking.

Groupon relied heavily on early users referring the service to friends over Facebook, helping ignite its rapid growth.

The groundwork for the latest fundraising was laid only two weeks after negotiations over an acquisition by Google, valued at as much as $6bn, were abandoned. The search company had pursued Groupon – which issues discount coupons online on behalf of local merchants looking to attract customers – to accelerate its push into local advertising and promotions, which remains one of the most under-developed markets online.

At $500m, Groupon’s latest round of fundraising is already among the largest by an internet company.

Were the company to go on to raise the full $950m, it would exceed the total amount of cash that has been raised by Facebook, which has attracted some $836m in several investment rounds.

Google’s initial public offering in 2004, which remains the high point for internet capital raising over the past decade, brought in $1.2bn.

Much of the latest cash round has been earmarked to reward the company’s founders and early investors, according to the filing with the SEC.

Some $344m will be used to buy back shares from Groupon’s nine board members and entities they are affiliated with.

The share repurchase arrangement amounts to an unusually early pay-out for Andrew Mason, chief executive, and two other founders who sit on Groupon’s board.

Others who could benefit include representatives of New Enterprise Associates, a venture capital fund that backed the company early on, and Accel Partners, which first became involved late last year.

Groupon’s nine-member board includes Ted Leonsis, one of the top executives at AOL during its reign as one of the top online companies of the 1990s, and John Walter, a printing industry executive who once served as chief executive of AT&T.

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