Andrew Mason, Groupon

Dan Frommer, Business Insider



Earlier Groupon had filed with the SEC saying it was raising as much as $950 million, and it appears that they're raising the whole thing.

A few things seem off to us here.


Insider selling is never a good sign at any company. Maybe the founders think the doubters about whether Groupon can sustain its business model have a point and want to take the money off the table now -- but again, why not take Google's higher offer in that case? Unless they think that offer would have languished for years in antitrust proceedings.

Second, the valuation seems low, even if it's pre-money. 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.

Then again, the universe of people who can put in $950 million into a startup is pretty small, which reduces Groupon's options. Growth venture funds and even DST aren't that big, and Groupon might still be too young for truly big financial players like buyout firms and big banks. Maybe that's the explanation.

Still, something about this doesn't sit right with us. Either TechCrunch's sources are wrong or the people at Groupon know something we don't.

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