Groupon raises $500 Million in Financing

VirtualWorld.ca

Surprise! Surprise!

Another hot tech company raises more money.  After spurning Google's $6 Billion offer, Groupon has just raised $500 million dollars of a planned $950 million financing.  With the way they're growing, I bet all kinds of VC's and angels are throwing money their way.

Much of the money raised will be used to buy back shares from existing shareholders.

I am a member of Groupon for two cities, though they haven't moved into my small town yet.  They do offer some good deals and if they operate in your city you can probably save money with them.  I've also seen that there are many other start-ups (like TeamBuy.ca in Canada) trying to do the same thing (offer discounts at local merchants). 

Groupon has been expanding rapidly, buying up competing sites and moving into Europe and other parts of the world.  I think they are in their growth stage, trying to get big fast so they have first mover advantage.  I have no idea how much revenues they are making, but their model must be based on doing a large number of small transactions.  Most of the deals I see involve getting $5 off a $10 price, or $10 off a $20 price.  You have to do a lot of those to start making some serious money.  They also don't have the same pull as Facebook or Twitter in time on site.  You can spend a long time each day checking out Facebook and Twitter pages, but with Groupon you'll just log in once in a while to get a deal at the most.

I think Groupon will have to be careful, unlike other social media sites I can see people joining similar coupon type sites.  There is no loyalty, people will go wherever they need to in order to get the best deal.  If there are three coupon sites doing deals in my town, I'll probably join all three.

The key for Groupon will be to grow fast and establish themselves on a wide basis before their competition does.  And they'll probably have to buy up more of their competition before they're done.  If not, they may regret not taking the $6 Billion from Google.

Link to full article:

http://ca.finance.yahoo.com/news/Hot-shot-local-deals-site-capress-2219793103.html?x=0