Kara Swisher

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Let's Make a Deal! Groupon Nabs $30 Million in Funding

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Groupon, a group-based social e-commerce buying service, has nabbed $30 million in its second round of funding, led by Accel Partners.

The innovative Chicago-based service, which launched only a year ago, had previously received $4.8 million in funding from New Enterprise Associates, as well as $1 million from an angel investor. NEA participated in this round too.

Groupon features a daily deal with a huge discount on a wide range of things–from spas to skydiving–in 26 U.S. cities, including Chicago, Boston, New York and San Francisco, for large groups of potential buyers on the Web, through email or via social networking sites like Facebook or Twitter.

Using social tools, Groupon–which is a mashup terms for “group” and “coupon”–tries to use collective buying power to get low prices and to push customers to local businesses.

If it reaches the number of buyers it needs, which can be in the thousands, Groupon sells coupons to the consumers and collects a hefty fee for the sale from the businesses it sends customers to.

At the cost of discounting and paying off Groupon, small businesses get a crack at a lot of new customers–think of it as social networking lead-generation or, perhaps, the “Social Shopping Network.”

Yesterday’s deal in San Francisco, for example, was a “restorative massage” at Teashi, cut from $100 to $45. It sold out by 10:47 pm with 1,000 buyers.

Groupon is profitable and has about 125 employees.

The start-up plans to use the money it has raised for increased customer acquisition, as well as expansion to more cities and improvement of its technology.

As part of its funding, Palo Alto, Calif.-based Accel’s Kevin Efrusy has joined Groupon’s board of directors.

Groupon grew out of a project of The Point, an online community launched in 2007 for organizing group action.

This kind of thing has been tried before, of course, centering on consumers who group together to get discounts on items by purchasing them in bulk.

In Web 1.0, there were many group-buying sites, most of which failed badly. One of the more high-profile ones–Mercata–got $90 million in funding from investors, including Paul Allen’s Vulcan Ventures.

Here is the official press release:

Groupon Raises $30 Million Round Led by Accel Partners with NEA
to Support Rapid Growth of Social Commerce

CHICAGO–Groupon, the social commerce service that has saved consumers in cities across America more than $36 million since its launch 12 months ago, has raised a $30 million round of capital led by Accel Partners with participation from Groupon’s initial investor, New Enterprise Associates. The financing will be used to accelerate Groupon’s customer acquisition, expand into new geographies and further develop its technology.

Groupon leverages group buying and social media to provide its millions of customers big discounts on the best local businesses in major cities such as Chicago, Boston, New York City, San Francisco, Atlanta and Washington, D.C. To date, customers have purchased over 800,000 Groupons on deals ranging from spa treatments and golf outings to fine dining and skydiving.

“We’re proud of the positive impact Groupon is having on consumers and business owners,” said Groupon founder and CEO Andrew Mason. “Groupon is pioneering a new category, and we believe adding Accel’s experience partnering with digital and social media companies together with NEA’s depth in the area will help us reach our full potential.”

“The social graph is laying the foundation for a new generation of industry-defining Internet companies, and Groupon has effectively invented social commerce,” said Kevin Efrusy, Partner at Accel Partners. “Andrew and the Groupon team are executing with incredible focus at a breakneck pace and are delighting both their merchants and customers.”

About Groupon

Groupon, launched in November 2008 in Chicago, features a daily deal on the best stuff to do, eat, see, and buy in 26 major cities across the United States, including Chicago, Boston, New York City, San Francisco, Atlanta and Washington, D.C. Groupon uses collective buying power to offer unbeatable prices and provide a win-win for businesses and consumers. The social commerce service is a project of The Point (http://www.thepoint.com), an online community launched in 2007 for organizing group action. Groupon plans to be in 30 cities by the end of 2009.

For more information, visit http://www.groupon.com.

To get Groupon’s daily free email for the best in your city, subscribe at http://www.groupon.com.

To learn more on how to become a featured business on Groupon, visit http://www.grouponworks.com.

To see some of Groupon’s top-performing deals, visit http://www.groupon.com/chicago/deals


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