Kara Swisher

Recent Posts by Kara Swisher

Latest Trend for VCs Is Overfunding Group-Buying Start-Ups: LivingSocial Nabs $25 Million

Start-ups that offer users big discounts via socially-charged local group-buying services are getting a lot of attention these days, especially from venture firms.

Today, it’s Washington, D.C.-based LivingSocial, which just announced a $25 million Series B round, led by U.S. Venture Partners.

The funding will be used to expand its footprint of cities, among other initiatives.

Sites such as LivingSocial feature a “daily deal” with a huge discount from a wide range of local businesses, such as restaurants and spas. They use social networking sites like Facebook and Twitter to turbocharge consumers into action.

This kind of thing has been tried before, of course, centering on users 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.

Still, the group-buying space is getting mighty competitive of late. Recently, Chicago-based Groupon grabbed $30 million from, among others, Accel Partners.

BoomTown, in fact, did a video interview with Groupon founder Andrew Mason last week, after which I was inundated with press releases from a half-dozen wannabe competitors.

Ironically, for businesses based on discounting, there seem to be no price cuts when it comes to group-buying start-up funding.

Here’s the full press release:

Social Commerce Leader LivingSocial Raises $25 Million Series B Round, Led by U.S. Venture Partners

Funding to Fuel Expansion to Dozens of Cities by Year End; Chicago, Denver, Raleigh Durham, and San Diego launch today

Washington D.C., March 11, 2010–LivingSocial, the social commerce leader behind LivingSocial Deals and top Facebook applications Visual Bookshelf and Pick Your Five, today announced that it has completed a $25 million Series B round of venture funding led by U.S. Venture Partners, with Grotech Ventures and Steve Case’s Revolution, LLC participating. With this round of funding, LivingSocial Deals is launching in four additional cities: Chicago, Denver, Raleigh Durham and San Diego, making the program live in 13 markets across the country, growing to dozens of cities by year-end. By signing up for LivingSocial’s free daily online service people are saving an average of 50-70% at their favorite places, such as the hottest local restaurants, spas, sporting events, hotels, and other local attractions, giving local merchants the Web prowess of viral marketing proven through LivingSocial’s explosive Facebook success.

“With more than a million people already using LivingSocial Deals, online group buying is a movement that is clearly resonating with consumers,” said Tim O’Shaughnessy, CEO of LivingSocial. “This round of funding enables us to accelerate our growth throughout more cities and combine our feet-on-the-street approach with our social channel expertise to offer our 85 million customers great deals at local businesses, while giving merchants a no-risk way to get customers through their doors.”

LivingSocial is the premier local activity discovery engine–the place where anyone can find out what’s “hot” in and around their city. As a result, it not only gives local merchants an innovative way to reach nearby customers, but also leverages LivingSocial’s unprecedented social media knowledge to grant merchants access to the company’s extensive community of more than 85 million people. With LivingSocial, merchants get the viral power of the Internet, the reach of the LivingSocial community, and the leverage of the iPhone platform.

LivingSocial today also launched an affiliate program for sites large and small, producing a revenue opportunity for affiliates, such as blogs and other sites, and broadening the advertising reach for merchants to the farthest ends of the Web. LivingSocial affiliates can generate revenue by delivering amazing discounts targeted to their loyal readers. Creating a centralized affiliate program gives participating merchants reach into new media, without requiring them to create, develop and manage individual relationships with an ever-growing cast of bloggers or other local content sites. More information can be found at http://livingsocial.com/affiliates.

“Local merchants deserve the ability to link online advertising spend with store visits, not just site visits,” said Ted Maidenberg, Principal at U.S. Venture Partners. “LivingSocial is at the forefront of a profound shift in the way local merchants engage with new and existing customers. This investment will allow them to continue to evolve the program and reach new markets so more merchants can reap the rewards of what LivingSocial has to offer.”

LivingSocial’s group buying service has grown rapidly since its launch in August 2009, expanding from Washington, D.C., to New York City, Boston, Atlanta, Austin, Seattle, San Francisco, Los Angeles, the Twin Cities, Chicago, Raleigh Durham, Denver, and San Diego, with more cities rolling out in coming months. Also, with the first social savings iPhone application, LivingSocial users can get savings on-the-go and be alerted when new deals are available through push notifications and even redeem directly from their iPhone. LivingSocial users throughout the country have already saved millions of dollars, with tens-of-millions more on tap throughout 2010.

“We’re really excited to bring LivingSocial to Chicago, Denver, Raleigh Durham and San Diego as these markets have such vibrant populations,” added O’Shaughnessy. “The deals we offer reflect the diversity and unique nature of each city, encouraging the exploration of nightlife, culture, entertainment, and outdoor activities.”

For more information or to sign up for your city, go to http://livingsocial.com.


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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik