Groupon Grabs $135 Million From DST and Battery–Valuation Above $1 Billion for Social Buying Site
Groupon, the social buying site that has become one of the hotter start-ups of late, has gotten a giant round of funding from the same Russian investors that backed social networking powerhouse Facebook and game phenom Zynga.
Digital Sky Technologies is the main funder of the round, but Battery Ventures is also participating.
The money, the company said, will be used to grow the business–and to speed far ahead of numerous rivals–as well as cash out employees and early investors.
Groupon is profitable and has 270 employees.
In December, Groupon nabbed $30 million in its second round of funding, led by Accel Partners.
The innovative Chicago-based service, which launched only a year ago, previously received $4.8 million in funding from New Enterprise Associates, as well as $1 million from an angel investor.
Groupon features a daily deal with a huge discount on a wide range of products and services–from spas to skydiving–in dozens of 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 and Twitter.
Using social tools, Groupon–a mashup term for “group” and “coupon”–tries to use collective buying power to get low prices and 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.”
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 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, received $90 million in funding from investors, including Paul Allen’s Vulcan Ventures.
But now the group-buying space has been reinvigorated, with a spate of competitors, some of which are clear copycats of Groupon.
Here’s an interview BoomTown did with Groupon CEO and founder Andrew Mason, one of the more affable and level-headed entrepreneurs around–at least until this megafunding. (Don’t go changing, Andrew!)
I have been quite interested in the innovative Groupon, as I said in that post in March:
“The last time I really was truly bullish on a start-up and its founder–BoomTown’s motto is wait-and-see rather than hype-it-up–was AdMob’s Omar Hamoui. That turned out pretty well, with the sale of the mobile advertising site to Google (GOOG) for $750 million last fall. My 2010 start-up that passes the slightly-less-raised-eyebrow test is Groupon.”
Here’s the video interview with Mason:
Here’s the official press release:
GROUPON RECEIVES $135 MILLION FROM DST AND BATTERY VENTURES
Investment to Support Rapid Growth of Social Commerce Globally
Chicago/Moscow, April. 19, 2010–Groupon, the leading social commerce site, today announced that DST, a leading global internet investment group, will lead an investment round of $135 million in the Company. A portion of the investment will be used to fuel Groupon’s global expansion, and the rest will be used to facilitate liquidity for employees and early investors.
DST comprises the majority of the investment, with participation from Battery Ventures, which is also a new investor in Groupon.
Groupon leverages group buying and social media to provide its millions of customers big discounts on the best local businesses in more than 50 cities across the United States and in Canada. To date, customers have purchased over four million Groupons on deals ranging from spa treatments and golf outings to fine dining and skydiving and have collectively saved over $150 million on these deals.
“Our growth is a reflection of the positive impact Groupon is having on consumers and businesses at a very early stage of the market development,” said Andrew Mason, founder and CEO of Groupon. “We are very pleased and excited to welcome DST and Battery as shareholders and we look forward to benefiting from their vast knowledge and experience of the social media sector as we continue executing on our growth plans in North America and globally.”
“This investment underscores our view that social networking and community based activity will drive, shape and define the web’s evolution in the years ahead,” said Yuri Milner, Chief Executive of DST. “Groupon, with its strong management team, offering and vision, is pioneering social commerce and is redefining the local advertising space. We look forward to being long-term partners of a company that is on a path to becoming a global Internet leader.”
“We’ve followed the social commerce phenomenon for many years, and are thrilled to have the chance to back such a visionary management team,” said Roger Lee, General Partner, Battery Ventures. “They saw a massive opportunity very early, and have executed flawlessly to define it and take the leadership position. We think there is a lot of runway ahead, and are energized to support the team in their quest.”
Founded in November 2008, Groupon has been aggressively expanding to cities throughout the United States, with plans to be in 100 cities by the end of 2010. Earlier today Groupon announced that it has launched its service in Orlando, Fort Worth, Tucson and Toronto, its Canadian city.