Groupon: Deals for Members, but What About the Investors?

When asked if it’s truly possible that his portfolio company Groupon Inc. could transform in 17 months from an idea to a business worth more than a billion dollars, New Enterprise Associates Partner Peter Barris chuckled in a way that indicates even he recognizes it may be a dangerous assumption.

But Barris and other investors who accepted a $1.35 billion valuation on the group-buying Web site after a recent round don’t see a return to Internet bubble levels of price inflation. Instead, they think Groupon is one of a new breed of Internet companies worth their weight in gold because of how quickly they can grow.

These days, “you can build a big company, a very, very big [Internet] company,” Barris said. “Business is back to measuring revenue and profits.”

Groupon attracted $135 million in funding, mostly from Russian investment firm Digital Sky Technologies, which has done similar deals with Facebook Inc. and social gaming company Zynga Inc. in the past year. The balance came from new investor Battery Ventures. Early investors NEA and Accel Partners did not reup, but they didn’t take any capital off the table, either.

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