Groupon May Invest in Chinese Competitor at Billion-Dollar Valuation

Groupon, which is still trying to figure out how to break into China, is close to investing in one of the largest group-buying sites there, we have learned.

The daily deal site is mulling a strategic relationship with Lashou, which has experienced astronomical growth on par with Groupon.

Sources close to Lashou tell us that since the company launched in March, it has hired 1,500 employees and operates in roughly 200 markets in China.

Most impressively, its revenues are now totaling $3 million per week for an annual run rate of  more than $150 million.

Sources say Groupon may participate in Lashou’s next round of funding, which is on track to give the company a $1 billion valuation. Groupon has already submitted a term sheet, we have heard. A Groupon spokeswoman declined to comment.

The deal could still fall apart.

Groupon has not appeared to have decided on one strategy for entering the market. Other options it is weighing include forming a strategic alliance with Chinese Internet giant Tencent, or even hiring its own staff and working alone.

The Chinese market is known for being difficult to enter, and Groupon is feeling the pressure to get a piece of the action. To be a serious international player without the economic powerhouse is less than ideal as it prepares for a public offering, (which CEO Andrew Mason admits he hasn’t made a decision about yet).

So far, Groupon’s efforts in China have been scattered.

Kai-Fu Lee, the former president of Google China, who has an influential blog, has written about Groupon’s approach, saying that it has been relying on a company it purchased in Germany last May to lead its expansion into China, Xinhua reports. The rumor mill is rife with other reports of Groupon’s aggressive attempts to hire employees from other group-buying sites. It also suffered a recent setback when Ren Xin, who reportedly was in charge of marketing in China, resigned to consider other job opportunities.

While not operating yet in China, Groupon does have a presence in Asia. Groupon is in Hong Kong, Singapore, the Philippines and Taiwan through the acquisitions of daily deal sites uBuyiBuy, Beeconomic and Atlaspost, respectively.

Much like the U.S., China has tons of group-buying companies fighting to be No. 1. Other successful brands there are Meituan and Nuomi. Lashou has raised tens of millions of dollars in venture capital from Norwest Venture Partners, GSR Ventures and Rebate Networks. Meituan has attracted capital from Sequoia Capital.

Latest Video

View all videos »

Search »

There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google