The local-deal vendor Groupon, fresh off raising nearly a billion dollars in venture capital, is eyeing an IPO worth $15 billion in the near future, according to a number of media reports.
The company, which caught the recession zeitgeist by offering deep discount deals to local businesses, is reportedly talking to bankers about an IPO that would value it around $15 billion, according to The New York Times — nearly triple the valuation of its just-closed investment round. At these valuations, the bet is that Groupon will be the company to finally crack wide open one of the last (and largest) markets for online ads: local businesses.
Groupon's reported foray into deep IPO waters adds to a growing enthusiasm for the financial prospects of the tech sector, which still hasn't quite recovered from the dot-com bust of the late 1990s, when what now seem like marginal ideas commanded billion-dollar valuations. Facebook recently raised money at a $50 billion valuation, and Twitter raised $200 million at a $3.7 billion valuation. For its part, LinkedIn is purportedly eying to go public before Facebook does, to cash in on the momentum. OpenTable went public in 2009 and is now worth nearly four times its $20 IPO offering.
What's different now is that the money isn't just following flashy companies with perceived potential in an market that can only go up. Rather, it's betting on operations that appear positioned to be the dominant player in an area where the winner takes most. Facebook, for example, has nearly 600 million members and is looking to corner the market on internet identity.
That makes investing in such companies more like Google redux than the notorious Pets.com, which burned $300 million in less than two years on the road to oblivion.
It's not clear yet what kind of company Groupon will become, but investors are clearly betting it can become infrastructure, and not just a company that rakes in cash selling coupons through e-mail lists.
In the downturn, Groupon has managed to convince many local businesses -- and a few struggling giant chains such as Gap -- to offer sharp discounts to users in exchange for getting hundreds and even thousands of new customers in the door.
If Groupon can merge that business with the explosion in mobile devices, it'll have found the right formula for geo-located offers. With that recipe, the company could become a major online force, and an indispensable partner for any company -- Google, Yahoo, Microsoft, Facebook or FourSquare, for instance -- that's focused on the conjunction of mobile and local.
Groupon recently turned down a reported $5 to $6 billion acquisition offer from Google, and instead raised a bank vault full of cash in order to hire more salespeople, beef up its tech operations and provide some money to early employees.
The decision investors will have to make when and if Groupon lists itself on the public markets isn't whether Groupon can continue to get merchants to sign onto offering deep discounts even as the economy improves, but whether the company can find a way to get its deals popping up on your smartphone as you walk through the mall. If it can pull off the latter, a Groupon IPO will be a deal you will regret not buying when you had the chance.
See Also:- Startup Hits Sweet Spot for Selling Local Services
