Dan Primack

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Groupon raises, like, a billion dollars

January 10, 2011: 4:14 PM ET

Groupon, the online coupon company that recently spurned a $6 billion takeover offer from Google (GOOG), announced today that it has raised $950 million in private equity financing. Actually, the press release headline reads: "Groupon raises, like, a billion dollars."

New investors included Andreessen Horowitz, Greylock Partners, Kleiner Perkins Caufield & Byers, Maverick Capital, Silver Lake Partners and Technology Crossover Ventures. There also have been reports that both Morgan Stanley, Fidelity and T. Rowe Price participated, but they are not listed in the release.

Returning investors included Battery Ventures and Mail.ru Group (fka DST Group), while fellow existing backers Accel Partners and New Enterprise Associates did not re-up.

Allen & Company served as placement agent.

An earlier regulatory filing disclosed that at least $345 million of the round would be used to provide liquidity for early employees and shareholders, but that was based on just the round's first $500 million. It's unclear if any of the remaining $450 million also will be used to provide liquidity, or only for expansion and technology investment. A Groupon spokeswoman declined to elaborate, even though the company likely will share the information in an amended regulatory filing.

A few additional thoughts on this deal, which already was discussed ad nausea before today's press release:

*** I called a Groupon spokeswoman to set up an interview with one of the company's senior executives -- either CEO Andrew Mason or president/COO Rob Solomon -- but was told neither were available. More specifically, she said both were in meetings all afternoon, which seems to imply that the press release timing was not entirely of the company's choosing (note: she did not explicitly say so, but also admitted that she was "out of the loop" in response to a deal-specific question -- despite being listed as the press release contact). Maybe another regulatory filing is on its way sooner than expected? Or some reporter had the scoop? Or maybe I'm just reading between lines that aren't there...

*** There has been lots of speculation as to why Groupon turned down Google's offer, including a theory that Groupon was concerned about the search giant's recent tussles with the FTC (AdMob, ITA Software, etc.). Were it true, then it could have a chilling effect on the entire VC market. After all, when you have a billion dollar-plus web company to sell, Google is usually your first stop. On the other hand, I've heard an alternate theory that much of Google's $6 billion offer was in the form of earn-outs, and that Groupon figured it could raise much of the up-front cash on its own (without sacrificing control).

*** Either way, plenty of Groupon stockholders were upset with the decision. That's one reason why they were allowed to cash out up to 15% of their shares via this financing round.

*** Until we know how much of the $950 million was "new" equity, we won't know if this is the largest-ever VC deal on record.

*** Upon hearing the news, Todd Dagres of Spark Capital tweeted: "Is it just me or are VC firms acting like hedge funds?" No Todd, it's not just you...

*** To that last point: Late-stage venture capital is nothing new, with a slew of regular participants that include new Groupon investor Technology Crossover Ventures. But this particular deal could be a bit troubling for those who invest in the overall VC asset class. Such investors, known as limited partners, typically try to diversify their investments in order to better manage risk. Moreover, they expect that different funds will invest in different deals. Sure there might be some syndication on certain deals, but rarely on so broad or expensive as this Groupon round. Seems to me that a bunch of LPs now have extraordinary exposure to Groupon, at the exact same valuation. Sure it may work out, but LPs typically shy away from such doubling down.

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Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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