Where Did Groupon’s $946 Million Funding Go?

Posted on June 3, 2011

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Groupon raised close to $1 billion in January this year, well $946 million to be exact. By March, it had $209 million in cash. So where did the money go? The company kept $136 million to keep the company running while the remaining $810 million was paid out, via stock purchases, to employees and early investors. Here is the break down:

(a) Andrew D. Mason – $10 million
(b) 600 West Partners II, LLC (Managed by Eric Lefkofsky and his wife) – $61.59 million
(c) Green Media, LLC (Owned by Eric Lefkofsky and his wife) – $257.48 million
(d) John Walter (Former director) – $20.57 million
(e) Entities affliated with Accel Growth Fund L.P. – $19.99 million
(f) Entities affliated with New Enterprise Associates – $70 million
(g) Entities affliated with CityDeal Management UG – $170.25 million
(h) Rugger Ventures LLC – $133.43 million
(i) Brian Totty – $655,019
(j) Kenneth Pelletier (Former chief technology officer) – $7.61 million
(k) Jason Fried (Former director) – $557,721

This is not the first time that Groupon had raised money and taken cash off the table. In April 2010, it raised $130 million and handed $120 million to many of the same people. Has Groupon turned into these people’s cash cow? Funds are usually raised for expansion and buffering during hard times. So why did Groupon made such huge payouts to employees and investors in the form of stock repurchases and not share earnings?

Could it be a signal that these people know that the deal site business model is not sustainable and are trying to milk every single penny they can from it before it crashes? It is understandable to make payouts to former employees who may not have much interest in the company but Andrew Mason and Eric Lefkofsky certainly has great interest in Groupon’s operations. If they are really confident that Groupon could make it really big, they should hold on to their shares and reap the benefits when its share price multiplies like crazy in the next few years. Similarly, why did early investors withdraw from the investment at such early stage if they are confident that Groupon would be huge in near future?

Well, we all know that Groupon is filing for an IPO now. Perhaps they are getting rid of their stock holdings before the IPO, in case the IPO price is lower than what they can currently get. In that case, they will lose out.

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