Google offered $6B to buy Groupon. Instead they took a private financing deal which allowed the founders and others to take some money off the table and go for an IPO.<p>The $6B from Google was real. The risk of proceeding was tempered by the private money. Nothing dishonest happened here. All that happened was a little overexuberance about the scalability of their business model.<p>While it's true that some people (including me) thought their model non-scalable back at the time, it's also true that a broken (analog) clock is right twice a day.<p>Everyone made their bets and they're all big boys and girls. That includes the public investors as well as the private ones.
I genuinely do not understand US securities law. One needs to be a "qualified" investor to invest in startups; these investors trade shares among themselves (no primary share issuance) at indefensible and unrealistic valuations, and they are later allowed to sell their shares (secondary issue) in the open market to "unqualified" investors.<p>Shouldn't the SEC and a bunch of attorneys be investigating this?<p>Congresses is having all kinds of hearings with banks for misselling mortgages and a dozen other shenanigans. Who is going to call on investors who (literary) pumped-and-dumped Groupon?<p>I still vividly remember watching Jeff Clavier defending the Groupon IPO valuation on TC TV (<a href="http://www.youtube.com/watch?v=MKrWtMmsl7I" rel="nofollow">http://www.youtube.com/watch?v=MKrWtMmsl7I</a>), and I couldn't feel more ashamed for all the unsubstantiated arguments he made back then. He wasn't the only one to do this.
My understanding (which I heard from a pretty reliable source at the time) is that this deal was baked (both sides agreeing), but broke down because the Groupon board insisted on a guarantee from Google that it would close over anti-trust objections, and Google wouldn't give that term.<p>Background: in a typical acquisition, closing is subject to HSR anti-trust approval. If the government doesn't approve, then the deal breaks up. This means that the target company is taking a risk that after announcing the deal (and being paralyzed in a post-signing/pre-closing period that could last several months), the deal could be broken up and the target company could be left holding the bag and forced to get back on an independent path. Which is pretty rough.<p>In this case, Groupon wanted Google to go long the anti-trust risk -> in other words, Google would have to divest the asset if the government killed the deal.<p>I think (not sure) Google had given this term up on the AdMob deal, but believed that it couldn't do it again on the Groupon acquisition (which would have been the biggest deal Google had ever done), or it would have set a precedent that every other company would have insisted on going forward in M&A discussions.
Imagine that billion divided up as $50,000 seed money to 20,000 new startups. Don't just plunk it down on them set up an automated system requiring justification for every expense. Then have a contest over the year where the earliest, best performers get to advance to another round of funding the next year.
"“I was fired today. If you’re wondering why… you haven’t been paying attention.”<p>Or maybe they were paying attention to the WRONG people.. such as.. oh say, HR and corporate spokespeople in Groupon who want you to believe Groupon is on the rise and will be a great company to work for!<p>Seriously, that statement is such an insult. Sounds like someone who can't admit he's wrong, by saying "Well duh! Didn't you knew this was gonna happen" to save face, rather than "Ok, I made a mistake by doing X, Y, Z"
Original HN title: "950 million of 1 billion of Groupon's funding wasn't used to fund the company"<p>This also stood out to me as an interesting claim from the article. Does anyone have a perspective on how that can happen without raising some sort of legal issue?
Groupon was always a ponzi like scheme. Once they ran out of suckers (err businesses) their income dropped like a rock. Everyone I know uses Groupons but challenge them on actually visiting the Grouponee again and you hear crickets.
When people complain about how the $1 billion raised in 2011 just went to insiders - did the investors who contributed that $1 billion know where the money was going to go? If they knew, then it's all their fault.