Groupon Receives $344 Million in Founders Liquidity in Recent $950 Million Secondary Round

Earlier this month I wrote an article on Business Insider explaining how I believed Groupon may have used Google as its BATNA (best alternative to a negotiated agreement) to create more liquidity, and it appears they may have done just that.

According to the SEC Form D filing by Groupon, they just closed on $500 million of a $950 million round they are raising.  Interestingly, the filing also states that existing shareholders will receive $344 million in liquidity in this round.  While the filing is not 100% clear what portion, if any, of the $344 million is founders liquidity, I assume both the founders and existing investors are receiving liquidity in this round.

Under Item 16 of the Form D filing, which is the Use of Proceeds section, it asks the Company to provide the amount of the gross proceeds of the offering that has been or is proposed to be used for payments to any of the persons required to be named as executive offers, directors or promoters in response to Item 3 in the Form D filing.  Groupon listed that they will use $355,547,138, and gave the following clarification for the use of proceeds:

A portion of the gross proceeds will be used to pay for shares repurchased by the Issuer in a tender offer for shares held by, among others, certain of the persons named in response to Item 3 above and/or their respective affiliates.

According to Fred Wilson of Union Square Ventures, entrepreneurs often have to hold out longer than VCs in order to get a good exit, and he explains that if that’s the case, its entirely reasonable to provide some founders liquidity to them.  Fred goes on to explain:

I’ve also seen entrepreneurs choose to sell the company prematurely because they want to take some money off the table. If offered the opportunity to take a bit off the table and swing for the fences, many would prefer to do that“.

That appears to be the case with Groupon.  Perhaps Google’s $6 billion offer to acquire Groupon was premature, and in order to swing for the fences, I think its reasonable to provide founders liquidity.  Remaining private and utilizing the secondary markets for some liquidity in return for the that risk is the best case scenario for Groupon in my opinion.  They remain in control of their business and its direction, they maintain their entrepreneurial spirit, there’s less scrutiny from the SEC and they take some cash off the table.  Not a bad!

Additionally, it appears Groupon may have used a broker to source this deal, as Item 15 “Sales and Commission & Finder’s Fees Expenses” is checked off with $7,500,000 listed as a Finder’s Fee for the raise.  It’s unclear if the Finder’s Fee is for the entire $950M or just the recent $500M for this portion of the round.  We’re seeing more brokers involved in secondary transactions, helping to bring more liquidity to the secondary markets.  I think this is great for accredited investors interested in investing in high growth technology companies that they would otherwise not have been exposed to.  Generally these companies have been reserved for the institutional venture capital investors.  These brokers are helping the market by creating more liquidity and more favorable terms to the founders, their shareholders and employees by increasing the demand for their shares.  Its great for all parties.

Well played Groupon.  Well played.

Aol Acquires, Four Days After Site’s Official Launch

Self described “Custom Profile and Personal Analytics Dashboard” start-up has been acquired by Aol for an undisclosed sum.  The company, which is just a splash page with links to a user’s various social media  presences (e.g., Facebook, Twitter, LinkedIn, Blogger…) went from idea to acquired startup in exactly one year and six days, and officially launched just four days prior to its acquisition.  The site provides users with simple tools to create colorful profile pages that connect to and pull in content from their social media sites (see Exhibit 13 below, with the of Brad Garlinghouse, the AOL’er credited with the acquisition). let users reserve their names and pages in September and officially launched the site on the 16th of December.  AOL was an angel investors in, and had acquired co-founder Tony Conrad’s previous company, Sphere, for a reported $25 million.

As his WordPress blog, Conrad wrote “As the business model of the oldest and one of the most venerable Internet businesses evolves, becomes an important piece of their strategy to reach across and engage the Web. In the past year, Aol has moved aggressively to build their senior management team around some of the Web’s finest minds – we’ll work in Brad Garlinhouse’s Consumer Applications group (as an aside, Brad and I have known each other since he acquired Oddpost, a company in which I was a board director). We think it’s a huge advantage to become part of a suite of communication (AIM, Aol Mail) and community driven (Patch, Seed) services. This is truly a win-win for our users, investors, team and Aol.”

Google’s Social Media Offering, +1, Coming Into Focus

The competition to be the world’s social network is over.  Facebook has won.  But as the world becomes more social, and every website becomes more social, speculation has continued to swirl around Google and its ability to provide a holistic approach to social, weaving together its properties including Gmail, YouTube, Android and Blogger, as well as other social signal providers like Twitter.  Google certainly has highly social assets to leverage.

TechCrunch recently released photos of what it believes to be one aspect of Google’s social product, now named +1:

TechCrunch is reporting that the service includes a toolbar that exists along the top of Google’s various properties to allow for easy sharing.  In addition, TechCrunch writes that +1 will include specific mobile applications which will include group functionality.  Another aspect of +1 appears to include large-scale video conferencing, which could support more than a dozen people at a time.   The video conferencing app could be tied into the group’s app.

This Week In Twitter

Twitter Raises Another $200 Million at a $3.7 Billion Valuation as Growth to Slows

Last week, Twitter completed its latest round of funding, $200 million at a $3.7 billion valuation, with Kleiner Perkins as the lead investor. The micro-blogging behemoth also added two new board members, Mike McCue (Netscape VP of Technology, TellMe CEO, and founder of Flipboard), and David Rosenblatt (former CEO of DoubleClick, also on the Board of IAC).  Both are solid additions and join another recent addition, Peter Currie (formerly from Netscape).  The raise enables Twitter to accelerate its infrastructure build out, as demands on its platform continue to grow exponentially.  While initial monetization efforts appear to be going well, with Promoted Trends sold out virtually every day, expenses appear to still be running ahead of revenue (estimated at $75 million in 2010) during these early days of monetization.   Total funding now stands at $355 million.  Our review of Twitter financing rounds to date include:

-          Series A:  $5.4mm raised (Union Square Ventures lead, angels Ron Conway and Marc Andreessen, July 2007)

-          Series B:  $15mm raised at an estimated $80mm valuation (lead by Spark, May 2008)

-          Series C:  $35mm raised at an estimated $250mm valuation (lead by IVP and Benchmark, Feb. 2009)

-          Series D: $100mm raised at an estimated $1 billion valuation (lead by Insight Ventures, Sept. 2009)

-          Series E: $200mm raised at an estimated $3.7 billion value (lead by Kleiner Perkins, Dec. 2010)

In a blog post, Twitter CEO Dick Costolo noted that “In the past 12 months, Twitter users sent an astonishing 25 billion Tweets and we added more than 100 million new registered accounts. In that time, our team has grown from 130 people to more than 350 today.”   The company has over 175 million registered users.  Per, Twitter is now the 10th most trafficked site in the world, and the 8th most trafficked in the U.S., but a look at the chart in Exhibit 3 indicates that growth to has slowed in the last quarter, since the site re-design.  Given the large number of users who access the site via mobile apps or other sites, it’s difficult to tell how fast Twitter is growing, or not, but the slowdown in traffic growth to is certainly worth noting.

Twitter’s 2010 Top Trends Highlight the Sites Remarkable Global Nature

Twitter’s global reach is highlighted by the fact that of the Top 10 most tweeted about people in 2010, only four are American:

What is also striking is that most American’s could probably only identify one or two of the non-Americans (only Julian Assange and Kate Middleton are likely to be recognized names).

Only one person, Justin Beiber, made it on to the list of the Top 10 trends of the year, with all the trends being global in nature.  The top 10 trends included three events, three products, two movies, one person and one Octopus (Pulpo Paul who correctly predicted the winner of all seven of Germany’s match’s in the 2010 World Cup).  Three of the trends were World Cup related.

Of the Top 10 technology trends in 2010, four were Apple related and two were Google related:

Finally, we finish with Twitter’s list of its 10 “Most Powerful” Tweets as determined by the team at Twitter:

A review of these 10 most powerful tweets highlights the tremendous global impact that Twitter has had, and it’s our belief that the impact is only going to continue to grow.

Sysmos Study Highlights Growth of Twitter in 2010 vs 2009

In a study released earlier this month, Sysmos, a leading provider of social media monitoring and analytics, analyzed more than a billion tweets generated by over 20 million Twitter users in 2010.   The study revealed some interesting facts/graphs including the rapid growth in new accounts in the first eight months of 2010:

The percentage of members following over 100 people tripled:

The percentage of members with over 100 followers has more than doubled.

All these figures speak to the robust growth of Twitter, which is why some of the world’s smartest investors just put in money at a $3.7 billion valuation.

This Week In Facebook

New Facebook Registration Tool Gives Sites Greater Flexibility, Users Greater Control

On December 16th, Facebook launched a new registration tool that gives Website owners the ability to offer quick, easy and social options for sign-up.  The new alternative to Facebook Login (formerly Facebook Connect) enables Websites to garner additional information that Facebook doesn’t provide.  It’s another smart move by Facebook that will increase the number of sites leveraging Facebook for Social Sign-ON (SSO), thus increasing the amount social graph data collected by Facebook in our opinion.

Facebook highlights how it’s SSO tool increases the registration rates at sites (by 300% at FriendFeed) where its implemented, engenders longer site visits, more  sharing of content, and more repeat visits.  The new registration tool can be added to sites with just one line of code, and customized to request new fields if required to create an account.  When a user is logged into Facebook and arrives at the registration tool on a Website, they’ll see that the form is prefilled with the relevant information previously shared on their Facebook profile. Users see the specific information the site is requesting, giving users greater control.   After a user registers with their Facebook account, the site is given permission to access the user’s basic info on Facebook in addition to the data presented in the form, enabling a more personalized and social experience on any site.

Facebook Grows Roster of Instant Personalization Partners……Slowly

Facebook launched Instant Personalization at f8 in April with three initial partners, Pandora, Yelp and Microsoft’s  The idea is simple and compelling, allowing sites to immediately customize the user experience with “General Information” provided by Facebook including friends lists and profile photos, for Facebook members who navigate to their site.   The program sparked immediate pushback from privacy groups who objected to the automatic initiation of Instant Personalization without a simple way to opt-out.  Those concerns were exacerbated when Yelp’s implementation was found to have serious flaws.  Facebook largely addressed those concerns in its May update to its privacy controls.

Facebook next rolled out Instant Personalization to Rotten Tomatoes on September 17th.  That was quickly followed by Scribd on September 27th, which was met once again with privacy concerns as Scribd inadvertently sent emails to the Facebook contacts of Scribd members in an opt-out fashion.   The next roll out was Bing’s on October 13th, which still doesn’t appear to be working well.  Trip Advisor launched Instant Personalization sometime in November, to little fanfare.  This past week Clicker became just the 5th site to launch Instant Personalization following its introduction in April, for an average of less than one new site a month.

We note that Facebook recently created a page and a video for the Instant Personalization program.  Given the issues the program has had, Facebook apparently believes better education is key to the program’s long-term success.

Facebook Implements Facial Recognition Technology to Tag Photos

Facebook’s photo product became the most popular photo sharing service on the Web, by a huge margin, once Facebook enabled tagging, which lets you associate your friends with the photos they’re in.  Facebook says that more than 100 million photo tags are added every day. That number is about to grow dramatically following the recent implementation of face recognition technology that guesses who the person is, using your network of friends as a reference.  Like all new Facebook features, privacy concerns have been addressed as users are given a choice of opting out of having their name suggested in the ‘tag your friends’ process (though users can still be tagged manually by friends).  In addition, the technology will not be used for any kind of site-wide face search, as the process relies on a member’s social graph. Given the relatively small number of friends any user has, the new service is very reliable as it doesn’t need to be super detailed when matching faces among a small sample.  The new face recognition feature will be rolled out slowly in the coming weeks, and will ramp up over time as bugs and privacy issues are addressed.

Tumblr Raises $30 Million, Emerges as Another Major Web Discovery Tool

As confirmed in an SEC filing, rapidly growing blogging site Tumblr raised a $30mm Series D round of financing, lead by Sequoia ($20mm), with Union Square Ventures and Spark Capital each contributing $5 million.  With just 16 employees, the site has struggled to stay up amid its torrid growth, but with the new infusion of capital, the company will have the necessary resources to facilitate growth.

According to the Alexa chart below, the rapidly growing site now reaches about 1.3% of the total internet population, and is the 86th most trafficked site in the world (Alexa ranks sites based on total page views) and the 39th most trafficked in the U.S.:

With over 11 million blogs created on its platform to date, Tumblr still has just 10% of the reach of the leading blogging site, Google’s Blogger (the world’s 8th most trafficked site).  However, Tumblr is on a significantly more rapid growth curve.  In trying to understand Tumblr’s rapid rise, we ran across an interesting post by über blogger John Battelle.

In his post, Battelle walks through a history of discovery solutions on the Web, starting with Yahoo’s curation model (which didn’t scale).  Google exploited human-created links as its leading signal about what people wanted.  Discovery moved from the site to the page – due to Google’s core PageRank algorithm (apparently named after Google co-founder Larry Page).  Google emerged as the Web’s largest advertising platform and the largest referrer of traffic.  The Web continued to evolve, from site, to pages, to people, with Facebook and Twitter emerging as increasingly important drivers of traffic to Websites. Battelle goes on to point out a problem vexing many Facebook and Twitter users, as we all grow our friend base on Facebook and the people we follow on Twitter, they are both getting increasingly noisy and less useful.  Battelle’s thesis on Tumblr is that it “combines the best of self expression (Facebook and blogging platforms) with the best of curation (Twitter and RSS), and seems to have stumbled into a second-order social interest graph to boot “.  It’s still early days at Tumblr, with simple tasks like finding people to follow proving difficult (Battelle suggests Googling people followed by Tumblr, the same way he discovered people early on with Twitter).  But the Alexa chart above highlights that Tumblr is providing tremendous value for its users, a new signal for users to discover relevant content.

In its most recent blog post, an outlook for 2011 Tumblr writes that:  “….we feel like we’ve let you down. We want you to know that we’re still right in the thick of the most comprehensive re-architecting our infrastructure has ever been through, and while you might still hit some bugs or errors this month, our incredibly capable team is working 24/7 to keep your blogs fast and stable. We have a solid roadmap to get Tumblr well ahead of capacity, and we’re working fast to get there.  Two notable things we’re right in the middle of:

We’ve dramatically expanded our engineering team, with five brilliant engineers coming on board just this month and more starting shortly. We just moved into a new office to make room for everyone. If scaling one of the fastest growing platforms in the world is up your alley, we’d love to talk!

After the holidays, we’ll be opening our second datacenter to nearly triple capacity and prep for much faster growth next year. Today, we already light up more than a rack of new servers every week.

Frustratingly, while we pride ourselves on launching new tools and features faster than anyone, we’ve had to slow down our product roadmap over the last few weeks to let our engineers turn their full attention to scaling. The very good news is that our product team hasn’t slowed down a bit, and is prepping some huge developments to show off soon.

One last thing: We strive to keep our company and infrastructure super-efficient, but growing this quickly isn’t particularly cheap. Tumblr is largely made possibly today by our extremely supportive investors, Spark Capital and Union Square Ventures, as well as Sequoia Capital, who we’re thrilled to have joining us this month. So please hug these guys if you happen to run into them. :)

Thank you for your patience, support, and for inspiring us every single day with your creativity.”

Chart of the Day: Facebook Crushes Google, Yahoo, AOL & MSN

If search is any indication of what people want, they want Facebook more than twice as much as Google and Yahoo according to Google Trends.

I also compared the most popular social media companies to Facebook on Google Trends, to see if perhaps social media properties skew higher than the old Internet titans.  They don’t.

I was curious how Google compared to the old titans, and interesting, Yahoo and Google are neck and neck.

To be fair, these results are based on Google search results, so I’m not quite sure why someone would go to Google to search the keyword term “Google”, but it was fun to pulling the data.

To learn more about how Google Trends are calculated, click here.

Jay Gould maintains a long position in shares of Facebook (private).

This Week In Social Media – December 15


We believe Social Media and its associated technologies will change the world to a larger degree than is currently appreciated on Wall Street.  Furthermore, we believe that for the foreseeable future, the news flow on the sector will be highly positive.  To keep investors abreast of the latest developments in the sector, we publish this weekly newsletter on all things Social.  In this issue:

  • This Week In Facebook
    • Facebook Fan Page growth accelerates, highlighting virtuous circle nature of FanPages
    • Facebook valuation reaches $55 billion in latest auction of shares
    • Cool Map of the World Graphic Highlights FB’s Global Domination of Social Networking
    • Social Gaming – Zynga’s Monster Hit Cityville, New Facebook Notification Policy, and More

  • This Week In Twitter
    • Pew Study Indicates More Woman Tweet Than Men (Is that Possible??)
    • Tweet Deck Is the Most Popular App in the Google Chrome Browser Store
    • Twitter Setting Up Shop in Europe (Finally)
  • Leveraging Social Media Is Most Important Priority for Search Advertisers in 2011
  • Guest Post: Enabling Social Ad Formats With SML, Rahim Fazal, CEO of Involver
  • LinkedIn Reveals 10 Most Overused Buzzwords on Its Site
  • Only 4% of U.S. Adults Use Location-based Services, But They‘re Influential and Male
  • Social Media Tops Search as Information Source Among Younger Workers