Over the past couple years, I’ve consulting on a number of projects (at least 4) in the same space as Groupon (et al).
This model of providing a heavily discounted coupon on local merchants just doesn’t sit right with me – for two reasons.
- it applies significant downward pressure on the merchant’s overall prices (even more-so when the coupon distributor takes a double-digit percentage off the top.
- it sends the wrong type of people (those only looking for a firesale) into the merchants doors.
- the slashdot-effect this causes it almost always makes the customer-merchant experience less enjoyable.
Groupon’s S-1 filing has exposed the downside remarkable hyper-growth strategy they’ve pursued – $230,000,000 in the red.
With how many competitors on their tail? At least 10 in a mid-sized market like Minneapolis – and that’s not counting the ones that haven’t launched
It’s a hot space. An overheating space running the risk of exhausting everyone – fifteen minutes from now.
Before then, Groupon’s series G investors sure would like to get their return.
Where do you turn when you desperately need a huge infusion of cash just to keep the lights on and you’ve already executed a G-round?
The public market!
And if you’re already a public company?
“This IPO game isn’t about finding value, it’s about finding a greater fool” – Sucharita Mulpuru