Investment HighlightsLeader in local deals market:
With over 50M totalsubscribers across over 300 cities in more than 40countries, Groupon is the largest player in the localdeals market. The company, a pure play on the localdeals segment, is poised to grow at a CAGR of 20%from 2011 to 2015, in our estimate.
Highly Suitable for businesses where customeracquisition cost is very high,
high fixed costbusinesses and businesses which thrive on repeatcustomers.
Groupon raised $950M in Series G funding inDecember 2010
at a post money valuation of$4.75B from DST Global, T.Rowe Price, CapitalGroup, Morgan Stanley, Andreessen Horowitz,Battery Ventures, Greylock Partners, Kleiner PerkinsCaufield & Byers and Silver Lake.
We have used two methods: a) steady-state target EV/Revenue multiple, and b)comparative EV/Revenue multiple based on a peergroup to arrive at a market cap of $5.95 - $6.07B forGroupon, and an estimated price per share of$39.41 - $40.20 for common shares.
Low barriers to Entry:
market are low and switching costs for consumers and local businesses is low.
Local businesses have to figure out the economics of the deals:
In some cases, local businesseshave offered deals in which there was no cap on the number of subscribers, the deal becameoversubscribed, and the local business suffered huge losses.
Low Consumer Retention:
Local business offering deals through Groupon have a low repeat consumerpercentage of 20%.
Groupon 40%- 50% revenue sharing arrangement
with local businesses is
in the long
February 1, 2011
New Enterprise Associates, AccelPartners, DST Global, Battery Ventures, CapitalGroup, Andreessen Horowitz, Greylock Partners,Kleiner Perkins Caufield & Byers
Andrew MasonRob SolomanJason Child
neXtup Estimates (details on page 40)Estimated Share Price
$39.41 - $40.20
Estimated Market Cap
$5.95B - $6.07B