They made an industry, and hopefully won’t unmake it. When Groupon sprung out from being another pivoting startup to a multi-billion dollar enterprise in two years, on its trail came a host of imitators, supplementors, technology augmenters, service aggregators and enhancers. Groupon is more than the leader of this ecosystem. It is its symbol and, in the modern form of social commerce and daily deals, will always remain known as the pioneering first. To be clear, coupons, promotions, discounts, group buying were not invented by Groupon, but these were all given a modern face with its emergence. And while the business model is old and has served its purpose well for ages, in the past two years it has assumed its shape in the mold of Groupon, as though a new thought in a new era.

With leadership comes responsibility, at least in certain fields, and just as Groupon laid the groundwork for the sector it still dominates, so too can Groupon do damage to it. The IPO document that the company has recently filed raises so many questions about its profitability, sustainability and insider motivation, that the concerns could spill over to the rest of the sector by association, as, rightly or wrongly, most peer groups are painted in the bold strokes of their visible leaders. We will not know how Groupon’s package will be received by the market for some time – and if the IPO prices well and does like LinkedIn in initial trade, for example – then all will be well and concerns raised here will prove unfounded. Unlike LinkedIn, however, there is a chorus of naysayers and vocal critics already, and Groupon’s presentation has added fuel to the fire.

In particular, the amount of money taken out through stock sales and dividends by Groupon’s shareholder group and founders presents these insiders as sellers rather than buyers of a long-term opportunity. It’s one thing to make a case for a high-growth business that operates at a loss and needs massive investment to support its rise, and quite another to do the same while extracting hundreds of millions in personal payoff after just a few years of work. The former case, which is common and can at least be debated, is compromised by the latter, which is full of noise and doubt and renders the argument less credible. This is too bad, because a discrete and isolated situation can cause questions to be asked of innocent bystanders, as it were, creating an atmosphere that would have been better avoided. Because the business concept is fundamentally sound – as evidenced by many decades of positive coupon and promotional experience for both merchants and consumers, regardless of the technology used – it would be truly unfair for anything of this sort to occur.

What’s done is done, and old deals cannot be reversed. But if the market pushes back and the IPO is forced to price below a target range, these prior deals may have something to do with the outcome. For the time being, if nothing else, these insider exits seem to be drawing more negative attention to Groupon than its huge revenue growth is drawing positive attention. As many investors contemplate exits in what may or may not be a tech bubble, this is a lesson in leadership, timing, excess, short-term and long-term responsibility, with applications extending well beyond an isolated circumstance. (Here is another post to read: It’s about issues related to money raised at values that are too high in advance of additional rounds required. The principles are similar.)

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