Gigaom

Groupon Founders' Master Plan: Build More Groupons


With the news that Groupon is filing for an initial public offering, people are poring over the fine details and wondering what it means.There are plenty of questions to ask: How should you feel about the fact that the company lost $413 million last year? Is the company's valuation too exuberant? And what about the discovery that the majority of the $946 million in funding the company raised recently has been used to pay early investors?

That last part is particularly interesting—and entirely true: According to the filing itself, two of the company's co-founders—serial entrepreneurs Eric Lefkofsky and Brad Keywell—used Groupon's winter funding round to cash out shares to the tune of $451 million.

The two were there right at the beginning, helping Andrew Mason build and fund Groupon when it was still a community action site known as ThePoint.com. What are they going to do with all that cash now?

It turns out the answer is simple: build more Groupons.

Or, more accurately, they plan to apply the lessons of Groupon's success to other companies through an investment vehicle called Lightbank.

Accent on Sales Teams

Lightbank hasn't received a lot of coverage, but to find out more about the company's plans, I caught up with Paul Lee, who joined Lefkofsky and Keywell as a partner at the firm in February. Lee came to Lightbank from Playboy Enterprises, where he headed the organization's digital efforts ("I had a great time, but not for the reasons that most people would think," he chirps) but previously acted as an investor through the Peacock Equity fund, an investment group put together by NBC and GE.

Lee says he couldn't wait to join forces with the Chicago-based duo, since they have a strong track record.

"Brad and Eric had taken two companies public, sold another, have one business with revenue in nine figures," he says. "And then there's Groupon."

He says Lightbank's philosophy is fairly simple. The company wants to look outside and find businesses, like Groupon, that can really benefit from building out a great sales team and getting the most out something most technology companies think is secondary: people.

"Our strength is human capital," says Lee. "There is lots of great technology, but that isn't enough. We take what we're good at, what we know, and use that."

Offline Techniques for Online

He argues that people are an underused asset in the technology business. While a huge amount growth is still to be had on the Internet, a lot could come from businesses outside the traditional Silicon Valley arena—and that means pressing the flesh is an important part of success.

"Had Groupon been in Silicon Valley, they'd have been working for two years on getting the technology right," Lee says. Instead, the company has scaled in a different way, aggressively expanding its sales force to drive growth. Mason told the D9 conference that the company currently employs around 8,000 people—half of them in local sales. And by trying to conquer the human conundrum in other areas, Lightbank's partners think they can strike gold.

"A lot of companies build out and then they say, let's get a rock-star salesperson," says Lee, emphasizing that it can often take a team of great sales staff to build out a business. "We think we can systemize the sales approach."

So far, Lightbank has invested in around a dozen companies, most of them in and around Chicago, with seed or Series A rounds of around $1 million. That includes a financial news service, Benzinga, and DoubleDutch, a company building out enterprise apps. More deals are on the way, he says, including some later-stage investments in businesses that could benefit from more focus on selling.

The call to improve online sales is one I've heard before. Ben Holmes of Index, one of the most successful European venture capital groups, told me recently there is still a lot of room in e-commerce—particularly for new online retailers to come in and make more use of the Web in vertical markets.

Lee suggests even more may be on the table.

"Take it further," he says. "We think you can take offline techniques to online businesses—call centers, inside/outside sales, that sort of thing."

In fact, he says, Groupon has shown one thing: Technology companies don't have to be inhuman to disrupt the status quo.

"You can own the last mile to the consumer, and if you can do that, then you can very quickly upend an industry."

Also from GigaOM:

What Local Social Commerce Needs to Really Take Off (subscription required)

Xbox 360: The Living Room's 800-Pound Gorilla?

What Media Companies Need to Learn From Startups

What We Want in iOS 5 and What We'll Likely Get

Tesla Plans to Raise $234 Million in Second Share Sale

Johnson is a writer for the GigaOm Network

The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus