Group-buying site Groupon has been valued at $US25 billion just 18 months after launch, making it one of the most valuable fast-growth start-ups in history.
According to a new Bloomberg report, Groupon is in discussions with banks about an IPO that would value the company at $US25 billion, with sources saying a float is likely to occur by the end of 2011 with a minimum value of $US15 billion.
In less than two years, Groupon has already attracted 70 million users and has expanded into 500 different markets, including Australia under the Stardeals brand.
The company was already rumoured to be worth $US1.3 billion last April after a $US135 million investment round, but a rejected offer from Google worth $US6 billion pushed it up even further.
While Groupon is continuing its success, it faces a growing number of competitors, particularly on a local front; Groupon’s popularity has sprouted more than 20 group-buying sites in Australia, all hoping to have the same level of impact.
One source within the group-buying industry has said Groupon has found it more difficult to penetrate the Australian market than it first assumed.
Groupon ran into trouble in Australia recently when it was criticised by rival group-buying site Cudo for using “bait and switch” tactics in order to add more subscribers to its user base.
Although several companies have attempted to emulate Groupon’s success, none have been able to match the global scope of its business; Groupon is constantly expanding into new markets, including the Middle East.
Meanwhile, analysts have questioned the sustainability of fast-growth web companies, arguing their business models may reach their limits a lot more quickly or fail to work in as many markets.
But Reuben Buchanan, founder of Wholesale Investors, says a lot of venture capitalist firms in the United States are looking for the “next big thing”, citing Groupon and Facebook as examples.
Phaedon Stough, co-founder of investment network Innovation Bay, says in addition to the huge interest in the tech industry, companies are under increasing pressure from investors to generate cash flow in a much shorter period of time
Stough says he is also seeing a strong trend towards start-ups operating in the business-to-consumer model, and Groupon falls into all three of these categories.