Earlier in June, David Heinemeier Hansson blogged about the Groupon IPO and how he was going to pass on the deal. My blog post was a view point, but he managed to put some actual figures on why it wouldn't work:
- They're spending $1.43 to make a $1.
- They raised $750m in the initial IPO and yet only have about $208m left after giving most of it to insiders and early investors and yet they're losing $117m per quarter!
- They've got 7,000+ employees and still growing
Will they ever manage to turn things around and make a profit? Not when they're chasing an ever diminishing set of small companies who actually want to do a Groupon deal. Amazon may well have taken years to show a profit, but at least it was investing in real-world stuff to enable it to do better in years to come. I remain convinced that this is not something I'll ever invest in...
I do however have a confession. Since leaving the comforts of corporate life, I am now involved in a web start up that has a group buying element in it and it's frustrating when you find yourself lumped in with Groupon and that whole business model. I know we're not a Groupon clone, but will our business opportunity be poisoned by Groupon's growing toxicity? I hope not...
