LivingSocial Is Said to Get Funding Valuing It at $6 Billion

By Douglas MacMillan - Dec 8, 2011 7:12 AM GMT+0700

LivingSocial.com, the online-coupon provider that competes with Groupon Inc., lined up $400 million in funding that gives it a valuation of about $6 billion, according to a person with direct knowledge of the matter.

The company has already sold $176 million of the total, Washington-based LivingSocial said in a filing with the U.S. Securities and Exchange Commission. The funding will be a mix of equity and debt, said the person, who declined to be identified because the figure hasn’t been disclosed. The investment will come from both existing and new backers, the person said.

LivingSocial, which was in talks with banks earlier this year about raising $1 billion in an initial public offering, shifted plans after other Internet companies faced turbulent debuts in the public markets. Groupon, which has a market capitalization of $13.6 billion, has seen its shares dip as much as 24 percent below its IPO price last month. The stock is now trading at 5.8 percent more than its initial price.

As LivingSocial grows and expands into new cities, it requires funds to hire and train more salespeople, said A.B. Mendez, a social-media analyst at WJB Capital in New York.

“LivingSocial has made the claim that they have a human sales representative on the ground in every city where they have a daily-deal presence,” Mendez said. “In theory, LivingSocial’s model is as human-capital intensive, if not more, than Groupon.”

Fueling Expansion

Executives and backers have discussed a round of funding valuing the company at $6 billion since September. LivingSocial plans to use the new investment to fuel operations and expansion, said the person familiar with the matter.

The company has almost doubled in value since April, when it raised $400 million at a valuation of $3.5 billion, two people with knowledge of the matter said at the time. With the $400 million in funding unveiled today, LivingSocial has received a total of $1.03 billion from investors, including Grotech Ventures, Institutional Venture Partners, T. Rowe Price Group Inc. and e-commerce site Amazon.com Inc. (AMZN)

LivingSocial delivers daily discounts on restaurants, hotels, events, and other goods and services. The daily-deal market may generate $4.17 billion in U.S. sales in 2015, compared with $1.97 billion this year, according to research firm BIA/Kelsey in Chantilly, Virginia.

U.S. consumers will spend $80 million to $100 million on daily-deal gifts between Thanksgiving and Christmas, estimates Yipit, a website that aggregates offers from a range of companies. That amount is up from $15 million to $20 million during the same period a year ago, Yipit said.

Other technology companies are pushing ahead with their IPOs, even if valuations are coming down. Zynga Inc., which earlier expected to be valued at as much as $10 billion in its IPO, now aims to sell shares at a valuation of up to $7 billion.

To contact the reporter on this story: Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net