11–20 of 77 posts
I hope they can do an IPO, and short it, along with Demand Media. You gotta invest in what you know.
it's increasingly clear that groupon is essentially a ponzi scheme with some graphic design. can't wait for the post mortem documentary a la "the smartest guys in the room".
Did groupon start in chicago or boston. The article says boston, but I thought it was chicago ...
This is the problem with those early payouts (I don't mind these in theory but this case was egregious). There's not a lot of incentive anymore for the people running the company to do anything but what they're currently doing. They've already had their exit.
If the owners didn't take ~700 million of the table from the last rounds of founding, groupon would be in a better financial situation than they are today.
What profitability comes down to is what the lifetime value of a user (in this case we have two types of users, consumers and providers) is and the cost of acquiring a user.
Nothing else really matters, focusing on the accounting of how a company is handling raising money or managing it's cashflow isn't really that relevant in the long term. Sure it adds risk that the company might have cashflow problems in the short term, but it's the price you pay for agressive growth and presumably the investors are happy with it.
People seem to forget that you could have said the same thing about Amazon, in the early days it was losing money hand over fist because it was using investor money to subsidize product sales. Amazon gambled on the high LTV of customers and it paid off hugely for them.
Well its a good thing $810M of their $946M round paid out the founders and early investors. Now no one but the late round VC's and the 5000 employees get stuck holding the bag if this thing implodes. This is the problem with those early payouts (I don't mind these in theory but this case was egregious). There's not a lot of incentive anymore for the people running the company to do anything but what they're currently…
it's increasingly clear that groupon is essentially a ponzi scheme with some graphic design. can't wait for the post mortem documentary a la "the smartest guys in the room".
Groupon's cash flow is just like any other business: it buys merchandise (coupons) from vendors (on a net 60 basis), marks it up and sells it to consumers. How is that a ponzi scheme? I think you might be confused since many news outlets are making it sound like today's Groupon buyer's are funding yesterday's vendors in some sort of mischievous way. But that's how all businesses work.
There's a reason the term ponzi scheme is being used by the business news, and it's not because they don't know how businesses work.