sharespost groupon research report

Created: 02-01-11 Authored by: neXtup

RESEARCH REPORT

This report has been downloaded from SharesPost, Inc., but was prepared by Global Silicon Valley Partners under the neXtup Research brand ("neXtup Research"), and any opinions contained herein are solely the opinions of Next Up Research. Information contained herein, including but not limited to research, valuations, calculations, estimates and any other material or sources, is believed to be reliable, however its accuracy and completeness is not warranted or guaranteed, and past performance is not indicative of future results. These materials are provided for informational purposes only and should not be used or construed as an offer to sell or a solicitation of an offer to buy any security. SharesPost, Inc. is not acting as nor is it registered as an investment adviser.

Investment Highlights

Leader in local deals market: With over 50M total subscribers across over 300 cities in more than 40 countries, Groupon is the largest player in the local deals market. The company, a pure play on the local deals segment, is poised to grow at a CAGR of 20% from 2011 to 2015, in our estimate.

Highly Suitable for businesses where customer acquisition cost is very high, high fixed cost businesses and businesses which thrive on repeat customers.

Groupon raised $950M in Series G funding in December 2010 at a post money valuation of $4.75B from DST Global, T.Rowe Price, Capital Group, Morgan Stanley, Andreessen Horowitz, Battery Ventures, Greylock Partners, Kleiner Perkins Caufield & Byers and Silver Lake.

Valuation: We have used two methods: a) steady-state target EV/Revenue multiple, and b) comparative EV/Revenue multiple based on a peer group to arrive at a market cap of $5.95 - $6.07B for Groupon, and an estimated price per share of $39.41 - $40.20 for common shares. Investment Concerns Low barriers to Entry: market are low and switching costs for consumers and local businesses is low. Local businesses have to figure out the economics of the deals: In some cases, local businesses have offered deals in which there was no cap on the number of subscribers, the deal became oversubscribed, and the local business suffered huge losses. Low Consumer Retention: Local business offering deals through Groupon have a low repeat consumer percentage of 20%. Groupon 40%- 50% revenue sharing arrangement with local businesses is not sustainable in the long

February 1, 2011

Media: Groupon Company Information

Founded: 2008

Headquarters: Chicago, IL

Total Funding: $1.12B Investors: New Enterprise Associates, Accel Partners, DST Global, Battery Ventures, Capital Group, Andreessen Horowitz, Greylock Partners, Kleiner Perkins Caufield & Byers

CEO: COO: CFO:

Andrew Mason Rob Soloman Jason Child

neXtup Estimates (details on page 40)

Estimated Share Price $39.41 - $40.20

Estimated Market Cap $5.95B - $6.07B

www.nextupresearch.com

http://www.nextupresearch.com/

Important disclosures on page 59 2

INVESTMENT THESIS

Leader in Local Deals Market

With over 50M total subscribers across over 300 cities in more than 40 countries, Groupon is the largest player in the local deals market. The company, a pure-play on the local deals segment, is poised to grow at a CAGR of 20% from 2011 to 2015, in our estimate. The growth in the future is likely to be at a slower pace, primarily because the company is already one of the largest in the local deals space. The local deals segment, mostly aided by new entrants, should grow at 20% from 2011 to 2015.

Exhibit 1: Growth of Groupon v/s Growth of LivingSocial

Source: Company reports & neXtup Research

Win-Win Proposition for Both Local Businesses and Consumers

of the 300 local markets thereby guaranteeing revenue and large number of new customers for local businesses. Local businesses do not have to pay upfront fees and need to share revenue with Groupon only if the deal achieves the minimum subscription.. Groupon

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LivingSocial Groupon

Groupon Expansion in to Europe - CityDeal Acquisition

Groupon Expansion in to Latin America - Clan Decuento Acquisition

Number of Cities


offers considerable savings to consumers who can discover services/merchandise that were not known to them earlier. Right Partnerships with Sustainable Local Business

with local businesses. Groupon breaks into new markets by researching the local market and identifying successful local businesses. Groupon sales personnel approach local businesses with outstanding reviews, and establish partnership with the local business. Highly Suitable for Businesses where Customer Acquisition Cost is Very High Groupon is best suited for high fixed cost businesses and business where the customer acquisition cost is

deals offer them a channel to reach out to a targeted consumer base in local markets without paying any upfront fees. Groupon is also best suited for businesses thriving on repeat customers such as spas and restaurants. Negative Working Capital and Lack of inventory Groupon has negative working capital as it gets cash from consumers as soon as they subscribe to deals. Groupon does not need to maintain any physical inventory. Groupon receives the money from customers up-front however the costs associated with the delivery of goods/services ordered are spread over 1-2 quarters thereby offering considerable negative working capital for local businesses

Groupon raised $950M in Series G funding in December 2010 at a post money valuation of $4.75B from DST Global, T.Rowe Price, Capital Group, Morgan Stanley, Andreessen Horowitz, Battery Ventures, Greylock Partners, Kleiner Perkins Caufield & Byers and Silver Lake.

Valuation: We use the following methods namely a) Multiple of EV/Revenue, b) Target EV based on steady state revenues, normalized net margins, and a growth multiple to arrive at an enterprise valuation of $5.95 - $6.07 B for Groupon.

(a) Multiple of EV/Revenue: With no publicly traded companies in the local deals segment, we believe a close proxy would be the publicly traded Internet software and online retail companies. We have used a median EV/Revenue multiple of 5.1x (Appendix A3) assuming long term EBITDA margin of 25% and growth rate of 40% over the next few years. Using a multiple of 5.1x and a 2012 revenue estimate of $1.19B, we arrive at a target enterprise value of $ 6.07B.

(b) Target EV based on Steady State Revenues: Appendix A details our valuation approach and the choice of our multiple. Assuming steady state revenues of $1.65B in 2014, normalized net margins of 25%, a growth multiple of 25, we arrive at a target enterprise value of $ 5.95B.


Investment Concerns Local Businesses Have to Figure out the Economics of the Deals In some cases, local businesses offered deals in which there was no cap on the number of subscribers and the deal was oversubscribed. In such cases, local businesses ended up being unable to meet the delivery expectations and incurred huge losses. Businesses with unprofitable promotions have reported

business again at full price. Low Barriers to Entry & Low Switching costs

business model is easy to copy, barriers to entry for the local deal market are low and switching costs for consumers and local businesses are low. There are 500 firms worldwide (200 firms in

ess. Competition from Players in Other Markets Groupon faces competition from LivingSocial which is rapidly expanding to all cities in which Groupon is offering deals. Groupon could also face competition from players in the local review & search space such as Yelp, which has started offering deals. Entry of larger players such as Facebook (Facebook Deals) and Google (Google Offers) could also pose significant competition to Groupon in the future. Consumer Retention is Difficult

mers are deal-driven and not long-term consumers. Local business offering

composed of deal seekers and bargain shoppers who are not willing to make purchases beyond the deal. The majority of users make onetime purchases at Groupon. 50% revenue share is not sustainable in the long run Groupon takes a 40%- 50% of the revenue from its deals. This arrangement is not sustainable in the long

titors could easily drive revenue away from Groupon by charging less.


HISTORY Groupon takes advantage of the collective buying power of its users to offer deep discounts for services and products. The business model is a combination of coupon discounts and group buying. Coupon discounts and group buying are old concepts which date back to the late 19th century and early 20th century, respectively. In 1887, Asa Candler, a partner with the Coca-Cola Company, was the first to utilize coupon discounts as an advertisement strategy. Candler made use of various avenues such as magazines, mail, employees and sales representatives to distribute complimentary coupons to potential customers. Exhibit 2: Early Coupons used by Coca Cola

Source: www.coca-colaconversations.com An estimated 8.5 million free drinks were served via Coca-The company gave soda fountain operators free syrup to cover the cost of the free drinks. The idea was soon picked up by other enterprising businesses. In 1909, Charles William Post, a manufacturer of

promoted coupons heavily to lure customers away from local markets. By 1965, over half the families in the US were utilizing coupons.

oadable coupons and online coupons were introduced to the market. The coupon industry has continued to increase in scale during this period. By 2009 over 86% of all American households utilize coupons. In 2009, over 3.2 billion coupons were redeemed by consumers leading to savings of $3.5B. While the coupon industry has thrived, the focus had been restricted mainly to grocery coupons and health and beauty care products, until now.


Group Buying While coupons started with businesses reaching out to consumers, group purchasing works the other way around. Historically, informal groups such as cooperatives have organized to buy goods directly from a wholesaler at a discounted price. Organized group buying was first utilized by the healthcare industry. In 1910, a healthcare Group Purchasing Organization (GPO) was established by the Hospital Bureau of New York. Later, other industries such as the grocery industry and industrial manufacturing and agricultural industries formed GPOs of their own to purchase raw materials and supplies at discount rates. Consumers did not always have a platform where they could organize themselves for group buying

together to form such groups. The first such groups formed in chat rooms and message boards. Companies facilitating such group buying first emerged towards the end of the century. Mercata.com, established in 1999, was one of the first group buying websites. The idea, then known as demand aggregation, allowed consumers to group together and purchase goods at low prices through volume discounts from a selection of electronics, sports equipment, software, jewelry and appliances. MobShop.com and Letsbuyit.com (an European company) were among the other major players in the market. These sites were free to use for consumers and earned revenues by taking a cut from businesses that sold the products. Exhibit 3: Mercata.com Advertisement

Source: www.mercurephoto.com


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itself. The dot com bust during the period also exacerbated the problem and Mercata shut down in January 2001. MobShop too shut down its consumer business in January 2001 and focused on the business-to-business sector. LetsBuyit.com filed for bankruptcy protection later that year. One of the problems with the early business model of group buying was the time factor. Sellers offered a deal only if a certain number of users opted for it. These buy cycles sometimes lasted over a week. By that time users would move on to other stores or online shopping sites. Social networking, though all-

about interesting deals. This increased the time it took for deals to achieve minimum numbers of users. Discounts offered on some items were not significant. Because the early group buying sites offered a variable discount model (the discount would increase with an increase in the number of consumers), it was possible that a consumer could buy the item at a comparable price (sometimes even lower) at local stores or on online shopping sites. This too was a hindrance to widespread adoption. These companies also competed against Wal-Mart, Amazon and Target - companies that enjoyed economies of scale much greater than what Mercata or MobShop could achieve at that point. During the same time, a variation of the group buying business model, Tuángòu, originated in the People's Republic of China. In this methodology, several shoppers connected over the Internet and approached a vendor together for the purchase of a specific product in order to drive a better bargain and get discounts. The Tuángòu phenomenon was very successful in Mainland China, where the popularity of the strategy is often attributed to the Chinese tradition of bargaining for the purchase of goods of all types. The popularity of Tuángòu soon led to websites that facilitated Tuángòu buying. These sites acted as intermediaries between vendors and shoppers. They would coordinate with vendors on team buying events for goods required by shoppers. Shoppers had to register in advance and the final number was communicated with the vendors. Negotiations were left to the shoppers who would conduct the bargaining themselves. This was markedly different from the early group buying sites where the shoppers would not know the final price of an item until the deadline had passed. However, this unique strategy would not translate well to the western markets where bargaining was not a tradition.

t group buying further evolved in to the present form.

over 200 group-buying sites such as Living Social, Tippr (whose parent company, Kashless, acquired


Exhibit 4: Timeline of coupons and group buying

Source: neXtup Research

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Great Depression provides a f ilip to coupon usage

Chain Grocery stores start promoting coupons

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Charles William Post of fers 1 cent coupons for Grape Nuts

break fast cereal

Group purchasing organization formed by Hospital Bureau of New York

Mercata.com and Mobshop.com are launched

Mercata raises over $89M, f iles for IPO

Groupon launched in Chicago

Groupon raises $30M. Expands to over a dozen cities.

More than 500 deal sites operate over the world. Groupon raises $950M at a valuation of $4.75B

Mercata shut down, MobShop closes its consumer business and

LetsBuyIt.com f iles for bankruptcy


MARKET OVERVIEW Local deals sites usually derive their revenue through deals featuring goods of local businesses. Local businesses use the deals as online advertisements to increase the popularity of the products and services. We estimate that the local deals market should increase from $994M to $1476M from 2010 to 2011, an increase of 48.40% from 2010 levels (Exhibit 5). By contrast, the overall US online spending is likely to edge up to $28.5B in 2011 up from $25.8B in 2010. Exhibit 5: Local Deals Market as a % of US Online Advertising Spend

Source: eMarketer and neXtup Research Estimates Local businesses create more than 50% of the US GDP and create more than 75% of new jobs each year. However, small businesses represent a fragmented, difficult sector of the US economy. Prior to the advent of local deal providers, local businesses had to access traditional advertising channels to reach their customers. Of 1 trillion global web pages, only 15M web pages feature content related to US local businesses.

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The advent of local deal providers such as Groupon, LivingSocial, and Coupons has provided small businesses with a new channel to reach out to a targeted customer base in local areas and offers a win-win situation for the customers as well as the local businesses. Exhibit 6: Benefits of Local Deal Providers

Source: Company Reports and neXtup Research Among pure-plays, Groupon is the leader in the local deals market with nearly 60% of the market share (Exhibit 7). We estimate that the market will increase from $1.48B in 2011 to $3.03B in 2015 and that

9B over the same period at a CAGR of 20%.

Benefits to Customers Benefits to Local Businesses

Deep discounts and considerable cost savingsAn alternative to traditional advertising -Groupon offers potential advantages: price discrimination and advertising

Discover services/merchandise that users had not known previously

Guaranteed revenue and large number of new customers; The revenue is obtained upfront and the costs for delivering the services/goods are spread over 1-2 quarters thereby providing negative working capital

Deal personalization based on voluntary disclosure of user preferences

No upfront fees and revenue sharing is required only if the deal is subscribed by a minimum number of customers

Deals feature products and services of local business which might not have any web pages

Ability to reach a targeted customer base within the local area

Customers receive a dollar credit for making repeat purchases (eBay)

Flexibility to set the parameters for the offer such as minimum and maximum number of subscribers, duration of deal


Exhibit 7: Groupon Market Share as a % of Local Deals Market

Source: neXtup Research Estimates

Groupon tops the popularity metrics with nearly 11.2M unique visitors a month in the US. Coupons occupies the second position with 10.5M unique visitors. Yelp and LivingSocial occupy the third and fourth position with 10.1M unique visitors and 7.7M unique visitors respectively (Exhibit 8). However LivingSocial occupies the second position in popularity metrics such as unique visitors, total number of subscribers worldwide behind the market leader Groupon.

In the US, we estimate that the number of monthly active users of Groupon has increased from 1.8M in November 2009 to 11.2M in November 2010. During the same time frame, Coupons has shown a decrease in monthly active users from 15.4M to 10.6M. LivingSocial has shown an increase in monthly active users from 0.8M to 7.7M. We believe that the local deals market is still in early stages of adoption and that variations over a few months may not necessarily portend a trend. The majority of users who purchase deals from local deal providers are early adopters highly affluent people with considerable disposable income. Nearly 75% of the users are 18 34 year old urban females. Most of the users use social networking sites such as Facebook and Twitter. Groupon alone caters to nearly 60k-200k users per city, and 100-1000 users subscribe to a particular deal in each local market.

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Exhibit 8: Number of Unique Visitors in U.S

Source: Compete

Exhibit 9: Groupon Subscriber Profile - Age

Source: Company Reports

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Exhibit 10: Subscriber Profile Education


Exhibit 11: Subscriber Profile Marital Status


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Exhibit 12: Subscriber Profile Gender


Exhibit 13: Subscriber Profile Employment


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$100,000+ $70k - $99k $50k - $69k $40k - $49k $30k - $39k $29000-


COMPETITIVE LANDSCAPE Among the pure-plays, Groupon is the largest player in the emerging local deals market, in our estimate, with more than 60% share. The company has more than over 50M total subscribers and offers deals in more than 300 cities worldwide, dwarfing the other players such as Coupons, CouponCabin, Kupikupon, Woot, Ideeli, CheapToday.com, GiltCity, BuyWithMe, Tippr and Yelp. We note that there is significant competition from LivingSocial which has raised $232M in funding and is likely to expand to all cities where Groupon is offering deals.

nearly 200 operating in US alone. Groupon expands to new markets by acquiring the dominant firms in those markets. The local deals market is going through a phase of consolidation as the leading players such as Groupon and LivingSocial have acquired many firms in 2010. Among the pure-plays, we believe only Groupon and LivingSocial have been successful.

Yelp San Francisco, US http://www.yelp.com

Launched in October 2004, Yelp is a local review website where users can write and read reviews on various categories such as shops, restaurants, beauty salons and spas, arts and entertainment, education, real estate, pets, financial services, hotels and travels. Yelp also offers its users social networking features such as the ability for users to add friends, form groups, arrange and conduct events, participate in discussion forums.

Yelp was founded by Jeremy Stoppelman and Russel Simmons, who were early employees at PayPal. In September 2004, Yelp started as an email recommendation service to help users find information on local businesses such as dentists, hair stylists and mechanics. Users could specify the service they were looking for and the email addresses of friends whose recommendations they wanted to ask for. These friends then received an email message along with a request to pass it to others who might be of help.

recommendations available for browsing but did not provide user-profile or photo functionality to contributors. The email service was aborted and the Yelp website was re-launched with a focus on Local Community in February 2005. The users just need to enter their locale and service they desired. In March 2005, Yelp launched the concept of the Elite Squad in San Francisco. Only users who were highly opinionated and wrote engaging reviews were selected to be a part of the Elite Squad. The Elite Squad also hosted local events and parties which brought together fellow yelpers. In June 2006, Yelp reached the milestone of 1M unique visitors. In July 2006, Yelp Mobile (http://m.yelp.com) was launched. In April 2009, Yelp introduced a feature allowing public business owner comments. Beginning in July 2009, Yelpers were able to share their reviews on Facebook and Twitter. From 2008 onwards Yelp expanded to other regions. In March 2008, Yelp opened its New York office. Yelp launched in UK in August 2008, followed by a Canadian version in January 2009. In June 2009, Yelp

http://www.yelp.com/

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was launched in Ireland. In February 2010, Yelp opened an office in Phoenix. In May 2010, Yelp launched in France. The German site launched in July 2010. Yelp has received $56M through five rounds of funding. In July 2004, Yelp received $1M of Series A funding from Max Levchin. In October 2005, Yelp received $5M of Series B funding from Bessemer Venture Partners. Series C funding of $10M in October 2006 was from Benchmark Capital. In February 2008, the company raised $15M in Series D funding from DAG Ventures. In the most recent round, Yelp raised $25M in Series E funding from Elevation Partners in January 2010 at an estimated post money valuation of $475M. It is rumored that in December 2009, Google made an offer of $550M for acquiring Yelp. Soon thereafter, Yahoo was rumored to have made a counter offer of $750M. Yelp management reportedly declined both the offers. Yelp generates revenue by selling advertisements to local businesses as well as through sponsored search results. We estimate that Yelp made revenues of $30M in 2009 and $50M in 2010. Headquartered at San Francisco, CA, Yelp has 150 employees. Yelp is accessed by over 38M unique visitors every month and is one of the top 150 of US Internet web sites. Users have written 11 million local reviews on the Yelp website, 85% of which have given businesses a rating of 3 stars or higher.

LivingSocial Washington, US http://livingsocial.com/ Founded in 2007, LivingSocial is a social discovery and cataloging network that connects users with their interests. LivingSocial's social applications enable more than 85M users to catalog, review, share and buy their favorite items. LivingSocial members receive daily deals based on their interests at local restaurants, bars, salons, spas, theatres and local attractions in major cities. LivingSocial offers one deal everyday with discounts up to 90% at local restaurants, bars, spas, theaters and other local attractions in major cities. Users receive their daily deal updates through email. Once a user buys a deal, the user has the option to share the deal details with friends. If more than a specified number of friends buy the same deal, then the user is offered the deal for free. LivingSocial is a strong number two in the local deals market after Groupon, and in some regional markets, a bigger player than Groupon. LivingSocial offers deals in more than 127 markets and four countries. We estimate that the US Online spending (on which local deals market is dependent) is likely to edge up to $23.6B in 2010 up from $22.4B in 2009. LivingSocial acquired BuyYourFriendADrink.com in April 2009. In October 2010, LivingSocial acquired UrbanEscapes, a company which organizes week-end excursions for young professionals. In October 2010, LivingSocial bought a majority stake in JumpOnIt, an Australian based local deals site. In January

-based local deal site that offers deals in Italy, Argentina, Portugal and Mexico.

http://livingsocial.com/


LivingSocial has received a total of $232M through four rounds of funding since its inception. In July 2008, LivingSocial received $5M in Series A funding from Steve Case and Grotech Ventures. In January 2010, LivingSocial raised $5M in Series B funding from Grotech Ventures. In March 2010, LivingSocial raised $25M in another round of Series B funding from US Venture Partners, Grotech Ventures and Revolution. In April 2010, LivingSocial raised $14M in Series C funding from Lightspeed Venture Partners, US Venture Partners, Grotech Ventures and Revolution. In December 2010, LivingSocial raised $183M in Series D funding from Amazon and Lightspeed Venture Partners. Headquartered in Washington D.C., the company has more than 280 employees.

Coupons Mountain View, CA http://www.couponsinc.com Founded in 1998, Coupons is a leader in interactive coupon solutions, providing clients with a solution to coupon based promotions and consumer services. The Company's marketing technology solutions have helped top brands and retailers reach consumers on thousands of Web sites with alternatives to offline-delivered coupons. Users can save money by using options such as printable coupons, Save to card offers and local coupons Coupons.com is the largest printable coupon Website on the Internet. Coupon Codes are available for diverse product categories such as Apparel & Shoes - Women, Home & Garden, Computers & Software, Books, Music & Movies, Toys & Hobbies, Auto & Travel, Beverages, Foods, Health care, Household, Office supplies, Personal care, Pet care, Photography, Professional Services, Restaurants and Toys & Games. Coupons' clientele and licensees include companies such as Johnson & Johnson, General Mills, Kimberly-Clark, Kraft Foods, McDonalds and Clorox as well as hundreds of grocery retailers including Kroger, Safeway, CVS and Kmart. Savings from coupons printed out or loaded to a loyalty card from its online properties doubled to more than $1B in the first half of 2010 from $529M in 2009. Headquartered in Mountain View, California, Coupons has 200 employees

http://www.couponsinc.com/


CouponCabin Chicago, IL http://www.couponcabin.com Founded in 2003, CouponCabin is a provider of online, printable grocery coupons for more than 2,800 merchants. CouponCabin does not create online coupons, instead CouponCabin finds and collects coupons much like how the Sunday newspaper collects grocery coupons. Users have the option to sign up for a daily newsletter of featured offers, or alerts to receive an email notification when new coupons appear for their selected merchants. Merchants pay CouponCabin a percentage of sales when an item is sold using a CouponCabin sourced promotion CouponCabin offers coupons in coupon categories such as Apparel, Home & Garden, Jewelry & Watches, Baby, Kids & Toys, Kitchen & Cooking, Books & Magazine, Music, DVDs & Video, Computers & Software, Office Supplies, Department Stores, Pet Supplies, Electronics, Shoes, Flowers & Gifts, Sports & Recreation, Food & Wine, Tools & Automotive, Health & Beauty and Travel & Luggage Headquartered in Chicago, IL CouponCabin has more than 100 employees.

Kupikupon Moscow, Russia http://www.kupikupon.ru

Founded in March, 2010, Kupikupon offers daily discounts on goods and services in major cities in Russia, Ukraine, Belarus, Latvia, Lithuania, Estonia and Kazakhstan.

It partners with local businesses to negotiate a discount on their goods and services in return of bringing them agreed number of customers.

Headquartered in Moscow, Kupikupon has more than 96 employees.

Woot Carrollton, TX http://www.woot.com Founded in July 2004 by electronics wholesaler Matt Rutledge Woot's main website generally offers only one discounted product each day, often a piece of computer hardware or an electronic gadget. Other Woot sites provide offers such as one t-shirt per day, five selections of wine per week, one children's item

http://www.couponcabin.com/

http://www.kupikupon.ru/

http://www.woot.com/


per day, four deals sponsored by other websites, and one closeout deal per day in cooperation with Yahoo! Shopping. Woot.com pioneered the 'one deal per day' business model that is now used by web-based retailers. Woot offers one product per day until its stock of that item is sold out or the product is replaced at midnight with the next offering. If a product sells out during its run, the next item still does not appear until midnight, except during Woot-Offs. Woot has created several spin-off sites such as Wine Woot, Shirt Woot, Sellout Woot, Kids Woot, Deals Woot and Moofi Woot, some of which follow a similar business model as the main site, while others provide other retail-related services. Woot was acquired by Amazon in June 2010 for $110M. Headquartered in Carrollton, Texas, Woot has more than 140 employees.

CheapToday.com Brookline, MA http://www.cheaptoday.com Founded in October, 2008, CheapToday is an Online Media Company that owns and operates an Online Shopping Network for Women. CheapToday offers deals, coupons, gift cards, freebie deals and information about best deals provided by top retailers such as Overstock, Target, Aeropostale, Nordstrom, Gap, Macy's, Sears and Kohl's. CheapToday finds and publishes the best deals handpicked by experts and displays them based on user's preferences. CheapToday offers deals and coupons in several categories such as accessories, beauty, casual wear, floral, gifts, jewelry, leather goods, make-up, clothing and home décor. CheapToday derives its revenue from advertising, percentage share of revenue generated through deals offered through its web site Headquartered in Brookline, Massachusetts, CheapToday has less than 50 employees.

Ideeli New York, NY http://www.ideeli.com Founded in 2007, Ideeli is an invite-only site that hosts sales of luxury merchandise at discounts ranging from 50% to 80%. Ideeli creates daily online events for its online members. Members are informed about the events through email and mobile alerts. Ideeli offers deals involving new brands with discounts up to 80%. The categories in which Ideeli offers deals and events are retail, shopping, fashion, style, clothing, accessories, handbags, luxury, shoes, and watches. Ideeli offers "first row" membership to its members for $7.99 a month using which users can get

http://www.cheaptoday.com/

http://www.ideeli.com/


mobile alerts about sales as well access to the sales up to an hour early of release on the site and $25 shopping credits for each friend who makes a purchase. Ideeli has raised $23.8M in two funding rounds. In December 2007, Ideeli raised $3.8M in Series A funding from Kodiak Venture Partners. In December 2009, Ideeli raised $20M in Series B funding from Kodiak Venture Partners, Constellation Ventures and StarVest Partners. Headquartered in New York, NY, Ideeli has more than 125 employees.

Gilt City New York, US http://www.giltcity.com Gilt Groupe launched Gilt City in April 2010. Gilt City provides local deals and offers with discounts up to 70%. Gilt Groupe is a privately held company dedicated to providing its members with access to coveted fashion and luxury lifestyle brands at sample sale prices. Gilt Groupe hand selects both established and up and coming brands relevant to its membership base. Like Groupon, Gilt City offers deals from local businesses (such as restaurants, beauty salons) and events. Deals are available in limited quantities and last for a one week period. Deals are updated once every week unlike Groupon where deals are updated every day. Deals offered by Gilt City do not require a minimum number of participants to get activated. Gilt Groupe has raised $98M of total funding through four funding rounds. In November 2007, Gilt Groupe raised $5M in Series A funding from Matrix Partners. In August 2009, Gilt Groupe raised $43M in Series B funding from General Atlantic and Matrix Partners. In May 2010, Gilt Groupe raised $35M in Series C funding from General Atlantic and Matrix Partners. In December 2010, Gilt Groupe raised $15M in debt funding from TriplePoint Capital. Headquartered in New York, NY, Gilt Groupe has more than 200 employees.

http://www.giltcity.com/


Exhibit 15: Reach of Local Deal Providers

Source: Company Reports and neXtup Research

Countries Groupon Coupons CouponCabin Kupikupon Woot CheapTo

day.com Ideeli GiltCity Yelp LivingSocial

North America

USA X X X X X X X X X

Canada X X X X X

Europe

UK X X X X X

France X X

Germany X X X

Ireland X X X

Rest of Europe X X X

Latin America X

Asia

Russia X X

Singapore X

Japan X X

Rest of Asia X X X

Australia X X


M&A activities in Local Deals Space The local deals market is going through a phase of consolidation as the leading players such as Groupon and LivingSocial have acquired many firms in 2010. Groupon and LivingSocial expand to new markets by acquiring the dominant firms in those markets.

Exhibit 16: M & A Activities in Local Search and Review Provider Space


Acquirer Target Date Comments Deal Size

Coupons Couponstar May-0650% stake in Couponstar, an Australian based digital marketing and promotions company that specializes in online printed coupon solutions

NA

Coupons J Michels Consulting Jan-07 J Michels Consulting provides coupon family code

management services NA

Coupons Boodle May-07 Boodle provides newspapers with printable coupons from national brands and local retailers NA

Coupons CouponBug Jun-08CouponBug provides online national and local grocery coupons, health & beauty coupons, entertainment coupons & retail coupons

NA

Microsoft Jellyfish Oct-07 Jellyfish is a social shopping site that provides product search features, ranking rebated items by price $50M

Coupons GroceryIQ Jan-09 GroceryIQ is a iPhone grocery shopping application NA

Groupon Citydeal.de May-10 Citydeal.de is a German based daily deal site which provided offers in 16 countries and 80 European cities NA

Groupon Mob.ly May-10Mob.ly is a mobile and online recommendation service that provides recommendations from friends and trusted sources

NA

Tippr FanForce Jun-10 Tippr is an Austin based deals site NA

Tippr ChiTown Deals Jun-10 ChiTown Deals is a Chicago based deal provider NA

Groupon ClanDescuento Jun-10 ClanDescuento is a Chile based Daily deal service which provided offers in Peru, Argentina, Colombia and Mexico NA


Exhibit 16: M & A Activities in Local Search and Review Provider Space (Continued)


Acquirer Target Date Comments Deal Size

Amazon Woot Jun-10 Woot is a Daily deal provider which pioneered the 'one deal per day' business model $110M

CrowdSavings Joffer Aug-10 Joffer is a San Francisco based deal provider that was launched in late 2009 NA

Groupon Qpod.jp Aug-10 Majority stake in Qpod.jp, a Japanese local deal site NA

Groupon Darberry.ru Aug-10 Majority stake in Darberry.ru, a Russian local deal site NA

LivingSocial UrbanEscapes Oct-10 UrbanEscapes is a social adventure company which organises week-end excursions for young professionals NA

LivingSocial JumpOnIt Oct-10 Majority stake in JumpOnIt, an Australian based local deal site $5M

WhaleShark Media RetailMeNot Dec-10

RetailMeNot is an Australian based search portal where users can find coupon and promotional codes for eCommerce sites such as eBay and Overstock.com

NA

Groupon Ludic Labs Dec-10

Ludic Labs is a San Mateo based social media tech development firm which owns Offer Foundry (advertising and deals platform) and Diddit (online community for local interests)

NA

Groupon SoSasta Jan-11 SoSasta.com is an Indian local deal site that offers deals in 11 major cities NA

Groupon Twangoo.za Jan-11 Twangoo.za is a South African based local deal site that offers deals in 9 major cities NA

Groupon Grouper.co.il Jan-11 Grouper.co.il is an Israeli based local deal site NA

LivingSocial Let's Bonus Jan-11 Let's Bonus is a Barcelona based local deal site that offers deals in Italy, Argentina, Portugal and Mexicco NA

Groupon Groupmore Jan-11 Groupmore is a Malaysia based group buying site that was launched in August 2010 and has 52K users NA


COMPANY BACKGROUND

Launched in November 2008 in Chicago, Groupon offers daily deals on local goods, services and cultural events across more than 300 cities in over 40 countries including the US (more than 150 cities), Canada, Europe and Latin America. Groupon uses collective buying power and provides a win-win proposition for local businesses and consumers delivering more than 400 daily deals worldwide. Groupon, whose name

discounts on services and goods offered by local businesses. Groupons on deals ranging from spa treatments and golf outings to fine dining and sky diving have collectively saved more than $570M for users. The idea that would eventually lead to the birth of Groupon was generated as result of the frustration felt by Andrew Mason when he tried cancelling a cell phone contract in 2006. In November 2007, Andrew Mason launched a web platform called The Point based on the "tipping point" principal (the number at which an idea reaches critical mass), that would utilize social media to organize collective action. Using The Point platform, Groupon was launched in November 2008 and Groupon grew quickly from a dozen employees to over 350 within a span of 1.5 years. In February 2009, Groupon deals were launched in Chicago and in the subsequent months, similar deals were introduced for major US cities such as Atlanta, New York, Los Angeles. In May 2010, Groupon expanded to Europe through its acquisition of CityDeal. Groupon was estimated to be worth $1B within 16 months of its launch. The combination of an increasing number of daily deals and no physical inventory

Central and Latin American markets. In August 2010, Groupon bought majority stakes in Qpod.jp (Japan) and Darberry.ru (Russia). These sites have been rebranded as local versions of Groupon. In October 2010, Groupon acquired Mob.ly, a mobile application developer, to enhance its mobile products. In December 2010, Groupon acquired Ludic Labs which is a San Mateo based social media tech development firm. In January 2011, Groupon acquired local deal providers SoSasta.com, Twangoo.co.za Grouper.co.il and Groupmore and expanded its operations to India, South Africa, Israel and Malaysia. Groupon has secured $1.1B in five rounds of funding. In January 2007, Groupon received an investment of $1 million in Series B funding from Eric Lefkofsky and Brad Keywell. Groupon secured $6.8M in Series D funding in January 2008 from New Enterprise Associates. In December 2009, New Enterprise Associates and Accel Partners made an investment of $30M in Series E funding in Groupon. In April 2010, Groupon secured $135M in Series F funding from Digital Sky Technologies, Battery Ventures, Accel Partners and New Enterprise Associates at a post money valuation of $1.2B. In December 2010, Groupon raised $950M in Series G funding at a post money valuation of $4.75B from DST Global, T.Rowe Price, Capital Group, Morgan Stanley, Andreessen Horowitz, Battery Ventures, Greylock Partners, Kleiner Perkins Caufield & Byers and Silver Lake. Groupon is planning to use the recent round of funding for expanding in China and plans to hire 1,000 Chinese employees within a year. In November 2010, Groupon rejected a $6B buyout offer from Google. Groupon has more than 24M total subscribers who have bought more than 23M Groupons leading to dollar savings of more than $1B in more than 150 US cities. Groupon has more than 50M total subscribers in more than 40 countries worldwide. Groupon is estimated to have achieved revenue in excess of $600M in 2010. We estimate that Groupon will achieve $920M in revenue in 2011, with as much as 40% coming from international markets. Headquartered at Chicago, Groupon has more than 3100 employees.


Exhibit 17: Company Timeline


2006

2007

2010

Idea that would eventually lead to birth of Groupon was born out of Andrew Mason's frustration in cancelling a cell phone contract

November 2007The Point based on the "Tipping Point" prinicipal launched

April 2009Deals launched in major US cities

April 2010Groupon estimated to be worth $1B

May 2010GroupOn expands to Europe via acquisition of CityDeal

November, 2008Groupon launched in Chicago using The Point's web platform

December 2009Groupon raises $30 M in a Series E funding round led by Accel Partners and NEA

April 2010Launches iPhone application; Received $135M from DST and Battery Ventures at a post moneyvaluation of $1.2 B

June 2010Expands to Latin America; Acquires Clan Descuento, a deal site in Latin and Central AmericaJuly 2010

Partners with McClatchyAugust 2010Expands to Japan and Russia by taking majority stake in Qpod.jp and Darberry.ru

November 2010Groupon & eBay announce Co-Marketing Incentives; Announces Global Distribution partnership with Yahoo

October 2010Expands to new markets in US, Canada; Launches in Mobile after acquiring Mob.ly

December 2010Obtains $950M in Series G funding at a post money valuation of $4.75 B; Launches big features - 'Groupon Stores' & 'Deal Feeds'; Acquires Ludic Labs

2009

2008

August 2010Launches Personlised deals; Launches National Deal with Gap

November 2010Groupon rejects a $6 B buyout offer from Google; Acquires ubuyibuy (Hongkong), Beeconomic (Singapore & Phillipines) & AtlasPost (Taiwan)

January 2008Groupon raises $6.8 M in a Series D funding round

December 2010Acquires SoSasta.com (India), Twangoo.za (South Africa) and Grouper.co.il (Israel)


M&A and Partnership Activities

In May 2010, Groupon acquired CityDeal, the second largest local deals provider. CityDeal operated in more than 80 markets in 16 countries at the time of the acquisition. The acquisition of CityDeal gave Groupon access to European markets. CityDeal follows the same business model as Groupon. The company had more than one million subscribers at the time of acquisition. CityDeal was founded in November 2009 by a group of European entrepreneurs, including the Samwer Brothers, founders of eBay Europe. CityDeal launched its first deal in Berlin in January 2010 and employed more than 600 people in offices in United Kingdom, France, Spain, Italy and other major European countries.

In May 2010, Groupon bought Mob.ly, a mobile development firm. Mob.ly, formerly known as Goodrec, is a mobile application service that works with clients to create mobile applications. Mob.ly had earlier built applications for clients such as Comedy Central, NBC, Digg and Yahoo!. Mob.ly acquisition was primarily

used to allow users to find and purchase nearby deals, search for those deals in different cities and redeem coupons. Users can now decide about deals, purchase the groupon, share deal details with other users, discuss deals and redeem Groupons directly from their iPhones.

In June 2010, Groupon acquired ClanDescuento, a deal site based in Chile. ClanDescuento provided deal offers in Chile, Peru, Argentina, Colombia and Mexico. This acquisition gives Groupon a foothold in the Central and Latin American markets.

In July 2010, Groupon signed an agreement with The McClatchy Company, an Internet and newspaper

Deals available on McClatchy websites are exclusive and are not available on Groupon.com. The McClatchy Company is the third largest newspaper publisher in the US with 43 non-dailies and 30 daily newspapers such as the Miami Herald, The Sacramento Bee, the Fort Worth Star-Telegram, The Kansas City Star, The Charlotte Observer, and The News & Observer (Raleigh). McClatchy also operates websites that offer users news, information, advertising, ecommerce and other services.

In August 2010, Groupon bought majority stake in local sale sites Qpod of Japan and Darberry of Russia. Groupon reportedly invested $10M in Qpod for the majority stake. Qpod, founded in June 2010, was started by direct sales company, PakuReserve and Infinity Venture Partners and has over 60 employees. Groupon invested in a new round of funding for a majority stake in Darberry. Darberry launched in March 2010, was funded by AddVenture and eVenture Capital Partners. eVenture Capital Partners had earlier sold CityDeal to Groupon in May 2010. Darberry operated in more than seven Russian cities and Ukraine and has more than 180k subscribers.

In October 2010, Media General, publisher of the Richmond Times-Dispatch, Tampa Tribune, and other

Media General has started placing deal powered by Groupon in its Richmond Times-Dispatch website and expects to add similar deals to its websites in six other markets.

In October 2010, eBay announced that it was offering regional daily deals to eBay users via a partnership with Groupon. eBay will determine the location of its users and display deals available in that location. Members of eBay rewards program will earn 5% in eBay Bucks for Groupon deals that they purchase. Such members can utilize their eBay Bucks for purchases on eBay.


In November 2010, Groupon reached a distribution partnership with Yahoo as a result of which Groupon

In November 2010, Groupon announced the launch of its offers in Hong Kong, Singapore, Philippines and Taiwan markets through the acquisition of local daily deal sites uBuyiBuy, Beeconomic and Atlaspost. In December 2010, Groupon acquired Ludic Labs which is a San Mateo based social media tech development firm that owns Offer Foundry (advertising and deals platform) and Diddit (online community for local interests). In January 2011, Groupon expanded its operations to India, South Africa and Israel by acquiring local deal providers such as SoSasta.com, Twangoo.co.za and Grouper.co.il respectively. In January 2011, Groupon expanded its operations to Malaysia by acquiring Groupmore, Malaysia based group buying site that was launched 5 months back and is serving 52k users.


BUSINESS MODEL Consumers subscribe with Groupon and receive deals through emails. Consumers can also see deals in the Groupon website. Groupon performs research of the local market and identifies the successful local businesses. Groupon sales personnel approach local businesses with outstanding reviews, and establish partnership with the local business. Groupon features deals involving products/services offered by local businesses in some selected locales based on the target consumer base. When a minimum number of users subscribe to the deal, the deal becomes active. The deal is generally available for a few days and the deal becomes inactive if the critical subscription is not reached. Consumers pay Groupon by purchasing the deal. Exhibit 18: Business Model

Source: Company Reports & Primitus Groupon pays the local businesses after taking a 40%-50% share of the revenue generated by the deal. Consumers then redeem coupons with local businesses and receive discounts.

Features deals f rom local merchants

Gro

upon

pay

s m

erch

ant

Mer

chan

t reg

iste

r with

G

roup

on

Money/Cost FlowInformation Flow


Exhibit 19: Revenue Model

Source: Company Reports Groupon derives its revenue through the deals that are subscribed by the consumers and is a factor of the deal size and the number of deals. Number of deals is dependent on the number of geographies where Groupon is offering deals and the deal categories Groupon offers deals in various categories such as Main Deals, Side deals and Groupon Stores. Net deal size is dependent on the discounted deal price and revenue share to Groupon (which is as high as 40%-50% and for deals below $10 Groupon charges 100% commission). The discounted deal price is dependent on the Gross/List price and the discount that is offered to consumers.

Groupon Net Revenue

# of deals

# of geographies

US

Local

National

International

Categories per geography

Main deal

Side deal

Groupon Stores

Net Deal size

Discounted deal price

Gross/List price

Discount to customers (%)

Share to Groupon (%)


PRODUCT

Stores. Groupon offers its users one featured deal per day for each city in which it operates. These deals enable users to buy goods/ services at a significant discount to their original price and each deal expires within a fixed time frame. Users will have to buy the deal before the deadline. Each deal has to be bought by a minimum number of users for the deal to be valid. Once the deal is effective, users can use the deal within a certain window of time. The window, in most cases, spans across a few months. Certain deals limit the number of users who can buy the deal. If the deal is executed, Groupon earns a commission from the retailer. Deals are offered across a wide spectrum of segments (Exhibit 21). Besides the main deal, Groupon may also offer a side deal in some cities. These side deals generally do not offer as deep discounts as offered by the main deal. Registered Groupon users are notified of deals through a daily email. Facebook and Twitter users can

book Page and Twitter stream respectively. iPhone and Android users can download the Groupon app to their mobiles for daily updates on deals. Exhibit 20: Groupon Homepage Snapshot

Source: Company Reports & neXtup Research


Segments Covered by Groupon Deals The deals offered by Groupon can be classified as belonging to the categories of consumer packaged goods, accessories, automotive, hotels and restaurants, beer, wine and spirits, diet and fitness, electronics, entertainment, fashion and beauty, health and pharmaceutical, financial and travel. An example of a Groupon deal in the Hotels and Restaurants segment is a Groupon of $189 for a two-

Exhibit 21: Deal Segments


Groupon Deals

Consumer Packaged

Goods

Accessories

AutomotiveHotels and

Restaurants

Beer, Wine and Spirits

Diet and Fitness

Electronics

Entertainment

Fashion and Beauty

Health and Pharmaceutical

Financial

Travel


Main Deal The main deal is the primary product of Groupon, in which it offers a deal each day for every location in which it operates, at a significant discount to the original price, to be availed of by a certain minimum number of users within a specified time frame, for the deal to be valid. For example, the main deal of the day for Atlanta in January, 2011 was an offer for either of the following, a) a Signature Facial (worth $135) at $59 or b) a Spa Night for two (worth $290) at $95 at Seraphim Skin care. A critical mass of 50 customers would have to be attained for this deal to be effective. Exhibit 22: Snapshot of the Main Deal of the Day



Side Deal In addition to the main deal, Groupon sometimes also offers a side deal, which works in the same way as a main deal does, but generally does not offer as deep a discount as a main deal does.

Groupons for this side deal sold out with 300 purchases. Exhibit 23: Snapshot of a side deal

Source: Company Reports & neXtup Research Groupon Stores In December 2010, Groupon announced a new service called Groupon Stores. Groupon Stores are virtual storefronts where merchants can organize their own deals. The e-commerce platform can be


started for free, however, when a deal is executed, Groupon charges a commission of 30% on deals which Groupon promotes for the merchants and 10% on the deals which the merchants promote themselves. For Groupon promoted deals, relevant users are targeted based on prior purchase habits, location, and merchants they follow. Such users are notified through their daily Groupon mail, Facebook and Twitter. Non-promoted deals are shared with users who opt to follow the merchant. Mobile Apps The company also uses the mobile channel through a Groupon App for iPhone users released in March 2010. In July 2010, the company launched an Android App as well, besides introducing an upgraded version of the earlier iPhone App in June 2010. Exhibit 24: Groupon Apps on Android and iPhone

Source: Company Reports & neXtup Research Deal Feeds In December 2010, Groupon introduced a new feature called Deal Feeds to its website, by virtue of which

featured daily deals, deals posted by merchants the user follows, and those posted by merchants recommended by Groupon based on what Groupon derives about the purchase behavior of the user.


Additional Products for Merchants Groupon has developed partnerships with several companies in order to provide a range of services to the merchants who choose to advertise Groupon Deals. Exhibit 25: Services Provided by Groupon Partners


Partner Partner's Logo Services offered

TransNational Offers payment processing services and products to small businesses at low pre-negotiated rates and transparent pricing

SurePayrollProvides online payroll processing and related services at low pre-negotiated rates to members

DiyseoOffers search engine optimization as small businesses as the web solution enables small businesses to maximize the organic traffic from search engines

Web Visible

Offers search engine marketing to small businesses where the latter has to decide only the monthly media budget. The members have to pay a small setup fee and they receive a first month media budget bonus

SpeakeasyOffers voice and data communications. Members are provided with pre-negotiated discounts on all voice and broadband services

Vertical Response Offers email marketing, online survey and direct mail postcards at pre negotiated discounts to members

InkChaserOnline provider of printing services at pre negotiated discounts across all print jobs

ZumaProvides a wide selection of office supplies through their website. Any order exceeding $75 gets free shipping and the company donates 50% of its profits to charity

Avis Offers car rentals to members at pre-negotiated discounts

BudgetOffers car rentals car rentals to members at pre-negotiated discounts

Crain's Chicago BusinessOffers a free 6-month subscription of Chicago business - a regional business newspaper


Case Studies: Spring Restaurant In August 2009, Chicago offered a Groupon deal of $35 for a $75 worth of seasonal and contemporary cuisine at Spring Restaurant, to be redeemed on or before February, 2010. Though the critical mass for the deal was 100 customers, the deal exceeded the expectations of the management and a total of 2873 Groupons were sold. Spring Restaurant does not do any traditional marketing except for working with a public relations house. The General Manager of Spring Chicago said that the Groupon deal, operated through a simple to execute process, led to new customers. Exhibit 26: Spring Restaurant Deal



Melt Salon and Spa Melt Salon and Spa, a full-service salon specializing in massages, facials, makeup and hair styling, offered a Groupon deal of $50 for a $125 spa and salon services in May 2009. Prior to this Groupon deal, the enterprise had not tried any form of advertising other than through magazines. The company indicated that the Groupon deal resulted in selling a total of 1407 Groupons and carried no expenses other than the commission. According to the company, the deal was more successful than the previous marketing attempts of the company in bringing in a demographically diverse group of customers, encompassing students, professionals as well as senior citizens. Exhibit 27: Melt Salon and Spa Deal



Rice University Study In September 2010, Rice University conducted a study in which they interviewed 150 merchants who had run deals with Groupon. 32% of the responding merchants said that the deals were unprofitable and that 40% said that they would not want to run a promotion with Groupon again. In particular, Posies café in Portland, which had run a deal with Groupon, suffered losses from running the deal. This was attributed to a) not putting a maximum limit to the number of users who could avail of the deal, and b) Groupon charging a very high percentage of commission, which meant 100% for Groupons below $10. Groupon justifies charging 100% commission for below $10 Groupons saying that for deals of this sum, customers would invariably purchase worth more than $10. However, the deal was not profitable for Posies, as it made a loss of $8000. The study also says that the advertising target of the merchant may not be met always. Since the Groupon customer base comprises deal-seekers and bargain shoppers, not many of the users turn into repeat customers ready to shop at full price without a Groupon. It also found that among service businesses, restaurants benefitted the least from Groupon deals while salons and spas were the most successful.


FINANCIALS AND VALUATION Groupon has established partnerships with small businesses in all local areas to form the backbone of its growth and revenue. Further, Groupon is forming national partnerships with larger Internet retailers such as Gap in order to launch bulk offers on a continual basis. On April 16, 2010, Groupon had 31 deals, 45,910 paying customers and sold nearly $1.3M worth of coupons. This was a significant increase from the 17 deals, 10,018 customers and $240,000 in gross sales it had on November 6, 2009. Groupon is seeing growth across various parameters such as number of deals/day, average customers/deal, average deal price and average gross revenue/deal. Of these parameters, the average deal price has increased from $24.65 to $44.94 in the same period. Groupon derives a major part of its revenue from US, Canada and European markets, but the company is rapidly expanding to Asian and Latin American markets by acquiring similar deal providers and taking majority stakes in the leading deal providers in those markets.

Source: Company Reports and neXtup Research Estimates

$ 0

$ 200

$ 400

$ 600

$ 800

$ 1,000

$ 1,200

$ 1,400

$ 1,600

$ 1,800

$ 2,000

2009 2010 2011E 2012E 2013E 2014E 2015E

Reve

nues

in

$M


Exhibit 29: Groupon Projected Revenues


We use the following methods a) Multiple of EV/Revenue, and b) Target EV based on steady state revenues, normalized net margins, and a growth multiple to arrive at an approximate valuation for Groupon.

A. Steady State Revenue Method:

As explained in Appendix A, valuing private companies while they are in a rapid growth trajectory is a difficult exercise. Minor shifts in time periods can cause significant shifts in valuation. We believe investors have to look at a year when growth moderates to around 15% and discount the valuation back to present.

We calculate target EV based on the following formula (please see Appendix A for a detailed description of this method)

Target EV = Steady State Revenues * Normalized Margins* Growth Multiple

Target Market Cap = Target EV + Net Cash

Target Price = Target Market Cap/Diluted Shares Outstanding

Assuming steady state revenues of $1.65B in 2014, normalized net margins of 25%, a growth multiple of 25, we arrive at a target 2011 enterprise value of $5.95B

2009 2010 2011E 2012E 2013E 2014E 2015E

Revenue (million)$85 $600 $920 $1,190 $1,430 $1,645 $1,885

%yoy 606% 53% 29% 20% 15% 15%


Exhibit 30: Valuations off Various Calendar Years Discounted to 2011 ($, million)

Source: neXtup Research Estimates

EV/Revenue Multiple:

To arrive at aproximate estimates, we have used a similar group of companies as a proxy for Groupon. The 2012 EV/Revenue multiple for the group is 3.6x (Exhibit 32). We believe that this universe will provide a conservative estimate f

We believe that Groupon can achieve a secular growth rate of 25% and EBITDA margins of 40%. Based

EV = (EV/Revenue using Appendix A3)*(estimated revenue of Groupon in 2012) EV = 5.1 * 1,190 = $6.07B

The list in Exhibit 31 has many companies which we believe have a slower growth rate than Groupon.

$ 0

$ 1,000

$ 2,000

$ 3,000

$ 4,000

$ 5,000

$ 6,000

$ 7,000

$ 8,000

2011E 2012E 2013E 2014E 2015E

Valu

atio

nin

$M


Exhibit 31: Comparable Company Analysis for Local Deal Providers

Source: MSN Money Central and neXtup Research Estimates

CY11E CY12E CY11E CY12E

Google GOOG 183.32 33.75 35.77 5.43 5.13 6% 43%

Yahoo YHOO 18.74 4.73 4.98 3.96 3.76 15% 35%

IAC IACI 1.53 1.80 1.92 0.85 0.80 15% 15%

Netease.com NTES 5.11 0.97 1.11 5.26 4.62 14% 45%

AOL AOL 2.19 2.10 1.98 1.04 1.11 15% 25%

Amazon AMZN 72.81 34.03 43.83 2.14 1.66 29% 7%

eBay EBAY 35.58 10.17 11.12 3.50 3.20 9% 32%

Mean 3.9 3.6 12% 34%

Median 4.6 4.2 14% 39%

Secular

Growth EBITDA Margin

EV/RevenueCompany Name Ticker Total EV

($, B)

Revenue ($, B)


Exhibit 32: Estimated Stock Price Per Common Share as a Function of Exit Valuation for an IPO


$0

$5

$10

$15

$20

$25

$30

$35

$40

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000

Shar

e Pr

ice

Valuation ($, M)

IPO Bear Case IPO Bull Case

Bull Case Valuation @ $6069 MBear Case

Valuation @ $5950 M


Exhibit 33: Valuation Summary


Methodology Enterprise Value ($,M)

Steady State Revenues $5,950

EV/Revenue $6,069


Exhibit 34: Post Money Valuation for Groupon


Event Series B Series D Series E Series F Series G IPO Merger

Date Jan-07 Jan-08 Dec-09 Apr-10 Dec-10

Authorised No of shares 42.00 42.00 43.00 48.00 300.00Diluted Shares Estimate (M) 19.0 19.2 25.8 30.2 135.4 165.4 165.4

Preferred Shares Issued (M) 0.2 6.6 4.4 4.2 30.07

Liquidation Multiple 1x 1x 1x 1x 1x

Anti-Dilution Provisions Weighted Average

Weighted Average

Weighted Average

Weighted Average

Weighted Average

Pay to Play Provisions None None None None None

Conversion Rate (Common to Preferred) 3.00 3.00 3.00 3.00 1.00

Issue Price/Share in $ $0.33 $0.24 $2.27 $10.71 $31.59 39.41 -40.20

39.41 -40.20

Dividend Rate (Non Cumulative) 6.0% 6.0% 6.0% 6.0% 6.0%

Amount of Funding (M) $0.2 $4.8 $30.1 $135.0 $950.0

Pre- Money (M) $6.3 $4.7 $58.6 $323.0 $4,276.3

Post Money (M) $7 $9 $89 $458 $5,226 $5.95B -$6.07B

$5.95B -$6.07B

Investors Eric Lefkofsky Brad keywell

New Enterprise Associates

New Enterprise Associates Accel Partners

Digital Sky Technologies, Battery Ventures, Accel Partners, New Enterprise Associates

DST Global, T.Rowe Price, Capital Group, Morgan Stanley, Andreessen Horowitz, Battery Ventures, Greylock Partners, Kleiner Perkins Caufield & Byers and Silver Lake


Liquidation Scenarios: Groupon has raised funding through five rounds.

Exhibit 35: Liquidation preference


Scenario 1: Exit Valuation less than or equal to $990M

In this case, Series G preferred shareholders receive their proceeds first because of their seniority over other shareholders.

Scenario 2: Exit Valuation between $990M and $1,005M

At an exit valuation of $990M, Series G preferred shareholders and Series D convert their shares into common stock. Once Series G shareholders and Series D shareholders receive their proceeds of $950M and $4.8M respectively, the remaining proceeds are shared among the other shareholders in the ratio of common shares they hold or convert in to at the time of conversion

Scenario 3: Exit Valuation between $1,005M and $1,327M

At an exit valuation of $1,005M, Series B preferred shareholders convert their shares into common stock. Series B preferred shareholders receive their proceeds of $0.2M and the remaining proceeds are shared among the other shareholders in the ratio of common shares they hold or convert in to at the time of conversion

.

Shares (M)Issue Price/Share ($)

Total Investment ($,M)

Conversion Rate (X)

Dividend Rate

Liquidation Rate ($,M)

0.2 0.3333 0.07 3 6% 0.20

6.6 0.2439 1.60 3 6% 4.80

4.4 2.2733 10.02 3 6% 30.05

4.2 10.7075 45.00 3 6% 135.00

30.1 31.5900 950.00 1 6% 950.00

Funding Type

Series B Preferred

Series D Preferred

Series E Preferred

Series F Preferred

Series G Preferred



At an exit valuation of $1,327M, Series E preferred shareholders convert their shares into common stock. Series E preferred shareholders receive their proceeds of $30M and the remaining proceeds are shared among the other shareholders in the ratio of common shares they hold or convert in to at the time of conversion.


At an exit valuation of $2,729M, Series F preferred shareholders convert their shares into common stock. Series F preferred shareholders receive their proceeds of $135M and the remaining proceeds are shared among the other shareholders in the ratio of common shares they hold or convert in to at the time of conversion.

Scenario 6: Exit Valuation greater than $6,198M

At an exit valuation of $6,198M, Series G preferred shareholders convert their shares into common stock. Series G preferred shareholders receive their proceeds of $950M and the remaining proceeds are shared among common shareholders


INVESTORS

Groupon has raised $1.12B through five rounds of funding. New Enterprise Associates Founded in 1978, New Enterprise Associates (NEA) makes investments in the information technology sector with a focus on communications, software and services, and electronics industries and the healthcare sector with a focus on energy technology, biopharmaceuticals, medical devices, healthcare services, and healthcare information technology industries. The initial investments by NEA range between $200K and $40M and typically sponsors subsequent finance rounds. The company is headquartered at Menlo Park, California with additional offices in Reston, Virginia, Baltimore, Maryland, Middle Shanghai, Mumbai and Bangalore. Accel Partners Founded in 1983, Accel Partners is a venture capital firm that makes multi-stage investments in Internet technology companies. Accel Partners has over $6 billion of assets under management. Accel Partners has invested in more than 300 successful companies such as Actuate, AdMob, Facebook, Real Networks among others. Accel has offices in Palo Alto, California, London and Bangalore. Accel Partners has a presence in China through their partnership with IDG. Digital Sky Technologies Founded in 2005, Digital Sky Technologies is an Internet holding company with focus in the Russian-speaking markets. The company has made investments in firms in social networking and communications, e-payment solutions, online marketplaces, MMO and social games. DST has offices in London and Russia. Battery Ventures

Founded in 1984, Battery Ventures is a principal investment firm which invests in infrastructure technologies (with a focus on cable infrastructure, network and wireless infrastructure, security software and services, and computing and storage infrastructure), application software, communications services, e-commerce products and services, tech enabled businesses, semiconductor and related products; media and content, consumer technology and energy materials. Battery Ventures makes investments ranging between $5M and $50M. Headquartered at Waltham, Massachusetts, Battery Ventures has offices in Menlo Park, California and Herzelia, Israel.


Andreessen Horowitz Ben Horowitz and Marc Andreessen separately and together made a series of 40 angel investments in early stage technology companies primarily in Silicon Valley between 2005 and 2009. In June 2009, Ben and Marc created the venture capital firm named Andreessen Horowitz to increase their ability to invest in and advise high technology companies. In November 2010, Andreessen Horowitz raised a $650M fund. The venture capital firm has invested in companies such as PicPlz, Bump Technologies, Factual, Viki, Tasty Labs, Proferi, BOKU, Foursquare, Canvas Networks and Instagram. Greylock Partners Greylock Partners is a Venture Capital firm based in Menlo Park, CA which is focused on the enterprise software and consumer Internet sectors. Founded in 1965, Greylock Partners has funded and helped build several hundred successful companies, such as Ascend Communications, CheckFree, CipherTrust, Constant Contact, Continental Cable, Data Domain, Decru, digg, DoubleClick, Facebook, Farecast, Internet Security Systems, Ikanos, Legato, LinkedIn, Media Metrix, Millennium Pharmaceuticals, Openwave, Open Market, Pandora, Redfin, Red Hat, RightNow Technologies, Success Factors, Tellabs, Trilogy, Wily Technology, Workday and Zipcar. Greylock primarily invests in Early Stage companies and occasionally invests in Growth Stage businesses. The venture capital firm has offices in California, China, India, Israel and Massachusetts. Kleiner Perkins Caufield & Byers Kleiner Perkins Caufield & Byers (KPCB) is a well known Silicon Valley venture capital firm. Founded in 1972, KPCB was early investors in many significant companies such as Amazon, AOL, Compaq, Electronic Arts, Google, Intuit, Macromedia, Netscape, Segway, and Sun Microsystems. The name of the firm comes from the four founding partners: Eugene Kleiner, Tom Perkins, Frank J. Caufield, and Brook Byers. In March 2008, KPCB announced the iFund, a $100M investment initiative focused on ideas and products related to the iPhone. In November 2010, KPCB raised a $650M fund.


Exhibit 36: Summary of Funding Rounds for Groupon

Source: Company Filings and neXtup Research

Total $1.12B

Series E Dec-09 New Enterprise Associates Accel Partners $30.1M

Dec-10

DST Global, T.Rowe Price, Capital Group, Morgan Stanley, Andreessen Horowitz, Battery Ventures, Greylock Partners, Kleiner Perkins Caufield & Byers and Silver Lake

$950M

Series F Apr-10

Digital Sky Technologies Battery VenturesAccel PartnersNew Enterprise Associates

$135M

Series G

Investment Rounds Period Investors Funds Raised

Series D Jan-08 New Enterprise Associates $4.8M

Series B Jan-07 Eric LefkofskyBrad keywell $1M


MANAGEMENT

Andrew Mason, Founder & CEO Andrew Mason, a founder, is the CEO of Groupon. Prior to starting Groupon, Andrew founded The Point in November 2007 which had a good approach to online collective action and fund raising, the collective action platform from which Groupon was born. Prior to The Point, Andrew was a developer at Inner Workings. Andrew developed Policy Tree, a policy debate visualization tool, and won a scholarship to attend the University Of Chicago Harris School Of Public Policy in 2006. In school for only 3 months, Andrew dropped out after receiving an unexpected offer to fund the idea that would become The Point. Andrew holds a degree in music from Northwestern University. Rob Solomon, President & COO

Rob Solomon is the President and COO of Groupon. Rob is also a venture partner at Technology Crossover Ventures, a growth equity stage VC firm with $8 billion under management. Rob is also on the board of directors at HomeAway.com. Rob has served on the boards of Tiny Prints and WidgetBucks. Prior to Groupon, Rob served as President and CEO of SideStep, a real-time vertical search engine in the travel category. Rob led successful turnaround at SideStep and $200 million all cash merger with kayak. Prior to SideStep, Rob has served in multiple management roles at Yahoo Senior Vice President, Commerce and Vice President/General Manager of the Yahoo Shopping Group. Prior to Yahoo, Rob has handled product management and marketing positions at Electronic Arts, Cendant, Golfweb (funded by Redpoint) and Zaplet. Ken Pelletier, CTO Ken Pelletier is the CTO of Groupon. Ken is also the CTO of The Point. Prior to Groupon, Ken founded NiKA software, an independent software consultancy. Prior to NiKA software, Ken was Senior Software Architect at G2 Switchworks where he helped launch an online travel distribution platform. Prior to G2 Switchworks, ken was a senior software engineer at UBS. Ken also worked as a Contract Software engineer at The Open Software Foundation and participated in the development of key public technology offering. Prior to UBS, Ken was Director of Technology at Delphi Information Systems. Prior to Delhi, ken was Director of Methods, Tools and Technology at McCracken Computer. Ken holds a degree in Computer Science from Northeastern University. Ken has a keen interest in visual design, cognitive science, linguistics, and has been a performing and recording musician.


BOARD OF DIRECTORS

Peter Barris Peter joined New Enterprise Associates (NEA) in 1992 and has served as Managing General Partner since 1999. At NEA, Peter has led investments in over 20 information technology companies that have completed public offerings or successful mergers, which included such industry pioneering companies such as Amisys, CareerBuilder, InnerWorkings, Neutral Tandem, UUNET, and Vonage. Prior to joining NEA, Peter was President and Chief Operating Officer of Legent Corporation (LGNT) and Senior Vice President of the Systems Software Division of UCCEL Corporation (UCE). Prior to that, Peter held a variety of management positions at General Electric Company. Peter holds a BS in Electrical Engineering from Northwestern and an MBA from Dartmouth. Kevin Efrusy Kevin Efrusy is also a board member at NorthScale, Mig33 and Metacafe. Kevin had earlier served on the board of BBN Technologies (acquired by Raytheon). Kevin is a General Partner at Accel Partners. Kevin joined Accel Partners in 2003. Kevin invests primarily in consumer Internet services and SaaS/open

RAMP, Metacafe, Medio Systems and Mig33. Within SaaS/open source software, he led investments or serves on the boards of Xensource (acquired by Citrix for $500M), Genius, SpringSource (acquired by VMWare for $420M), Terracotta, Aptana, and Northscale. Kevin built and served as the first CEO of IronPlanet, an online marketplace for heavy equipment. Prior to IronPlanet, Kevin served as Entrepreneur-In-Residence at Kleiner Perkins Caufield and Byers where he started Corio, an ASP/SaaS pioneer which went public on Nasdaq and was acquired by IBM in 2005. Kevin holds a MSEE, BSEE, and BA in Economics from Stanford University, and an MBA from the Stanford Graduate School of Business. Jason Fried Jason Fried is the CEO and co-founder of 37signals, a Chicago-based private firm involved in building web-based tools. Jason co-wrote all of 37signals books including their latest offering Rework. 37signals' products include Basecamp, Highrise, Backpack, Campfire, Ta-da List, and Writeboard. Brad Keywell Brad is one of the founders of Groupon. Brad is the co-founder and Chief Executive Officer of MediaBank LLC. Brad is the co founder of Echo Global Logistics, Starbelly, and several other companies. Brad is a founder and Principal of ThePoint. Brad is the Managing Partner of Meadow Lake Management. Brad is on the Board of the Zell-Lurie Entrepreneurship Institute at the University of Michigan, Big Communications, Warrior Productions, and University of Michigan Hillel Foundation. Previously Brad was with Equity Group Investments. Brad was President of HA-LO Industries which acquired Starbelly, a technology firm which Brad founded in May 1999.


Brad served on the Board of Trustees of Columbia College, the Board of Directors of Warrior Productions, a documentary filmmaker. Brad was also on the Advisory Committee of the University Of Chicago Graduate School Of Business Directors' College. Brad is a Trustee of the University of Michigan Hillel Foundation. He is a member of the Chicago chapter of the Young Presidents' Organization. Brad is a member of the State Bar of Illinois and the Michigan Bar Association. Eric Lefkofsky Eric Lefkofsky is one of the founders of Groupon. Eric is also a co-founder and President of Blue Media, a Chicago-based private equity and consulting firm focused on applied technology. Eric is also a founder at Lightbank. Eric is the founder of InnerWorkings, Inc. (INWK: NASDAQ), a global provider of print solutions. Through BLUE Media, Eric plays an active role in managing the operations of several large technology firms such as InnerWorkings. Eric is also the founder and a Director of several other firms, including Echo Global Logistics (a technology-driven transportation outsourcing firm), MediaBank, a leading provider of integrated media procurement technology and ThePoint, an online activism website. Eric was previously the COO of HA-LO Industries. Prior to HA-LO Industries, Eric was the President and one of the founders of Starbelly. Eric is on the Board of Directors of Children's Memorial Hospital, Steppenwolf Theatre and The Art Institute of Chicago. Eric is also a member of the Chicago 2016 Olympic Committee. Eric is the author of Accelerated Disruption and a guest professor at Northwestern University's Kellogg Graduate School of Business. Eric graduated from the University of Michigan and received his Juris Doctor at University of Michigan Law School. Ted Leonsis Ted Leonsis is vice chairman of American Online. Ted has more than a decade of experience in global Internet services and media at AOL, where he also served as vice chairman and president of several business units. Ted retired from AOL in 2006. Ted had founded Redgate Communications which was acquired by American Online in 1994. Ted is the owner of sports properties such as National Hockey League's Washington Capitals and the Women's National Basketball Association's Washington Mystics. Andrew Mason Refer to Management Section John Walter John is the retired President and COO of AT&T, and the former President and CEO of R.R. Donnelley & Sons. He is a member of the Board of Directors of Deere & Company, Manpower, Inc., Novarra, Inc., Vasco Data Security International, Inc., Innerworkings, Inc., and SNP Corporation, Singapore. He is a Trustee of Northwestern University, the Chicago Symphony Orchestra, and Evanston Northwestern Healthcare.


Harry Weller Harry is a General Partner at NEA focused on technology and consumer investments. Prior to joining NEA, Harry was a Partner at FBR Technology Venture Partners where he worked with several successful startup teams. Early in his career, Harry managed strategy and technology initiatives in the financial, energy and telecommunications industries for the Boston Consulting Group and Deloitte & Touche Management Consulting. Prior to his business career, Harry served as an officer in the U.S. Navy. Harry

University.


Appendix A: What Multiple?

It becomes very difficult to value companies while they are on a high growth trajectory. Not only do the revenues grow rapidly but the profitability starts to expand as well. Under such a rapid growth scenario, any valuation attempt could lead to significant errors due to timing of estimates.

A better approach is to focus on a year when growth rate is slow enough, that small shifts in time period do not sufficiently alter the valuation and then discount the value to the present assuming a cost of capital and risk premium that is in line with a slower growth steady state mode.

Due to law of large numbers, any growth company will moderate to a slower growth rate of 15% a year (or less) in a finite number of years. For the purposes of our report, we are assuming that subject companies

5 years.

Exhibit A1: Hypothetical Revenue Growth Pattern of a Firm Since Inception


At 15% or lower growth rate, the market multiple (Exhibit A2) is then determined primarily by the yield on ten year notes. Although yield at the time of writing could be higher due to loose monetary policy, we believe eventually ten year notes will tend to trade closer to their historical averages of about 5%.

Accordingly, we are assigning a growth multiple of 25 for most of our subject companies based off steady state revenue numbers and normalized net margins.

Most companies tend to focus on growth at the expense of profitability during early stages of growth. Normalized net margins are the maximum profitability that a company could potentially achieve at any revenue level. This could vary dramatically from actual net margins.

0

50

100

150

200

250

300

350

400

450

0 2 4 6 8 10 12 14 16

Steady State Growth


Target EV = Steady State Revenues * Normalized Margins* Growth Multiple

Target Market Cap = Target EV + Net Cash

Target Price = Target Market Cap/Diluted Shares Outstanding

Exhibit A2: EV/Revenue Multiple as a Function of T-bill Rate and Revenue Growth

Source: Benjamin Graham, Security Analysis (1951), McGraw Hill

Revenue Growth 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%

5% 34x 27x 22x 19x 17x 15x 13x 12x 11x 10x

10% 41x 32x 19x 23x 19x 17x 16x 14x 13x 12x

15% 50x 39x 32x 27x 23x 20x 18x 16x 15x 13x

20% 60x 47x 38x 32x 27x 24x 21x 19x 17x 15x

25% 72x 56x 45x 38x 32x 28x 24x 22x 19x 17x

30% 86x 66x 54x 44x 38x 32x 28x 25x 22x 19x

35% 102x 78x 63x 52x 44x 38x 33x 29x 25x 21x

40% 120x 92x 74x 61x 51x 43x 37x 33x 29x 24x

45% 141x 108x 86x 70x 59x 50x 43x 37x 32x 28x

50% 165x 125x 99x 81x 67x 57x 49x 42x 36x 31x

T Bill Rate

Cost of equity khg=risk free rate (T-Bill)+ B (changed to 1.5 and 1) x (equity risk premium) (assumed 4%)

gn growth in the stable period, made assumption that it s 4%

ROEst in the stable period, made assumption that it s 10%

ROEhg return on equity in the high growth period, made assumption that it s 30%

Beta - 1Assumptions:

P/E=(1-(g/ROEhg) x (1+g) x (1-((1+g)^n)/(1+khg)^n)/(khg-g)) + ((1-(gn/ROEst) x (1+ g)^n x (1+g)^n x (1+gn))/(kst-gn)x(1+khg)^n)Formula:

Cost of equity khg=risk free rate (T-Bill)+ B (changed to 1.5 and 1) x (equity risk premium) (assumed 4%)

gn growth in the stable period, made assumption that it s 4%

ROEst in the stable period, made assumption that it s 10%

ROEhg return on equity in the high growth period, made assumption that it s 30%

Beta - 1Assumptions:

P/E=(1-(g/ROEhg) x (1+g) x (1-((1+g)^n)/(1+khg)^n)/(khg-g)) + ((1-(gn/ROEst) x (1+ g)^n x (1+g)^n x (1+gn))/(kst-gn)x(1+khg)^n)Formula:


We are providing our methodology as a framework. Investors can change any of our variables to arrive at their own metrics.

In our valuation methodology, we also have tried to look at comparable group of companies and estimate their EV/Revenue multiple. We believe that adjusting for risk, the EV/Revenue multiple is a function of growth rate (over the subsequent 2 3 years from our reference year) and EBITDA margins. We may attribute a higher or lower multiple than peer group based on these two variables as outlined in Exhibit A3.

Exhibit A3: EV/Revenue Multiple as a Function of EBITDA Margins and Revenue Growth


EBITDA Margin 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

50% 2.5x 3.3x 4.0x 4.8x 5.6x 6.3x 7.1x 7.9x 8.7x 9.4x 10.2x

45% 2.3x 2.9x 3.6x 4.3x 5.0x 5.7x 6.4x 7.1x 7.8x 8.5x 9.0x

40% 2.0x 2.6x 3.2x 3.8x 4.5x 5.1x 5.7x 6.3x 6.9x 7.5x 8.2x

35% 1.8x 2.3x 2.8x 3.4x 3.9x 4.4x 5.0x 5.5x 6.1x 6.6x 7.1x

30% 1.5x 2.0x 2.4x 2.9x 3.3x 3.8x 4.3x 4.7x 5.2x 5.7x 6.1x

25% 1.3x 1.6x 2.0x 2.4x 2.8x 3.2x 3.6x 3.9x 4.3x 4.7x 5.1x

20% 1.0x 1.3x 1.6x 1.9x 2.2x 2.5x 2.8x 3.2x 3.5x 3.8x 3.1x

15% 0.8x 1.0x 1.2x 1.4x 1.7x 1.9x 2.1x 2.4x 2.6x 2.8x 3.1x

10% 0.5x 0.7x 0.8x 1.0x 1.1x 1.3x 1.4x 1.6x 1.7x 1.9x 2.0x

5% 0.3x 0.3x 0.4x 0.5x 0.6x 0.6x 0.7x 0.8x 0.9x 0.9x 1.0x

Revenue Growth


DISCLAIMER

This report has been downloaded from SharesPost, Inc., but was prepared by Global Silicon Valley Partners under the neXtup Research brand ("neXtup Research"). The views expressed in this report correspond to our subjective views on the subject securities and issuers. This report does not purport to be a complete statement of all material facts related to any company, industry, or security mentioned. The information provided, while not guaranteed as to accuracy or completeness, has been obtained from sources believed to be reliable.

This notice shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which said offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

Neither neXtup Research nor any of its employees own a direct or indirect long or short position in any of the companies mentioned in this report.

The opinions expressed reflect our judgment at this time and are subject to change without notice and may or may not be updated. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance.

This research report was intended to provide background information for accredited or institutional investors. Recipients who are not market professionals or institutional investors should seek the advice of their personal financial advisor before making any investment decisions based on this report.

Email [email protected] for further information.

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