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LivingSocial eyes $400M funding for expansion

Groupon competitor LivingSocial opts for combination of equity and debt funding, valuing it at US$6 billion after it turned away from filing US$1 billion initial public offering earlier this year, report states.
Written by Kevin Kwang, Contributor on

LivingSocial is working to raise US$400 million in fresh funding, which will give the online coupon provider a valuation of about US$6 billion, in order to hire and train more sales people as it expands into new cities.

A report by Bloomberg on Thursday cited a source with direct knowledge of the matter saying the Groupon rival had already sold US$176 million of the total US$400 million funding, comprising a mix of equity and debt. The investment would come from both existing and new backers, the person added.

WJB Capital's social media analyst, A.B. Mendez, said in the report that as LivingSocial grows and expands into new cities, it requires funds to hire and train more sales people.

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

The funding round comes after the company decided against filing for a planned US$1 billion initial public offering (IPO), as it witnessed other Internet companies facing turbulent entries into the public market. Groupon, in particular, has seen its shares dip as much as 24 percent of its IPO price last month, the report noted.

An analyst ZDNet Asia spoke to earlier said the daily deals market was not profitable and not worth pursuing in a major way. Sucharita Mulpuru, vice president and principal analyst at Forrester Research, said in the report that daily deals had been around for a while and could be a small, profitable business for anyone, but Groupon's IPO delay showed it was difficult to stay sustainable or grow in this industry.

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