LivingSocial raises $2.9M...not $500M

Reports that LivingSocial was raising $500M in funding were met with an anticlimactic $2.9M today

Financial trends and news by Faith Merino
March 29, 2011
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Update: LivingSocial says that the funding is in conjunction with the company's recent acquisition of InfoEther, so it sounds like a large-scale funding round is still a possibility.

LivingSocial has raised an additional $2.9 million in equity funding, according to an SEC form filed Monday by LivingSocial's parent company Hungry Machine. No word yet on who the investors were.

Interestingly, the funds are not part of a larger round the company is attempting to raise. LivingSocial sought to raise $2,889,720, and that's exactly what they got. So this is an anticlimactic contradiction to reports from Bloomberg and Wall Street earlier this month that LivingSocial is raising anywhere from $400 million to $500 million for a valuation of $2 billion.

But who knows, a larger round could certainly be in the works. $2.9 million is a drop in the bucket compared to the $232 million the company has raised since launching in 2007. LivingSocial's most recent financing round raked in $183 million from Amazon and Lightspeed Ventures. 

It's an even tinier drop in the bucket compared to Groupon's recent $950 million fundraising round, which gave it the resources it needed to rocket-launch its global expansion efforts. In just three months, Groupon has nearly doubled its employee headcount from some 3,000 in December to nearly 6,000 in March. Furthermore, it now reaches 70 million subscribers in more than 500 markets across 45 countries. By comparison, in December the company reached 50 million subscribers in 300 markets across 37 countries. Groupon is now rumored to be eyeing an IPO valued at $25 billion. 

LivingSocial is doing what it can to catch up, now reaching 20 million subscribers in 120 markets across 11 countries. It's market share is still only a fraction of Groupon's, but Tim O'Shaughnessy said in an interview with Bloomberg in December that LivingSocial is gaining a few percentage points on Groupon every month. 

But is it enough? Groupon and LivingSocial are both catapulting the daily deal industry into real-time mobile tech with apps that allow users to locate nearby deals by the hour rather than the day. The move is sure to leave the copycats in the dust, but while LivingSocial actually launched its app right before Groupon did, Groupon took a different strategy: focusing on expansion first to clobber the market before focusing on tech. Thus, with more than three times the amount of subscribers LivingSocial has, users looking for instant deals on-the-go are more likely to check Groupon first. 

But a new $500 million round of funds could give LivingSocial the leg-up it needs to drive its expansion to really become more competitive with Groupon. 

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