LivingSocial raises $25 million

U.S. Venture Partners and Grotech Ventures pouring cash into online group buying startup

LivingSocial, a startup offering daily retail discounts, announced on Thursday it raised $25 million in Series B funding.  U.S. Venture Partners led the round with Grotech Ventures and Revolution, LLC participating.  With this round, the company has raised $30 million in total VC funding.  

The company is in an emerging sector, in which sites offer daily deals for a particular place in a particular city.  For example, today's deal on LivingSocial is for a restaurant in San Francisco for Moshi Moshi Sushi.  It's a pretty decent discount of $25 for $50 worth of food and drink.  But there's some neat social twists.  Once a user purchases the deal they can share what they've bought on their Facebook Walls or other social destinations.  If that user can get three of their friends to purchase the same deal using their special link, then that user gets their deal for free.  

LivingSocial makes money by taking a cut of these transactions from whichever retailer they've partnered with for the day.  

The trend is starting to catch on, LivingSocial said it's seeing more than a million people using its online group buying service.  But they aren't the only company doing this.  One major competitor, Groupon is leading the way in this market, and also has raised a total of $35.8 million in funding.

LivingSocial has evolved to where it is now.  Just last year, the site was more of a social networking/shopping site which allowed users to review and share their favorite things.  It launched its group buying service back in August of 2009.  The company must have seen more opportunity in this sector.

As for how the company plans to allocate the funds, Tim O'Shaughnessy, CEO of LivingSocial said, "This round of funding enables us to accelerate our growth throughout more cities and combine our feet-on-the-street approach with our social channel expertise to offer our 85 million customers great deals at local businesses, while giving merchants a no-risk way to get customers through their doors."

The Washington D.C.-based startup has already expanded its offerings to New York City, Boston, Atlanta, Austin, Seattle, San Francisco, Los Angeles, The Twin Cities, Chicago, Raleigh Durham, Denver and San Diego.  It said it would roll out to more cities in the coming months.  The company also has an iPhone application reaching a very important and growing mobile audience looking for deals on the go.