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Big Deal
Comments () | Published December 3, 2010

The company has made strong moves in 2010. When it convenes this year’s holiday party, LivingSocial won’t be in the same location, it won’t fit into one room, and the motto voting probably will have to take place by text message, as on American Idol.

In March, O’Shaughnessy gave up personally interviewing everyone the company hired. Since then, LivingSocial has been growing at an average rate of one new hire a day. Walking through the offices in DC’s Chinatown, O’Shaughnessy threads his way through a maze-like network of desks and staff. “We didn’t have desks in there until a few days ago,” he says, gesturing toward a space that once held the company lounge and video-game room.

In April, LivingSocial was in 18 cities nationwide. Its deal e-mails now reach 10 million subscribers in more than 100 markets in the United States, Canada, and the United Kingdom. In October, the company—by then with satellite offices in New York City and London—expanded into Ireland. Launching an international expansion, the company is advertising positions in 50 countries ranging from Uruguay to Hong Kong.

Its second round of venture funding—called a Series B round—raised $21 million in March, and just a month later LivingSocial closed a $24-million Series C round, bringing two West Coast firms into the mix along with Steve Case and Grotech.

Says O’Shaughnessy: “I called out to a half dozen firms that I’d developed relationships with and told them we weren’t doing a long process. I’d be out in Silicon Valley this week for individual meetings and then the following week for partnership meetings. If they were interested, great. If not, no hard feelings.”

O’Shaughnessy made the sales pitches alone; the rest of the team concentrated on the core deals business. All told, he came home with more than $50 million in funding. “I’m good at getting people to write large checks,” he says.

The company’s cash flow is sufficient to let it continue growing without ever doing another round of venture funding. As more firms enter the daily-deal market—in Washington, there are close to a dozen daily deals—the field has grown super-competitive: The same month LivingSocial closed its Series C funding round, Groupon closed a $135-million venture round that valued the company at more than $1 billion. The only company ever to reach that value faster was YouTube, which still hasn’t turned a profit. Both Groupon and LivingSocial are profitable. LivingSocial closed its Series C round with a valuation that, sources involved in the deal say, reached well into the hundreds of millions of dollars.

Nationally, the group-buying market is the hottest tech area of the moment. Washington’s other investment gorilla, Ted Leonsis, has weighed in with LivingSocial’s chief competitor, backing Groupon and sitting on its board of directors along with Peter Barris, managing partner of the Chevy Chase office of venture firm New Enterprise Associates, also an early investor in Groupon. Barris’s NEA partner, Harry Weller, also sits on the board.

Groupon claims to have sold 15 million coupons, totaling more than $600 million in savings for its subscribers across some 250 markets worldwide—roughly double LivingSocial’s size today.

For the merchants who take part, the group-buying practices can be revolutionary. Last fall, in a matter of hours, LivingSocial sold 2,500 tickets for a luxury Washington–to–New York bus service—enough to fill more than 50 buses. Its biggest local success was a $40 gift card for $20 to Sweetgreen, the salad-and-frozen-yogurt chain, which sold more than 12,000 of the coupons. On another day, LivingSocial sold nearly 7,000 coupons for half off the $18 admission to the International Spy Museum.

In Washington, LivingSocial’s largest market, its e-mail list is roughly half a million people, with New York, Chicago, and other major cities closing in fast.

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Posted at 02:06 PM/ET, 12/03/2010 RSS | Print | Permalink | Comments () | Washingtonian.com Articles