Despite stock price, Groupon still considered role model for startups
BY Emily morris Staff Reporter emorris@suntimes.com July 13, 2012 7:57AM
Erik Severinghaus, 30 founder and CEO of Simple Relevance, a company that helps marketers and companies target emails and other web communications to consumers. | Emily Morris~Sun-Times
Updated: August 14, 2012 6:38AM
Though Groupon’s shares are trading far below the IPO price and hit a low earlier this week, that doesn’t appear to dampen the hopes of some small Chicago startups that say they want to mimic the company’s level of success.
Many CEOs of burgeoning companies at 1871, a hub for local tech startups at the Merchandise Mart, talk about the Chicago-based daily deals site with a certain reverence.
“If you tell me that my company [will] be the failure that some perceive Groupon to be, I would be thrilled,” said Erik Severinghaus, the founder and CEO of Simple Relevance, a startup that helps companies target emails to consumers. “Getting to an IPO, regardless of what happens after, is a massive success for anybody.”
Groupon’s shares hit an all-time low of $7.72 on Wednesday and closed at $7.77. The shares rose on Thursday to $7.98 per share, though the company slipped in after hours trading.
Jeffrey Houston, an analyst for Chicago-based Barrington Research Associates Inc., said some of the recent faltering had to do with concern in Europe, where Groupon does more than half its business.
But he also said he hasn’t seen much of a chilling effect from Groupon’s volatile trading on Chicago’s startup community, which he thinks is encouraged by the company’s overall success. He also said the company is “very dynamic and nimble, and they’re continuing to innovate.”
“I think as long as they continue to execute and work toward the goal of becoming a local commerce platform, that will help the company and the stock, too,” Houston said.
However, there is a sense among some local CEOs that the path toward going public should be taken with caution.
Mike Zivin, co-founder of My Servista, a site that compares the cost of local services for consumers and also has a space at 1871, said the scrutiny a company gets when it goes public “can distract from solving problems for your customers, which makes [an IPO] less appealing.”
“We’re not in a hurry to go down the path of an IPO,” Zivin said, “We’re trying to get the fundamentals in place and solve our customers’ problems.”
Groupon debuted at $20 a share in November and reached a high of $31.14 on its first day of trading before it started to tank. It last traded above the IPO price in February.
Founders Andrew Mason, Brad Keywell and Eric Lefkofsky together hold all of Groupon’s Class B shares and collectively hold 33.8 percent of Class A shares, according to Groupon’s filings with the Securities and Exchange Commission. The company is currently valued at about $5.15 billion.
Even with a very low price, analysts doubt that the company, firmly in the control of its founders, would sell for less than the IPO price.
