Updated: December 13, 2010 12:07PM
While Groupon’s employees and insiders eventually stand to cash out with anywhere between tens of thousands and hundreds of millions of dollars from a multi-billion dollar sale or initial public offering, the rest of us can still benefit from what is Chicago’s most significant business story of the 21st century.
Here are five reasons to be happy about Groupon’s stratospheric success, even if you don’t have any skin in the game.
Chicago will never again be seen as flyover country
For decades, venture capital investors from both coasts viewed Chicago as a cow town incapable of spawning a massive technology startup. No more. In a little more than two years, Groupon executed on a revolutionary business model that is now spitting out more than $50 million in revenue each month. Further, the $6 billion offer that Groupon reportedly spurned from Google last week is more than three times what YouTube (which was founded in San Mateo, Calif.) fetched from the search giant in 2006, when the economy was at its peak. It’s also more than the $4 billion valuation revenue-challenged Twitter is reportedly assigned but potential acquirers and private equity investors.
Breakthrough businesses like Groupon, YouTube (co-founded by Illinois Math and Science alum Steve Chen) and Netscape (which began at the University of Illinois) no longer need to relocate to Silicon Valley to raise funding and get off the ground. Chicago now more than ever is in a great position to attract (and more importantly retain) its tech talent.
A new generation of entrepreneurs will emerge
The thousands of employees working for what Forbes magazine described as “the fastest growing company ever” are getting a first-hand account of what it takes to build a truly great business. Expect more than a few to venture off and start their own companies. These new business builders will benefit from some money in the bank, unprecedented work experience, and a desire to prove their success at Groupon was not the result of riding anyone else’s coattails.
Success begets success. Employees from San Jose-based PayPal went on to start or run the likes of Yelp, YouTube and LinkedIn after their company was acquired by eBay in 2002. Closer to home, River North-based Viewpoints.com was founded by a former CoolSavings CEO (Matt Moog) while Itasca-based Accertify (which recently sold to American Express for $150 million) was founded by former Orbitz executives.
More investment capital will be available closer to home
One year ago, Groupon’s angel investors Eric Lefkofsky and Brad Keywell committed $100 million to start Lightbank, a venture capital fund that invests (mostly) in Chicago-area Internet startups. With more liquidity from Groupon and their other ventures - which include publicly traded InnerWorkings and Echo Global Logistics - expect more deals to come out of their 600 W. Chicago headquarters. Groupon CEO Andrew Mason and other insiders could also redeploy their riches into younger companies.
We are now driving the consumer-facing Internet sector
While Chicago may never be able to fully compete with Silicon Valley, Boston and other areas as a pure tech town, Groupon proves we can excel in applying technology to other sectors. True to our Midwestern roots, Chicago’s area of expertise is in applying technology to reinvent experiences between business and consumers. More than a century ago, Sears and Montgomery Ward’s did the same thing with shopping catalogs. Coincidentally (or not), Groupon is based in Montgomery Ward’s old headquarters.
This is only the beginning
To give you a sense of scale, the price Google was rumored to be offering Groupon last week before it was turned down was more than 50 times that of FeedBurner, the last Chicago-based tech company to be acquired by Google ($100 million in 2007). Aspiring Internet entrepreneurs witnessing a local outfit generate billions of dollars of value in a few years can now plausibly, as Daniel Burnham encouraged, “make no little plans.”