Daily deals company LivingSocial has a fresh infusion of cash, Washington Business Journal reports.Staff reporter Bill Flook says he’s obtained a memo from CEO Tim O’Shaughnessy announcing a $110 million fundraise that was emailed to employees this morning.
The memo hasn’t been published, but Reuters quotes it as saying: “This investment is a tremendous vote of confidence in our business from the people who know us best, our current board members and investors.”
O’Shaughnessy also mentioned an “aggressive roadmap” and said the financing would “allow [LivingSocial’ to dedicate the resources it need, while also building a significant cash reserve against unanticipated events or bumps in the road.”
It’s not clear if Amazon invested in the latest round, or if LivingSocial’s earliest investors re-upped.
So, although $110 million sounds like a lot of money, it isn’t clear what LivingSocial’s current valuation is.
When startups aren’t profitable and they’re losing a lot of money like LivingSocial is, sometimes founders are forced to raise “down rounds.”
When a company raises a down round, previous investors usually get more shares because of special rights they got when they put money in. Meanwhile, founders, executives and employees who hold common shares — or options — have no such protection. They end up owning a lot less of the company or, even worse, their options might become worthless.
While companies can issue new options to employees, those take time to vest. So the whole experience can be incredibly demoralizing. It’s like working for a public company when the stock price is going down but worse, because the options aren’t liquid and there’s no way to get out.
Groupon, LivingSocial’s larger competitor, lost two-thirds of its market value when it went public, so we can assume LivingSocial’s valuation took a hit.
At one point, LivingSocial was worth $5.7 billion, and it has raised more than $800 million to date. Since then, the company has experienced massive layoffs and management turnover. In November it let go of 400 people to save money.