Photo: Michael Kumm
Groupon’s huge, almost billion dollar financing isn’t even closed yet, and we already have the names of some of the investors. Alongside previous investors like DST some names raised our eyebrows: megabank Morgan Stanley and Fidelity, a pension fund.Big financial players going after web startups isn’t exactly new, but it seems that it’s a trend that’s on the rise. Morgan Stanley invested in Twitter‘s Series D round that valued the company at $1 billion. The last time Fidelity invested in a web startup that we know of, it was Slide, alongside T Rowe Price and at a $500 million valuation, before the company was acquired by Google for a disappointing $182 million. And before that was Legg Mason in Ning, another company that seems to be having trouble.
While Morgan Stanley is a big bank with fingers in every pot, and a long history in technology, it’s a bit startling to see strait-laced pension funds like Fidelity investing in young web startups.
Now the instinctive response in many people is to cry “BUBBLE!” — and that’s generally been a good instinct.
That being said, this new breed of web companies are actual businesses — that are growing like literally nothing we’ve seen before. Slide failed to generate the returns its investors expected, but the thesis behind the company, that there’s money in Facebook apps and virtual goods, has been proved staggeringly correct by Zynga. Ning is in the midst of a turnaround and might still become a big business.
Meanwhile Twitter and Groupon are on an absolute tear. Morgan Stanley’s investment in Twitter at $1 billion looks prescient now that the company has raised money at $3.7 billion. And Groupon is on a $2 billion gross merchandise sales run rate only a few years after inception. These companies are growing much faster than eBay, Amazon or Google did at the same age. If we were in a populist mood, we’d say these online businesses are much more “real” than the mirages big financial players poured trillions in before the financial crisis.
We think it’s another sign of the internet finally turning into the internet — becoming big enough that huge new businesses can be built overnight. In any case, it’s interesting to watch.
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