A data scientist from India was instrumental in preventing Groupon from ending up as another google company, according to a new book on the Chicago-based daily deals giant.
Nitin Sharma’s presentation containing projections on the future valuation of the company led Groupon CEO Andrew Mason to reject the search giant’s $ 6 billion buyout offer.
That’s the story according to Timeout Chicago editor-in-chief of Frank Sennett’s new book with the long title: ‘Groupon's Biggest Deal Ever: The Inside Story of How One Insane Gamble, Tons of Unbelievable Hype, and Millions of Wild Deals Made Billions for One Ballsy Joker’.
It happened in late 2010. Yahoo and Google were on a race to buy Groupon. Google had made a $ 5.75 billion offer. A negotiation process was on.
Here is an excerpt from the book, as reported by Wall Street Journal, on what happened next:
"Toward the end of the process, Mason brought in Nitin Sharma, a data scientist who worked for Groupon to make a presentation to (Chairman Eric) Lefkofsky, (board member Brad) Keywell, and (Chief Operating Officer Rob) Solomon. Sharma had crunched the numbers and, based on his jaw-dropping projections, Groupon could end up more than 10 times larger if it fully optimized its data processes. He strongly recommended that the company remain independent.”
“That is when everyone started climbing down off the fence. Lefkofsky was neurotic enough that he might not sleep for the next 18 months if antitrust concerns held up the Google deal, and now these new projections supported the Groupon founders' gut feeling that they had a lot of running room left with this still largely unexploited commerce model.”
“In the six weeks during which the Yahoo and Google negotiations played out, the company's sales had exploded to some $50 million a month, twice what they had been just three months earlier.”
“The leadership team started wondering if gross revenues in 2011 might top $1 billion, or even $2 billion … Add in the fact that international sales were exploding and now accounted for more than half of the company's revenue. Staying independent started to seem almost irresistible.”
“Mason and Lefkofsky holed up in a Groupon conference room and talked the proposed deal through one last time. They now believed their company was worth well more than $6 billion, but it was difficult to say precisely how much more—unless they chose to believe leaks from New York investment bankers who pegged Groupon's valuation at anywhere from $20 billion to $30 billion.”
“Ultimately, they concluded the company had so much growth potential, and they were so passionate about the business model, that the only move left was to call Google on Dec. 3 and kill the deal.”
Nitin’s projections were not perfect, but the company – at that time anyway -- was definitely worth more than what Google would have got it for. Before the Facebook IPO came along this year, Groupon was still the highest tech valuation since Google went public in 2004.
By the end of 2011, the site’s stock was reportedly valued at $20 per share, giving it a valuation of $12.7 billion, though pared down from the initial valuation of around $25 billion.
When Nitin made the projections, the Research Scientist had just joined Groupon after stints at Google and Yahoo. According to his profile, Nitin’s core expertise is in “mining very large (Terabytes or more) data sets to find directly actionable insights that target structural inefficiencies in existing businesses, or identify new/overlooked business opportunities.”
Currently he leads the Data Science team at Groupon in Palo Alto, California.
Nitin’s work may have something to do with the growth of Groupon’s revenue by nearly 90 % this year, which happened after it rolled out a deal-personalization technology, driven by big data analytics.
The company’s current stock value, however, is another story. As of June 4, the valuation is tumbling down to below the $ 6 billion, the amount offered by Google in 2010.
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