LivingSocial raises $110M in funding from current investors

The cash infusion will allow the daily deals site to pursue its "aggressive road map" while buffering it against "unanticipated events or bumps in the road," says CEO Tim O'Shaughnessy.

LivingSocial has raised $110 million in funding from its current investors, Chief Executive Tim O'Shaughnessy wrote today in a memo to employees, giving the daily deals site a much-needed cash infusion.

"This investment is a tremendous vote of confidence in our business from the people who know us best, our current board members and investors," he said in a memo viewed by CNET. "They have reviewed our plans for 2013, and they are enthusiastic enough to want to commit additional financial resources through this round."

The financing followed a "competitive process" in which the company had multiple options for funding, O'Shaughnessy added.

It's a rocky time to be a daily deals company. Groupon, LivingSocial's biggest rival, was considered one of the hottest startups when it went public in 2011. However, it quickly fell from favor as the company continued posting losses and slowing revenue. Its stock has tumbled from its $20 IPO price but has rebounded a bit in recent weeks, trading today at $5.70, down 3.8 percent but still up 22 percent in the year to date.

Privately held LivingSocial, meanwhile, has faced similar woes. It has been trying to branch into other markets -- such as offering merchandise as well as coupons -- to make up for its financial struggles, but it's unclear how well such efforts are going. The company laid off nearly 10 percent of its staff late last year.

Amazon, which held a 29 percent stake in LivingSocial as of the end of 2012, disclosed in a regulatory filing last month that LivingSocial's revenue in 2012 more than doubled to $536 million, but its net loss widened to $650 million from $499 million in 2011.

We've contacted Amazon about LivingSocial's funding round announced today and will update the report when we hear back.

O'Shaughnessy said in his memo that the new investment doesn't change LivingSocial's plans to reach profitability but gives the company "deeper resources to take advantage of new opportunities, extend our promising lines of business, and expand a robust funnel of new customers."

The CEO has told employees in the past that he hopes the company will be profitable at some point this spring, but it has still been posting big losses in recent periods, as evidenced by the recent Amazon report.

The Internet giant also said LivingSocial's current assets (mostly cash) slid to $76 million at the end of 2012 from $176 million at the end of 2011.

According to The Wall Street Journal, LivingSocial has spent some $600 million of investors' cash in recent years, with a recent round raised at a $4.5 billion valuation. By comparison, Groupon is currently worth $3.9 billion, according to Google Finance.

A person familiar with LivingSocial's most recent transaction told CNET that the funding round was structured in such a way that there's no way to determine an implied valuation. It wasn't simply a share issuance, the person said.

Either way, the cash is sure to buy LivingSocial time to turn itself around.

"This new investment round will allow us to dedicate the resources we need, while also building a significant cash reserve against unanticipated events or bumps in the road," O'Shaughnessy said.

Here's the full memo from O'Shaughnessy:

LivingSocialites --

We've got some great news to announce today, as many of our current investors have reinforced their support for the company through a new round of financing that will give us an additional $110 million to build our reserves, solidify our long-term plans, and execute against our vision for the future.

This investment is a tremendous vote of confidence in our business from the people who know us best, our current board members and investors. They have reviewed our plans for 2013, and they are enthusiastic enough to want to commit additional financial resources through this round. This round also follows a competitive process in which we were fortunate enough to have multiple options for funding.

As you know from our all-hands last month, we have an aggressive roadmap for profitability and expansion this year, and those plans include increased investment in areas like marketing, technologies, and mobile. This new investment round will allow us to dedicate the resources we need, while also building a significant cash reserve against unanticipated events or bumps in the road.

This new investment does not change our plans to reach profitability, and we believe that a cash-flow positive and growing company will give us even deeper resources to take advantage of new opportunities, extend our promising lines of business, and expand a robust funnel of new customers. We will be sharing regular updates on our results and progress against goals as we move forward.

We've had a solid start to the year, and I am excited about the opportunity to solidify our path to success over the next couple months. Thank you again for your hard work and dedication.

(Via Reuters)
 

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