The online retailer has spent nearly $300 million acquiring three shipping software vendors over the past nine months.
The daily deal site hopes to raise more than a half billion dollars.
Hungry Machine Inc., the holding company for LivingSocial, wants to raise approximately $565 million in new capital funding, according to a March 31 filing with the state of Delaware, where the company is incorporated. The investment round would be the company’s fifth.
The company says in the filing that it intends to sell more than 100 million shares at $5.651 each. Depending on the number of shares issued, that price would value LivingSocial at $3 billion, according to VC Experts, a research firm that analyzes the value of private companies.
That seemingly high valuation reflects to the fact that daily-deal operators have figured out how to monetize their business, says Greg Sterling, an analyst and founder of Sterling Market Intelligence.
“This model has revenue generation as an intrinsic element, and that’s unlike a number of other start-up businesses,” he says. “Monetization is baked into their business model in a direct way and that’s what’s directing this investor enthusiasm.”
While the filing gives the company authorization to raise the funds, it does not mean that it has raised the money to date. However, LivingSocial last week reportedly raised $400 million from existing investors including Amazon.com Inc. and Lightspeed Venture Partners, as well as new ones, including T. Rowe Price and Institutional Venture Partners.
Institutional Venture Partners confirms to Internet Retailer that it has invested an undisclosed amount with the company. LivingSocial, Amazon.com, Lightspeed Venture Partners and T. Rowe Price did not immediately respond to requests to comment.
A spokeswoman from Institutional Venture Partners says that Amazon’s positioning with LivingSocial helped influence its investment. Amazon invested $175 million in LivingSocial in December for an undisclosed stake in the company.
“Amazon’s investment was definitely one of the positives about LivingSocial,” she says. “We think LivingSocial is coming out of the pack as a potential leader in the space because of the rapid growth that they’ve had and team they have in place.”
Sterling anticipates that LivingSocial will follow Groupon’s lead in using the funding to spur international growth through acquisitions and investments in daily-deal companies that have established themselves in other markets.
“The fastest way to grow is to buy up local providers,” he says. “I think we’ll have a situation in the next year where a number of countries will have Groupon owning the leading company and LivingSocial owning another leading company.”
LivingSocial is part of the rapidly growing online daily-deal industry, which could generate up to $2.67 billion in 2011, according to a recent report by Local Offer Network Inc., which sells advertising and technology services to group-buying sites.
Jeremy Liew, managing director, U.S., for Lightspeed Venture Partners, will speak at the Internet Conference and Exhibition 2011 in a session entitled "The entrepreneur-financier tightrope: Keeping both sides happy when outside money comes in."