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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Groupon’s Andrew Mason on how the 5-year-old company race for scale

Groupon’s Andrew Mason on how the 5-year-old company race for scale

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Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

By his own admission, Andrew Mason is a "social recluse" who would once a year, drive past people on a riverboat tour or a museum and lament the fact that he was not out there doing those things more often. True to his words, the 31-year-old founder and CEO of the world's largest deep-discount website Groupon doesn't betray any signs of reclusiveness when CD meets up with him in a Delhi hotel to gauge how the company clocked zero to a billion dollars in less than a record four years. A music grad and a web designer by profession, Mason lacks the finesse of trained business executives and responds to most queries with what can perhaps be termed as 'monosyllabic Masonry'. After all, from setting up the fastest growing web services firm, clocking the fastest billion in revenues and touching almost $17 billion in valuation on its debut on the bourses, the company lost much of its sheen last year when its worth plummeted to $2 billion as share prices came crashing down to an all-time low of $2.60/share with the news of his job being on the line for falling performance, making the headlines. But Mason is unfazed. As CD talks about the peaks, he speaks freely but when it comes to the troughs, words flow at a premium. Edited excerpts:

How did the Groupon story come into being?

It started out with just an idea I had in grad school. I was in the School for Public Policy (in Chicago) and taking classes in collective action. I started to think about all the collective problems that exist in society. That was the beginning of ThePoint, a social platform that allowed groups of people to come together and rally around a shared cause and take some action. So we played around this for about a year. This was my first startup and I learned a lot of lessons, including the importance of simplicity. The problem was it was a big abstract idea. So we decided to simplify it-to pick one use case that had a lot of merit and develop a service that's completely dedicated to that one use case.

That was the fall of 2008 and I had this idea of Groupon about people using this thing to organize discounts from local businesses. What if we go out and work with these local businesses to procure deals and then we email them out to our customers-one a day. It appealed to me because I'm a social recluse who once a year will drive past people on a riverboat tour or a segway tour or a museum and lament the fact that I'm not out there doing these things more often. And I've got these things sent to me for limited time offers that were too good to pass up. It was this dead simple value proposition-discover great things to do in your city and save. It took off like crazy. What surprised us was that not only was it popular with customers but it was unbelievably popular with merchants.

How many of you spearheaded Groupon?

About 5 of us.

Did you do research on small businesses?

We learnt by working with them and really didn't do a lot of research in advance. It was learning by doing. As the business grew, we realized we were acquiring this unique set of assets. Today, we have 40 million active customers and millions of direct relationships with small businesses.

How many small businesses do you have in your kitty today?

Over a quarter of a million have featured deals but we have relationships with millions that were calling every day. And we sit better than anyone else to be the company that plugs local commerce to the web in the same way that we've seen retail commerce get plugged into the web for the last two decades
What was the pitch you made to Eric Lefkofsky?

I made the pitch for ThePoint in 2006. I worked for him in a company called InnerWorkings. Then I went to grad school. He actually heard the idea from a colleague at InnerWorkings and called me up one day and asked me about it. I actually said that this is a way to bring people together to use their collective influence to solve problems that one person can't solve alone. At that time, I didn't know anything about angel investing or venture capital. Eric offered a million dollars into it to turn it into a company. By the time we got to Groupon, he was more skeptical of that. He was encouraging us to simplify, to shake things up, to think different. But the idea wasn't as obvious earlier on as it seems now. I remember the day we made enough money that covered the salary of our most expensive employee at the time, I walked into his office and said, 'Hey, we made a thousand dollars!' He said. 'Get out of here. Come back when you make $10,000!' But we kept at it and it worked.

How's your experience been with the VCs?

It's been good. They've all been supportive along the way and I've learnt a lot from them. Peter Barris (New Enterprise Associates) helped us think about scale, to imagine what the organization would look like when it had 100 people and 1,000 people and work backwards from there. So we got thinking more strategically.

In the zero-to-billion race, Groupon scaled the fastest. How long did it take?

There are two reasons that we could scale quickly. Firstly, we were blessed to have a model that worked. For all purposes, it worked the same way in Paris as it worked in Chicago. People like the idea of saving money, people like the idea to go out and eat. So we had that going for us. The other reason we scaled as quickly as we did was that the pipes had been laid for innovation to spread much faster than what exists. And that's the infrastructure through social channels, like Facebook and the e-commerce companies that have come before us. Social has helped us grow and get the word out.

Groupon has gone through a valuation roller coaster. You've seen the highs and lows. How did you hold your nerve?

The process of going public started about a year and three quarters ago. The whole process has been a non-stop learning experience. The last year has been very difficult but if I were to look back, I would say it has been an important character-building exercise for the companyone that we wouldn't trade. It has given us conviction in the core principles that we believe in.

What are those?

To start with, the customer and work backwards from there and to be ruthless about living up to that principle. What I found is that in business, it is often more important to have courage than to be smart. And a big part of courage is staying true to the values that made you successful in the first place, regardless of what happens.

Wall Street seems to be disenchanted with the darlings of the internet-Facebook, Zynga, Groupon. Why?

I'm not a Wall Street analyst. For me to spend too much time thinking about that or trying to find an answer, is not going to resolve anything. How did Groupon go global? We started in the US and did it until May 2010. Then we did an international acquisition and took the company in Europe and then we expanded from there. We're now in about 48 countries.

From a web designer, you rose to become the CEO of a multinational billion-dollar company. What have been the top 3 challenges?

I'll give you one. There's a transition that you have to go through from being a founder of a very small company to running a company with 10,000-plus people in it. When you are small, you have to wear many hats, being in a room solving most of the problems yourself. That's an asset and part of what makes you very successful. As you scale, your job is to empower other people to do those things, inspire them, to get the best out of them and not necessarily solve every problem yourself.

On hindsight, do you think you should have taken the $6 billion offer Google made for Groupon in 2010?


What were the 3 big lessons while scaling up?

It's all about getting great people. Part of our success has been having strong entrepreneurs in every country and our ability to attract strong talent across the globe. Doing what the customer wants is always the right decision. Any time we've strayed from that, even in a micro-scale, it has been something that we've looked back and wished we hadn't. I think two (lessons) are good enough.

What made you move from music to web designing?

I got involved in music because I guess I'm a creative person. I play the piano. As I got older and started doing more web development, I realized that it satisfied my insane creative impulses. I also wanted to do something that touched a lot of people and started thinking that music was a naive way to achieve such goal. On the web, it's a blank canvas and there are so many interesting opportunities to innovate.

Is all well now between you and the board?

Everything is great.

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