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Term Sheet — Friday, March 20

Groupon: LOL?

This is Erin Griffith filling in for Dan until Monday. Find me at (@eringriffith) or (erin.griffith@fortune.com). 

• In a January article titled “Let’s stop laughing at Groupon,” Dan argued that the daily deals company which is largely viewed as a failure, should not be viewed as such. It was a great contrarian argument, except that it was wrong.

Dan’s argument boiled down to the following points:

1.) Groupon is not a failure because it has a $4.9 billion market cap, which is more than it was worth as a private company. (Its market cap has risen to $5.3 billion since his story.)

2.) Groupon is not a failure because it has steadily grown since its IPO, with plenty of cash on hand and no debt, signals of a healthy company.

3.) Groupon was a victim of high expectations, and it’s not the company’s fault when it failed to live up to them.

I’ve addressed each point in order below:

1.)  Indeed, Groupon is worth more than it was ever valued as a private company. But barely. Groupon’s last round of private funding valued it at $4.75 billion. That was in 2010. When Dan published his story, Groupon was worth $4.9 billion. A 3% increase is not much of a return for investors in five years, especially for a high-growth startup.

What’s worse, Groupon could have been worth more. In 2010, Google (GOOG) offered to acquire the company for $6 billion. After rejecting that deal, then-CEO Andrew Mason declared, “Like, okay, we’re the best company in the world.” Today it’s clear that not many people believe Groupon is the best company in the world, or that it’s worth $6 billion.

But the real reason a $5 billion valuation does not make Groupon a success is because anyone who bought into Groupon’s growth story at IPO got burned. Groupon went public at a valuation of $13 billion, trading up to $19.5 billion on its first day. Shortly after, the stock price cratered, and it has been worth half of its IPO valuation (or less) ever since.

Even insiders got burned, since Groupon’s shares collapsed before the 90-day lock-up period was over, meaning they couldn’t sell while their stock lost more than half of its value. Any employee that exercised shares in the IPO likely owed more in taxes than their stock was worth. Anyone who bought low has yet to see much growth either. Over the last three years, Groupon’s stock has ended up relatively flat. It’s hard to call that a success.

2. I’m as surprised as Dan that people still spend $7.6 billion a year with Groupon. (That’s gross sales—the company’s annual revenue was $3.2 billion last year.) Groupon is growing: It grew revenue by 24% last year. Revenue is expected to grow 11% this year. But Groupon has reported a net income loss for each year it’s been public, including last year, when it lost $73 million. That’s not likely to change, because Groupon is a company that has to to overcome a bad business model.

By now we know the daily deals business model is a novelty. Even Andrew Mason (who was ousted in 2013) admits the model stinks. Last month he told the Associated Press that Groupon was a “stupid, boring idea that just happened to resonate.”

Groupon’s revenue from daily deals has been relatively flat since 2011. To diversify, Groupon launched “Groupon Goods,” where it sells things like iPhones and jelly beans at a discount. This business has grown to represent the majority of Groupon’s income, but the margins are significantly smaller: 88% for daily deals versus 20% for goods.

The problem with both of Groupon’s businesses are the barriers to entry, or lack thereof. With daily deals, anyone could buy a “build your own Groupon” software package (from a company called Groupon Clone, no less) and start selling coupons with cute emails. In the height of Groupon-mania, many did just that, driving Groupon’s customer acquisition costs sky-high and forcing Groupon on an aggressive acquisition spree to take out regional competitors. At the height of the boom there were hundreds of daily deals startups. Groupon bought more than 30 of them. Now Amazon is moving in with its “Amazon Local” competitor. And Groupon Goods is already competing with Amazon (AMZN) , and every other online discounter.

To recap: flat growth in Groupon’s core business and some growth in Groupon’s low-margin business. This is why Groupon’s stock has been uninspired for the past three years. Today, 14 analysts rate Groupon as a “Hold,” and only nine rate it “Buy” or “Strong Buy.”

3. Read the rest, including why Groupon was not a victim of hype, plus a cameo appearance from Pajama Jeans, here on Fortune.com.

Chris Dempsey has resigned from Bain & Co. If his name sounds familiar, it’s because he has become the public face of the movement against Boston’s bid to host the 2024 Olympic Games. Dan reports that the resignation is unrelated to his work for No Boston Olympics, the non-profit he co-founded for the cause. Read more here. (Note: This item has been corrected to note that Dempsey works for Bain & Co., not Bain Capital.)

• Dan will be back on Monday. Enjoy the weekend!

THE BIG DEAL

Snapdeal, the Indian ecommerce startup, is in talks with electronics maker Foxconn to raise $1 billion in funding, according to the Wall Street Journal. The deal could value Snapdeal, which is also backed by eBay and Softbank, as high as $7 billion. Read more.

VENTURE CAPITAL DEALS

• Maple, a food-delivery startup based in New York, has raised $22 million led by Greenoaks Capital with participation from Thrive Capital, Primary Ventures, David Chang of the Momofuku empire (who serves as the company’s chief culinary officer) and Bonobos CEO and founder Andy Dunn. Read more.

• Rover.com, a Seattle-based platform for dog walkers and sitters, has raised $25 million in funding led by Technology Crossover Ventures with participation from existing investors Foundry Group, Madrona Venture Group, Menlo Ventures, and Petco. www.rover.com/

• Quid, a San Francisco-based artificial intelligence company, closed a $39 million Series D funding led by Liberty Interactive. quid.com/

A Plus, a viral content website associated with Ashton Kutcher, has raised $3.5 million in venture funding from Kutcher, Sound Ventures, Venture 51, Social Starts, and a number of angel investors, according to Business Insider. Read more.

• Thirstie, an alcohol delivery startup based in New York, has raised $1.1 million in seed funding from angel investors. thirstie.com/

• Vidder, a Campbell, Calif.-based cybersecurity company, raised $12 million in Series B funding led by LDV Partners, with participation from Presidio Ventures and current investors ONSET Ventures and Voyager Capital. www.vidder.com/

ProtonMail, a Switzerland-based provider of encrypted email, has raised $2 million in venture funding from Charles Rivers Ventures and FONGIT, a Swiss incubator. protonmail.ch/

• Nimbus Therapeutics, a Cambridge, Mass.-based biotechnology startup, raised $43 million in Series B funding led by Pfizer Venture Investments and Lightstone Ventures with participation from existing investors Atlas Venture, SR One, Lilly Ventures and Bill Gates. The company previously went by Nimbus Discovery. www.nimbustx.com/

•  EJ Wealth Management, a Chinese internet finance company also known as Yijie, has sold a stake to Sequoia Capital China. EJ Wealth Management is a subsidiary of Shanghai-based Noah Holdings, a publicly traded provider of wealth management services. www.noahwm.com/

Azalead Software, a marketing automation software company, has raised €2 Million in Series A funding led by Aurinvest. azalead.com/

• Shadow, Israeli-based provider of a public opinion platform, has raised $3 million in funding, according to peHUB. Read more.

Help Scout, a Boston-based maker of software for small and medium-sized businesses, has raised $6 million in Series A funding from Foundry Group and CommonAngels Ventures. www.helpscout.net/

Pagecloud, an Ottawa, Canada-based provider of publishing software, has raised $2.2 million in funding from MaRS IAF and Export Development Canada, and angel investors. pagecloud.com/

etaskr, a Richmond, New South Whales-based maker of task management software, has raised $1.3 million in seed funding from Oxygen Ventures. etaskr.com/

• Degreed, a San Francisco-based education technology startup, has raised $7 million in venture funding, according to VentureWire. degreed.com/

AchieveIt, an Atlanta, Ga.-based provider of performance management software, raised $2 million in Series D funding led by BIP Capital. www.achieveIt.com

• TheAsianParent, a Singapore-based website for parents in Asia, has raised $3.27 million ($4.5 million Singapore) from Vertex Venture Holdings, the venture capital subsidiary of Singapore sovereign wealth fund Temasek. sg.theasianparent.com/

• Airdog, a Palo Alto-based drone company, has raised $2 million in seed funding from Seraph Group, IT-Farm Corporation, Base Ventures, FlyCap and Imprimatur Capital. www.airdog.com/

• Healthfind, a Madison, Wisc.-based hospital automation software company, has raised $1.5 million in funding led by Jumpstart Ventures with participation by Chicago Ventures, OCA Ventures and angel investors. www.healthfinch.com/

PRIVATE EQUITY DEALS

• Audax Group has agreed to acquire AllOver Media, a Minneapolis, Minn.-based out-of-home advertising company, for an undisclosed amount. www.allovermedia.com/

• Black Dragon Capital has acquired Enterworks, a Sterling, Va.-based provider of product information software, for an undisclosed amount. www.enterworks.com/

• Abraaj Group and Helios Investment Partners are bidding for Emerging Markets Payments Group, the payments company owned by Actis, according to Bloomberg. The company could garner as much as $400 million in the sale. Read more.

IPOs

• Sogou, a Beijing-based search engine, plans an IPO valuing the company at more than $3 billion in the U.S. in the second half of this year, according to Bloomberg. The company is owned by Sohu.com. Read more.

EXITS

• Nutmeg, a New York-based maker of a gif messaging app, has sold to Giphy, a gif search engine backed by Betaworks, for an undisclosed amount. www.thisisnutmeg.com/

• PT Solusi Tunas Pratama, an Indonesia-based, Carlyle Group-backed operator of telecom towers, plans to sell shares worth as much as $400 million, according to the Wall Street Journal. Read more.

• Minibar Delivery, a New York-based on-demand booze delivery service, has agreed to acquire Booze Carriage, another alcohol delivery platform based in New York City. Minibar Delivery is backed by Female Founders Fund, Winklevoss Capital and Great Oaks Venture Capital.  minibardelivery.com/

OTHER DEALS

• Northland Securities, a unit of Northland Capital Holdings, has agreed to acquire “certain assets” from Summer Street Research Partners, an investment bank which focuses on healthcare deals. www.northlandsecurities.com/

•  Novinum, an Auburn, Wash.-based provider of power cable repair services, acquired UtilX, a subsidiary of Willbros, for an undisclosed amount. www.novinium.com/

• Apollo Global Management is close to hiring Blackstone Group to advise it on a sale of the $132.4 million in convertible debt it owns in Molycorp Inc., a rare earth miner, Bloomberg reports. Read more.   

RadioShack has received only one bid to acquire its assets in bankruptcy, from investment fund Standard General. Salus Capital, a lender to RadioShack, filed an adversary complaint to RadioShack’s lenders seeking to hold bidding to $111 million. Cerberus Capital Management is also a lender to RadioShack. www.standardgenerallp.com/

FIRMS & FUNDS

• The Vistria Group has raised $200 million in commitments toward a $300 million fundraising goal on its first buyout fund. The fund had an original goal of $500 million when it launched fundraising in 2013, according to peHUB. Read more.

• Carlyle Group raised $2.5 billion in commitments from 160 investors for a new fund called Carlyle International Energy Partners, which will invest in oil and gas deals outside of the U.S. The fund had a $1.5 billion target. www.carlyle.com/

• Partners Group, a Swiss investment firm, has begun to raise €2.5 billion for its new secondary fund, according to LBO Wire. The firm’s prior fund, a 2012 vintage, was worth €2 billion and has generated a net multiple of 1.44x and a net IRR or 37.6%. Read more.

MOVING IN, UP, ON & OUT

Joe Haslip has been named managing director and head of capital strategies and investor relations for Silverfern Group. Previously he was Managing Director for Public Relations at Blue Harbour Group. www.silfern.com/

• Fred Ebrahemi has joined Clearlake Capital as general counsel and chief compliance officer, Prashant Mehrotra has been named partner, Colin Leonard and Arta Tabaee have been named principals, and James Pade has been promoted to vice president. www.clearlakecapital.com/

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