Groupon's IPO Road Show Playbook
Groupon CEO Andrew Mason will take to the road next week to deliver a series of crucial presentations to potential investors as the company barrels towards an initial public offering expected on November 4.
According to online materials of Mason’s presentation, the 30-year old entrepreneur will speak at length to reassure investors that the company’s controversial and costly marketing strategy will pay dividends.
Clean-shaven and dressed in formal business attire—a departure from the CEO’s typically casual Silicon Valley wardrobe—Mason, in front of bankers and potential investors, emphasized that the company’s customer retention rates were nearly 50 percent in the third quarter, meaning that half the vendors were return customers.
“This is a long presentation, but if I was an investor, this is the part that would get me the most excited,” Mason said. “As soon as we realized it was happening, we decided to frontload our marketing investment so we could achieve scale as quickly as possible.”
Mason highlights that in some specific instances, the company is able to recover those marketing costs within 6 months.
Groupon has been criticized for its expensive and controversial marketing strategy which spends huge sums of money for customer acquisition—$613 million in the first 9 months of the year (a sizable chunk when compared to the company’s $1.1 billion in revenue over the same period). It’s an expense the company originally stripped out of its financials, but was put back in following outcry from some in the financial community.
Mason also cautioned potential investors that how the company puts together a daily deal is more complicated than they’d think.
“We have 10,000 people who wake up in the morning and go to bed at night thinking about nothing other than how to get great deals in front of our customers. This is not a hobby, this is not a side project,” he said. “Just to get one deal closed, there’s 10 discreet stages ... some of these deals might have six or seven sub-stages.”
If all of those things don’t go right, Mason continued, you can have a deal go “horrifically wrong” which could “completely erode the trust of your consumers…we’ve built an extremely complicated and elegant operation to make it all work.”
Mason’s presentation was published by RetailRoadshow.com, which provides electronic road shows for individual investors seeking information about public offerings.
A Groupon spokesperson declined to comment.
Follow Jesse Bergman on Twitter: @JBergmanCNBC