Sayonara Mr. Groupon

6 years ago by in Technology

Andrew Mason sent an email to employees that leaked last week. The email started: “After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today. If you’re wondering why… you haven’t been paying attention.”

Many technology startup CEO’s hope to remain themselves as their startup becomes a great success but success forces young CEO’s to change, or out of necessity become more guarded. Their honest feeling shared with only a small circle of old friends, but Andrew Mason was the anti-thesis of the guarded CEO.

When Groupon first started it was founded as a platform for people to gather to solve problems called ThePoint. There wasn’t much of a revenue model and while the service gained traction in Chicago it didn’t grow much anywhere else. While montiroing usage of the platform Andrew noticed that one of the groups using ThePoint had organized a gathering of people to request a discount at a local retailer, instead of the more politically oriented gatherings organized on the site.

Seeing that, Andrew experimented by creating a separate page that allowed users to organize groups for discounts. Many of the characteristics that made groupon unique, such as a the limited number of coupons served per day and the minimum requirement for buyers were more the result of the original team being more socialist than capitalist, slowly embracing this new revenue generating model.

Andrew Mason, when he started what became Groupon was definitely inexperienced but extremely optimistic. I don’t think he has ever evolved from that original persona. Its the reason employees went to work for him and entrepreneurs admire him, but ultimately it was his undoing.

A reporter discovered several post by Mason when he first started Groupon looking for help, “I created an idea for a website that has gained the interest of a private investor with deep pockets. He wants to pour a lot of money into the site and hire me to front the project for the time being.” and he continues “He has offered me a percentage of the shares of the company and a reasonable wage. I have no idea if what he is offering is standard, generous, or if I’m being taken advantage of. I’m going to hire a lawyer, but I don’t know what kind of lawyer to hire. Can anyone help give me an idea of what I should expect, of how these deals usually divide up between the idea guy/developer and the business man?”

The business man that Andrew refers to is likely Eric Lefkofsky, the money behind Groupon and the individual who has benefited the most from Groupon’s meteoric rise. Lefkofsky’s investment company infamously cashed out more than 300M of its investment in Groupon prior to IPO, upsetting many investors.

Since Mason’s departure, Lefkofsky has taken the job as interim-CEO while Groupon searches for a new CEO. Lefkofsky doesn’t take any salary but he has several companies that have benefited from his relationship with Groupon through consulting services. Lawyers felt that this was important enough for them to disclose it in SEC filings as a potential conflict. Lefkofsky more than the vendors that have experimented with the platform, has mastered the technique of extracting profits from Groupon.

While many have lauded groupon for being an abusive or even corrupt company, I know I haven’t been one of the companies biggest fans, but no one can fault Andrew Mason. He came and went as someone who just wanted to do good.

Today Groupon is growing into a more sophisticated company with more mature managers. The top management at groupon now are mostly executives recruited from Amazon.com, roles such as CFO, COO, SVP of product management and its SVP of global marketing are all Amazon veterans. Which makes me wonder if a more traditional ecommerce approach is in the future plans for Groupon.

Its extremely difficult for founders of internet startups to maintain control of a company that IPO’s in the USA. Primarily because by the time a company reaches the point of being ready for an IPO, venture capitalist dominate the board and generally don’t have the best interest of the founder in mind.

When we compare the raise of vs the raise of Groupon we gain a better understanding of the way american investors think about founders. Facebook grew very quickly before they took in outside investors, because of this Zuckerberg was able to dictate terms to investors. Andrew Mason lost control before he even started. So if he was so inexperienced and doing such a bad job, why did investors leave Andrew Mason in place for so long?

If I was a conspiracy theorist I might say that some of the company’s more aggressive investors needed a inexperienced CEO as a front person. Someone who wouldn’t question some of its more aggressive business practices and now that earliest investors have gained as much as they can in the short term, Mason’s job is done. But that’s just one theory. In which case Andrew Mason is now the richest patsy in the world. Not all that bad.

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