On the heels of Groupon‘s $135 million round (and $1 billion valuation), Living Social has stepped up to the plate with a new $14 million C round, led by Lightspeed Venture Partners, with U.S. Venture Partners, Grotech Ventures and Steve Case’s Revolution LLC participating. The new money gives Living Social a total of $39 million to match its Daily Deal against Groupon and 150+ other deal-a-day entities that have emerged in their wake.
The new money will be used to rapidly expand Living Social’s reach. While it doesn’t come close to the full Groupon investment, it may actually equal Groupon’s budgeted spending, since a lot of that money has been designated to pay back investors and founders.
Living Social is currently in 14 markets and adding four more: Portland, Orange County, Charlotte and Philadelphia. Dozens of markets are expected to be launched by the end of the year. This count is compared with50 markets served by Groupon, which says it will be in 100 markets by year-end.
Living Social CEO and cofounder Tim O’Shaughnessy, a former AOL executive, tells us that the company has realized that the Daily Deal is “an opportunity that needs to be fed.” While the D.C.-based company’s origins are in social Facebook apps such as Virtual Bookshelf, the Daily Deal is now getting “the majority” of the company’s attention.
O’Shaughnessy also says that while the guts of the daily deal offers may be quite similar from company to company, he believes that Living Social is differentiated in several important ways: One, it puts feet on the street in each of its markets, instead of relying on telemarketing. There is at least one salesperson in each market, he says.
Another differentiator is that the company is beginning to launch in large suburban markets, such as the San Fernando Valley outside Los Angeles, and Escondido outside San Diego. O’Shaughnessy believes the suburbs have their own appeal to consumers. Some users may choose to get a suburban offer for routine bids, and a metro offer for weekend fun, he suggests. That’s one way to boost the amount of inventory, he says.
“We’re looking at getting more hyperlocal. We are getting a good volume for most of the merchants we’re working with in smaller [population] centers.”
A third differentiator is Living Social’s viral effort, where consumers receive their coupon for free if they get three friends to sign on from a provided custom link. The “Sell 3, Get 1” offer has been available from the get-go, says O’Shaughnessy, with certain categories outperforming others on a regular basis.
While Living Social is launching solo in most of its markets, it also has attracted local media partners, such as The San Francisco Weekly and The Washington Post. The Post deal was made two months ago with Living Social, which is headquartered in D.C. It is based on a revenue share. It doesn’t utilize Post sales teams, but will eventually offer deep integration of the Daily Deal into the paper’s local content, including its metro pages, its sports pages and going out guide.