In the run up to its recent IPO, a number of outlets reported that the daily deal giant Groupon was running short on cash. Over at the Motley Fool, Evan Niu noted that the company had $243.9 million in cash and equivalents at the end of September, compared with $465.6 million in accrued merchant payables, that is, the money they owed people who ran Groupon deals.
The company ended up raising $700 million, but according to a source familiar with its business, there still isn’t enough cash on hand to make critical structural improvements the company needs to grow. Groupon is shelling out millions every month on hosting costs, and paying a premium to third parties. The company is very eager to construct it own data center, but simply can’t afford it.
As ZDNet notes, Groupon’s massive scale is a challenge and an opportunity. “Groupon’s growth—revenue, subscribers and merchants—is off the charts and under the hood rests on whale of an information technology story. In many respects, Groupon is the ultimate IT petri dish. In two years, it has grown from a company that could be run on a simple spreadsheet to one that needs systems spread across the globe. Meanwhile, Groupon is a greenfield opportunity—there aren’t legacy systems dating back decades.”
The company actually made a note of this in its IPO prospectus: “We have spent and expect to continue to spend substantial amounts on data centers and equipment and related network infrastructure to handle the traffic on our websites and applications. The operation of these systems is expensive and complex and could result in operational failures. In the event that our subscriber base or the amount of traffic on our websites and applications grows more quickly than anticipated, we may be required to incur significant additional costs.”
You can see some of what Groupon had in mind on this job application the company put up for a Performance Engineer.