Michael Seto / BI
Andrew Mason is out as CEO of
The stock is surging nearly 8% after hours, but the stock fell nearly 25% today after reporting dismal earnings last night.
The company has not named a permanent replacement yet.
The departure of founder Mason has been speculated about for quite some time.
And just yesterday after the earnings report, our Owen Thomas speculated that Mason was not likely to last much longer.
And last November, the subject of his tenure was the focus of an interview at our Ignition conference.
Here's the story of how Mason started Groupon, from a longer post we published in 2011 called: INSIDE GROUPON: The Truth About The World's Most Controversial Company
In 2006, Andrew Mason was a music major, getting a graduate degree in public policy at the University of Chicago.
Mason maintained a website called Policy Tree, which featured articles like "Karl Rove should be fired or resign over the C.I.A. leak."
On the side, he was doing contract work building databases at a company founded and funded by an entrepreneur named Eric Lefkofsky.
Lefkofsky was already a very rich man, having built several businesses around call centers and the Internet. Mason was an intern, "kind of squatting in their offices," according to one source.
In January 2007, with Lefkofsky's backing, Mason started working on a company — a do-gooder enterprise called The Point.
The Point was a social media platform designed to get groups of people together to solve problems.
The Point was not intended to be a big money-making enterprise, and by one early employee's account, that was fine with most of the staff.
The Point launched in June. It gained modest traction in Chicago, but basically went nowhere.
Every Monday, Lefkofsky, Mason, and a handful of early employees would meet to talk about the Point's progress. One Monday, in the middle of 2008, Lefkofsky raised an idea he thought could revitalize the struggling start-up, based on a campaign he'd seen launched on The Point.
Ordinarily, people used The Point to organize around some sort of cause that might make the world a better place.
But in this case, a group of users decided their cause should be saving money. Their plan was to round up 20 or so people who all wanted to buy the same product and see if they could get a group discount.
"Eric said maybe this is the thing that we do," says a source who was at the meeting. "Maybe we set up a separate page, make it dedicated to group buying."
In his intitial business plan for The Point, Andrew Mason had actually mentionend group-buying as a possibile way the startup could eventually make money. But when Lefkofsky brought it up more than a year later, Mason and The Point's other early executives dismissed the idea. "It didn't seem core to our mission," says the person who was at the meeting.
Through the rest of the summer and early fall of 2008, Lefkofsky would not let that idea go. He'd bring up all the expensive purses his wife and all her friends were buying, and say, "It's crazy! Couldn't they buy 20 of them and get a discount?"
Around this time, the global economy entered free-fall as the sub-prime mortgage crisis exploded and credit markets ground to a halt. Then in September 2008, Lehman Brothers filed for bankruptcy and famous Silicon Valley venture capital firm Sequoia sent out a presentation called "R.I.P. Good Times." Mason and Lefkofsky decided to lay some people off.
"There was this pressure from the market crash [and] looking at our burn rate and revenue — it was time for us to try something to scratch that itch," says a source close to early employees.
Groupon — a side project launched out of desperation by a team of do-gooders who professed no real desire to make big bags of money — was born.
Sources do credit Mason for coming up with some of Groupon's defining characteristics: that it's one deal a day, that the deal doesn't go into effect until enough people buy the voucher, and that the vouchers should be for local businesses.
Some of the characteristics evolved out of a crucial element of Groupon's early DNA; it was a business created by reluctant capitalists.
"[The] way we rationalized it with ourselves," says an early employee, "[was that we were] helping people find interesting things to do in their city."
"Some of the early things we did were an hour in a sleep deprivation tank, or skydiving. We [didn't] want to do stuff that's going to wind up in a landfill. We [didn't] want to sell overstock gadgets. We [didn't] want to deal with shipping and returns."
These reluctant money-makers decided that Groupon should offer one deal a day, and that it should sell vouchers for local businesses. They decided that the daily emails should have funny copy. Mason also pitched Groupon as a way to help local businesses with cash flow at a time when banks were not lending.
The concept immediately took off. Local press got wind of the company and made a lot of noise about it. Employees successfully recruited local business owners among their friends and families to sign up.
"Merchants started to tell us 'if I want to do a 10,000 dedicated email blast on Daily Candy, it's going to cost me X, but you're telling me I can send it to 10,000 people for free, and only if they buy, we'll give you a cut?' That was an eye opener," says one early employee.
By the end of 2008, Andrew Mason and Eric Lefkofsky knew that The Point would become Groupon. In December, Lefkofsky recruited Ted Leonsis, who made his name and fortune building AOL. Leonsis would eventually become Groupon's vice chairman. Lefkofsky's long time business partner, Brad Keywell, also signed on.
Others at the The Point/Groupon didn't see the transition quite so clearly.
"At first we thought it would be a little skunkworks project and we'd go on and it would help us raise money to further develop The Point. But I think that idea didn't last very long because we realized we had a tiger by the tail."
In January 2009, Groupon held its company holiday party at the small apartment of its CTO, Ken Pelletier. He cooked for everyone — the whole company and all their spouses and significant others.
A year later, Groupon had around 300 employees.
A year after that it had 5,000+.
Today, Groupon has more than 10,000 employees.
Investors, some of them who also put money into Facebook, began calling Groupon the fastest growing company in history.
The first major test for the project was its move into a second market: Boston. "In Chicago," explains one early employee, "we had a big network of friends and family to sign up and spread the word. We had a lot of people who knew business owners. It's easier for business owners to trust a local company."
The expansion went off without a hitch — but only thanks to a number of make-it-work hacks on the technical side.
During Groupon's first months, customer support head Joe Harrow would spend three hours every afternoon personally emailing all the customers who bought Groupon vouchers whenever a deal closed.
Nine months in, Groupon switched to software specifically designed for the new business.
Groupon successfully expanded into a third market: New York. By this time, says an employee, "we kind of had the playbook we needed to open in another city, another city, another city." Groupon knew, for example, exactly how much to invest in advertising in order to build a sizable subscriber list in a new market.
By the summer of 2009, Lefkofsky started pushing hard for growth in Groupon's Monday meetings.
He started by suggesting Groupon be in five cities by the end of the year.
Then he started pushing for 10 cities by the end of the year.
Finally, according to a source familiar with those meetings, Lefkofsky just started saying, "Why don't we try and go as fast as we can? Why don't we turn up the jets?"
"We realized the main barrier to entry is going to be scale. So we wanted to get to as many cities as we can because we saw direct, outright, verbatim copies of what we were doing, popping up all over the place pretty quickly. We said we can either go chase them and beat them back and fight them legally, or race ahead and do what we do, as best we can. So the choice was to not look back, and try to be better and bigger."
One source close to Groupon's board says it was director Peter Barris of Groupon investor NEA that came up with the original analysis behind this aggressive growth plan.
Groupon began to grow into a real startup with lots of employees. It hired a COO who had worked at Yahoo and sold his own company before: Rob Solomon.
By this time, not only were consumers noticing Groupon, the press was catching on too. Mason went on CNBC. He went on "The Today Show." In August 2010, Forbes magazine put Mason on its cover. His shirt is un-tucked. He's shrugging as if to say, who me? The cover reads: "Groupon Is The Fastest-Growing Company … Ever: The New Web Phenom."
Groupon developed a "typical startup culture," with "everyone in their hoodies, and sales reps dating each other — that kind of nonsense," says one early employee." It was sort of like a fraternity that worked very hard."
"Working there was crazy," says another early employee. "[From 2009 to 2010] we hired 10,000 people. That was completely insane — something that's never happened before, and should never happen again. We ended up in 45 countries in 16 months. It was nuts, it was fun, it was a blast."
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CHICAGO--(BUSINESS WIRE)--
Groupon (GRPN), the global leader in local commerce, today announced a leadership change in which Executive Chairman Eric Lefkofsky and Vice Chairman Ted Leonsis have been appointed to the newly created Office of the Chief Executive, effective immediately, replacing Andrew Mason. Lefkofsky and Leonsis will serve in this role on an interim basis. The Board has commenced a search for a new Chief Executive.
“On behalf of the entire Groupon Board, I want to thank Andrew for his leadership, his creativity and his deep loyalty to Groupon. As a founder, Andrew helped invent the daily deals space, leading Groupon to become one of the fastest growing companies in history,” said Lefkofsky.
“Groupon will continue to invest in growth, and we are confident that with our deep management team and market-leading position, the company is well positioned for the future,” said Leonsis.
The company’s guidance for first quarter and full year 2013 outlined in yesterday’s earnings announcement remains unchanged.