LivingSocial, the second-largest website devoted to daily coupons, is close to raising as much as $400 million in funding that would value the company at more than $2 billion, two people with knowledge of the talks said.
Venture-capital firms and larger institutional investors are expected to participate in the financing, said the people, who asked not to be identified because the discussions haven’t been made public.
LivingSocial would use the new funding in its effort to narrow Groupon Inc.’s lead in the daily-deal market, which consulting firm BIA/Kelsey predicts will surge to $3.93 billion by 2015. Groupon has raised more than $1.1 billion in three rounds of financing, including a $950 million investment that closed in January.
The funding may be completed as early as next week, one of the people said. Maire Griffin, a spokeswoman for Washington, D.C.-based LivingSocial, declined to comment.
Groupon and LivingSocial make money by offering local-business deals to their subscribers -- say, $20 off a $40 haircut. The sites then keep a portion of the revenue raised.
Both companies each hiring large sales forces to solicit business in a growing number of markets. LivingSocial said in December that it expects to at least triple its employees base to 1,800 this year and double the number of markets it serves to 300. Groupon has more than 5,900 employees selling deals in more than 500 markets. The financing that closed in January valued Groupon at $4.75 billion, people familiar with the matter said at the time.
Gaining Market Share?
Groupon and LivingSocial control more than 90 percent of the daily-deal market, LivingSocial Chief Executive Officer Tim O’Shaughnessy said in an interview in December. LivingSocial is gaining a few percentage points of share every month, he said.
LivingSocial began testing a new service last week that lets local merchants set up deals for specific days and periods of time using an Apple Inc. iPad.
LivingSocial said in December that it raised $183 million from investors led by e-commerce site Amazon.com Inc.
The Wall Street Journal reported yesterday that LivingSocial is in talks to raise about $500 million.