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Let's Stop Laughing at Groupon Groupon is not a cautionary tale of unicorns past.

By Dan Primack

This story originally appeared on Fortune Magazine

When we began work on our Age of Unicorns cover for Fortune, one internal conversation was about cautionary tales. Fab? Sure. Box? Seemed so at the time, not so much today. "What about Groupon?" someone asked with a chuckle.

Social buying site Groupon was one of the original unicorns, becoming valued at more than $1 billion by venture capitalists less than two years after its founding. It later would turn down a reported $6 billion acquisition offer from Google, before going public in November 2011 at an initial market cap of $12.65 billion and closing its first day of trading worth more than $23 billion.

But it didn't take long for the wheels to fall off: By June 2012, the company was valued below Google's proposed acquisition price. The following March, founding CEO Andrew Mason was fired. The company that was supposed to re-energize Chicago's startup scene — replete with a warehouse chic headquarters that also served as a new business incubator — had run out of gas.

And then everyone seemed to forget about it, as a much larger group of billion-dollar startups emerged. Everyone, that is, except for people who wanted to make jokes about past valuation excess.

But from where I sit, the laughter is unwarranted.

Groupon not only was an original unicorn, but it remains a successful one. The company currently has a market cap of $4.9 billion, which is higher than it ever was valued by venture capitalists. Its revenue and EBITDA have consistently climbed in each year since going public, and there is plenty of cash on hand without a single cent of debt.

If you want to criticize someone for overvaluing Groupon, take a good long look at public market investors. You know, the folks who are supposed to use all sorts of clear-headed, quantitative metrics (as opposed to VCs, who are said to pull unicorn valuations out of thin air). In fact, even Groupon's final deals in the private market were largely driven by mutual fund managers dipping down to buy secondary shares from VCs who were smart enough to bake in some early gains.

It would be like if the smartest guys in the room convinced everyone that this year's Boston Celtics were going to win 60 games, and then making fun of the Celtics when they failed to achieve such lofty goals. Obviously the team isn't where it ultimately wants to be, but it wasn't the one making bold predictions. Nor has it collapsed.

If Groupon is a cautionary tale for other unicorns, perhaps it only is in the context of going public. Groupon's decision to IPO when it did is arguably the reason it remains in business. As venture capitalist Bill Gurley noted, it is much easier to survive a valuation decline as a public company than as a private one. Had Groupon waited a couple more years, perhaps it would have been worthy of derision. But it didn't. And it isn't.

Dan Primack blogs, writes, muses and opines on deals and deal-makers for Fortune.

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