just asking questions

The Super-Quick Rise and Even Faster Fall of Groupon

Former CEO Andrew Mason on what the roller-coaster ride felt like.

Andrew Mason at the TechCrunch Disrupt conference in 2010. Photo: Noah Berger/Bloomberg via Getty Images
Andrew Mason at the TechCrunch Disrupt conference in 2010. Photo: Noah Berger/Bloomberg via Getty Images

Andrew Mason started Groupon ten years ago. He was a graduate student in his mid-20s, making money on the side by building websites. Through that work, he’d met tech billionaire Eric Lefkofsky, and Mason had mentioned to him this idea for a website he wanted him to fund.

Within two years of its founding, Groupon was earning hundreds of millions a month in revenue and was valued at several billion dollars. It grew faster than Apple. Faster than Facebook. Faster than Google.

And then, just as rapidly and just as dramatically, its fortunes changed. After Groupon’s stock had dropped to a quarter of its IPO price, Mason was fired, and his tenure is perhaps best recalled by the frank letter he sent to employees announcing his departure: “After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding — I was fired today. If you’re wondering why … you haven’t been paying attention.”

This dream rise and nightmare fall, in an incredibly short span of time, is almost like the comic-book version of a start-up story. These days, Mason is a CEO of a much smaller company, of just ten employees. It’s called Descript, and it makes software that transcribes and edits spoken-word audio.

I met Mason in 2013, around the same time my co-founder and I were starting the podcasting company Gimlet. Because Mason and I were both involved in audio, we got to know each other a bit. He eventually became an angel investor in Gimlet.

We never really talked about his experience at Groupon until I sat down with him in a studio in San Francisco a couple of months ago, when I used my podcast as an excuse to finally get him to tell me his story.

This interview is being published in collaboration with Without Fail, Gimlet Media co-founder Alex Blumberg’s new podcast, on which he talks with entrepreneurs, artists, athletes, and visionaries of all kinds about their successes, their failures, and what they learned from both. Without Fail’s ten-episode season premiered October 1 and features interviews with Flickr co-founder Caterina Fake, the Golden State Warriors’ Andre Iguodala, Nasty Gal founder Sophia Amoruso, and more. Listen to Without Fail’s episode on Groupon’s Andrew Mason below or on iTunes.

I always wanted to ask about Groupon. When I was in my 20s, I was incapable of doing anything, let alone running a 10,000-employee company.
I mean, the whole experience now seems like this fever dream that almost happened to someone else.

In 2006, you were not an entrepreneur.
Yeah, I’d gone back to grad school in public policy at the University of Chicago. I got about three months into it before someone that I had worked for previously called me up and said, “Hey, why don’t you drop out of school and I’ll give you a million bucks to come and start this thing.”

That’s pretty crazy …
I was in Chicago. I wasn’t aware of the entrepreneurial Silicon Valley technology culture. So the idea that someone would just give you money was completely foreign.

So this billionaire Eric Lefkofsky calls you and says he’ll give you a million dollars to start … what?
The idea was this website called the Point. It was simply a resource for a user to say, “I’ll do something but only if a critical mass of other people do it with me.” I’d had a bad experience with a cable company. I was pissed off that I couldn’t just get à la carte cable channels or something dumb like that. And I was like, Whoa, it would be great if there was a website where I could get together with enough other people that we would create a rational financial incentive for them to listen to us, and we’ll say we’ll all switch to a competitor unless you do what we want. It could also be about raising money — we’ll all donate to a cause but only when we hit a certain tipping point of funding.

So it’s like sort of like Kickstarter and Facebook and MoveOn and Groupon all sort of combined to one platform?
Yes, exactly.

How did it go?
I had no idea what I was doing. In the early days, we would buy a bunch of academic books on collective action, and me and a couple of the people who were working there would just sit around and read.

What books were you reading?
Who’s that famous community organizer? Saul Alinsky. Stuff like that.

How many employees did you have at this point?
Maybe like five to seven employees, something like that: developers and a couple community-manager-type people.

What were you hoping for, and what was actually happening?
Because it was so abstract, once we launched it nobody knew what to do with it. Even we didn’t know what to do with it. I remember doing an interview on NPR, and they’d asked for an example of a campaign that we were organizing, and the example we gave was a campaign to raise a billion dollars to build a dome over Chicago to protect it from the cold in the winter. And for me, it was a good thought piece on how you might apply the model. And that’s cool, but we didn’t have any good examples of things that people actually could do with the site. Eventually, people on their own started coming up with some interesting ideas. And one of those was group purchasing. People would start campaigns to get ten people to buy something at a discount, but only if those ten people got together.

Do you remember the first time you noticed that on the site?
It wasn’t like getting hit on the head with an apple, where you’re like, Eureka, this is going to be a multibillion-dollar business! In many ways, it always felt like kind of the dumbest and least inspiring application of the model.

What led to going all in on the group buying?
Desperation. We had been at it for about nine months, and there was no growth, and Eric and our other investors  were saying, This isn’t going to work. There was a risk of losing our funding.

Was that something Eric told you?
I don’t remember the exact words, but it was very explicit that he felt it might be better to shut it down and distribute the money back to investors. So we laid off a couple of people to bring our burn rate down to something like $40,000 to $50,000 a month. That would give us a little bit of runway to experiment with whatever ideas we could. One of the ideas was group buying, and the idea we decided to go with — instead having this marketplace — was to find one deal a day and email it to a list of people who would be interested. And that was the first version of Groupon. It was called getyourgroupon.com because Groupon was taken by some guy in England.

What was the first deal that you guys did in Chicago?
We got to the point where we were ready to launch. We had a couple businesses that were kind of interested, but we didn’t have anything that was really, really great. The first deal we were going to run — and this could have been it for Groupon — was called Christie’s Sports Lingerie or something like that: garter belts that were sports themed. It was so ridiculous, and you have to realize the whole team was in a kind of mood of desperation by this point. And so we were like, Whatever, got to try something

So you’re days away from that being your first deal. What happened?
We got this other deal at Motel Bar, which is the bar and pizza place downstairs from our office. I think we sold 20 of those the first day that we ran it. The way that we sold them was by going to the lobby of the office building, or standing outside of Motel Bar, and handing out little postcards that we had printed. I remember standing behind people in some of the other office spaces in the building and actually walking them through signing up and saying, “You go here every day; why would you not get this?” It took a lot of manual hand-holding.

Just to get 20 people to act?
Every one of those 20 was a labor of love.

When did you realize that this was working?
If I’m remembering correctly, there was a sushi place where we sold maybe 500 Groupons and that was like, Wow, we’re on to something here.

How are you feeling then?
It was incredibly intense. Every day, we’re putting a new deal up. We’re trying to figure out how to launch in new cities. And I remember my team and I going to the mat — really fighting it out — on what deals we were going to run. Someone would say, “Hey, let’s do this indoor soccer deal,” and someone else would be like, “No, that’s the dumbest thing — people would hate it!” We were so passionate about it. In a way, we were behaving like children. But it was beautiful to care that much about something.

Groupon was six months old when we decided to get into another city, Boston. We sent a couple of our people out there to go door-to-door and try to sign up some businesses. We went into a business, and they said, “Don’t be so pushy. You were here a week ago, and we told you we’d get back to you.” And we were like, “We weren’t here a week ago. What are you talking about?” They gave us the flyer, and it was the first Groupon clone. They had like literally copied a bunch of the writing on our website and sales materials. It was completely shocking. I was new to business. I always thought I was going to be a musician, and in that world we would call this plagiarism. But in business, I was learning, it’s called competition. I hated that someone would shamelessly copy what you’re doing in order to make a quick buck.

What offended you most?
It was my idea, my thing. At that point in my life, I got a lot of my satisfaction from having that. It felt like cheating. Once the model had been validated, we were in a situation where we had a backlog nine months deep of people who wanted to be featured on the site. And because we were stalwarts about running only one deal a day, we couldn’t serve that demand. So the whole model invited the existence of these competitors to sop up the excess demand from these businesses.

Did that competition drive this push for growth?
A lot of the growth was definitely driven by realizing that if we didn’t do it, then they were going to eat our lunch. It felt like, This huge opportunity is out there, and we need to run as fast as we can to grab it before somebody else does. It was March or April of 2009 when we launched Boston, and then it was three months before we launched our third city, which was either New York or Washington, D.C. We kept on cutting it in half, and we got to the point where we would launch a city a month and then two cities a month and then four cities a month. We came up with this recipe for launching a city, and it just became rinse and repeat.

I remember an investor coming to the office when we were 20 or 25 people, and saying, “Before you blink, there’s going to be 100 people in here.” And I was like, 100 people working for me? How does that work? Like how do you how do you manage 100 people? You must have had this experience where, one day, you wake up and have hundreds of people working for you and it’s kind of working and it’s really hard to imagine how something like that couldn’t be a complete shit show.

Oh, it’s crazy. We went from 20 to 80 over the course of one year. You’re talking about adding thousands of people over the same time period —
Well, the hardest part is actually kind of 20 to 100. I’d say that’s the most disorienting part.

Really? Zero to 100 felt different from 100 to 2,000?
Something like that. Like once you get over your kibbutz or whatever, that all feels like a process of being reborn. Your relationship with people changes. You start thinking about people that work for you differently than when you’re thinking of each one as an individual human. A lot of them you never even see. Once you cross over to that point where you’re like, I don’t know everybody’s name anymore, when you need to relearn how to do your job. You just start reading these bullshit business books like Good to Great — I mean, it’s a great book.

Were you reading those books?
Yeah, I was reading everything I could to try to figure out what the fuck was happening to me.

I think there is this thing where all of a sudden you’re a CEO and it sort of starts as a joke like, Ha, ha, ha, I’m a CEO. I would say it ironically a lot. And then all of a sudden I’m like, No, I am. And I can’t just joke about it anymore because everybody now is working for me.
I also had a really hard time accepting that. I remember Forbes wrote an article putting us on the cover, calling us the fastest-growing company of all time. And I hung it up in the lobby of our office and I surrounded it with cover articles about like Webvan and —

Myspace —
Yeah, they were all, like, the “hottest company ever.” All these companies that had gone under. And it was this kind of like morbid joke that just came from my discomfort with the insanity of everything that was happening.

This would’ve been 2010, two years after you started the company—
That was a period for Groupon when we almost sold the company. It started with an offer from Yahoo. Groupon was going gangbusters; it seemed like there was no end in sight. We were doing over a billion dollars topline and just growing superfast, just this rocketship ride. And then all of a sudden we have to contend with this offer. And to me that was the least attractive idea in the world. I was thinking about wanting to build a company that was going to live on for generations. I think the offer started out something in the order of $2 billion or $3 billion. We thought that it could be a bigger business. There is something safe about just getting out, but the idea of going to work at Yahoo? It just was not an inspiring idea.

But we had to take it seriously; the board wanted to take it seriously. The head of corp dev from Yahoo came to Chicago. I went out to dinner with him, and I remember being so depressed about meeting with this guy. I had been vegetarian at that point for about ten years, and without even thinking about it, when it came time to order, I was like, “I’ll have a steak.” I was just like, Well, if I’m going to sell to Yahoo, I’m going to do it eating steak. This is it. If I’m going to sell to Yahoo, what’s the point in having values or believing in things?

What did selling to Yahoo represent, exactly?
It was kind of this graveyard for cool companies. That’s what we were afraid of. I just didn’t want that. I wanted this thing to be successful and as big as we wanted it to be, right?

I’m filtering everything you’re saying through my own experience. I want to be true to some vision that I have, but at the same time I want to grow the company and be really successful. It sounds like this was that moment for you where you were sort of like, If we sell to Yahoo, I’ve just gone to the dark side.
Yeah, growing a company is kind of like a process of having principles methodically beaten out of you. The 18-year-old version of myself was listening to Fugazi and had strong opinions about the way the world was supposed to be and not be. Everything becomes a lot more gray once you actually go through an experience like this. That nuanced understanding of the world is the most beautiful thing that, as a human being, I took away from my Groupon experience — just realizing how little can be explained by, for example, people or organizations being called evil, crazy, or stupid.

So you get the offer from Yahoo. You eat your steak. What happened?
Okay, so while the Yahoo thing was happening, we reached out to Google and said, “Hey, we have an offer from Yahoo; are you guys interested?” We started talking to them, and we got very close. We were literally at the peak of our hypergrowth when it came time for the board to meet and discuss it. We looked at our numbers, and we were just growing faster than ever. We looked at the offer we were getting from Google, and Google seemed like it could have been a great home. But we felt like it was fun to do an independent company, and we thought we could make more money doing it that way.

You’re not going to be acquired by Google — you’re going to become Google, essentially?
We saw ourselves as wanting to reach that upper echelon of technology companies and turn into something that was one of the internet’s treasures, as our COO was fond of saying. When we were making that decision, it was us and the board. And we’re sitting in a room talking about Do we do it? Do we not do it? And I remember making what I thought was a very good point, which is to say, “Well, look, they’re offering about $5 billion. What’s the worst case here? Let’s say we turn it down. We keep going, and the company tanks and ends up being worth a billion dollars. We’re still going to make a lot of money based off that. That’s still great, right?” They kind of like shook their head and were like, “Andrew, that’s not the way that this works.” That’s what they said: “That’s not the way that this works.”

So you passed. How did you feel about that decision?
Great! I mean, it was a hard decision. But it was energizing to decide to cast these things off and go it alone. There had been all these rumors in the press, and nobody in the company knew what was going on. We had our annual end-of-the-year, all-hands meeting, where everybody in Chicago — 500 or more people — are all in a theater, and everybody from all the other offices are dialing in. We thought we were going to be acquired by Google, and we were going to announce it at this meeting, so we bought like 500 huge yoga balls that we were going to give to all the employees on the day, as if it was a gift from Google. Google had this reputation as being the place where they had yoga balls — that was basically what we knew about Google.

So we had all these huge yoga balls and nothing to do with them. I came up onstage, and I said, “Hey, guys, I have some really exciting news. We’ve been acquired by Yahoo.” We hired an actor to play Yahoo CEO Carol Bartz, and she was far enough away that nobody could really tell. And she comes out onstage and people are clapping in a semi-shocked way. And so this actress goes — she had a reputation for swearing a lot — “What’s up, fucktards? Really excited to have you as part of the team! I’m going to get some pizza. I can fit four. Who’s with me?” And then she walked off the stage.

Then I came back and was like, Just kidding! But we had to figure out what to do with these yoga balls, so we said, “Hey, we have a gift from Salesforce because we’re a big Salesforce customer and they sent us a Christmas gift.” We played this video of Aaron on our team dressed up as a fake CEO of Salesforce, and he sings, “Salesforce balls / Salesforce balls / Everybody get your Salesforce balls.” It lasted 20 minutes of him singing while we passed out these giant yoga balls to everybody in the auditorium. And that was it. I don’t know why we did that.

In in this meeting, did you also say, “By the way, we’re not going to get acquired and we’re shooting for the moon?”
Yeah, we’re shooting for the moon. And the board is happy, but is like, Okay, we’re not going to get acquired. But we’ve got to go public. And the argument to go public was, Well, why not go public? What’s stopping us? And I was like, I don’t know. I’m not crazy about it. I hear all kinds of horror stories about it. But between selling to Google and going public, sure, I’ll go public.

Just remaining a gigantic private company seemed impossible?
You have to go public at some point. The way we were structured and the way we had raised money, we were just engineered so that, if we weren’t going to get acquired, that was the only exit option for us.

How much did the money play into it?
When the company was big enough, I got a financial adviser and I said, “Hey, what’s the amount of money that I need to make that I don’t need to think about money anymore?” And he said $15 million or something like that. So I always thought, As long as I’m north of that, then who cares? I was thinking about the value of the company and creating shareholder value and all that stuff, for sure. But it was never getting back to how is this going to affect my personal wealth.

How long was it before you eventually did go public?
We passed on Google in December of 2010. And we went public in the fall of 2011.

So just a year later. What did it feel like to finally go public?
When you go public, you go through, I think, a 90-day quiet period during which you’re pretty limited from being able to say much about the company or defend the company in any way. That was like this crazy hazing. Before then, we were the darlings of the internet. There had been very little negative press, and everything was going swimmingly. And then we entered this quiet period, and we just got hammered. It had turned the overall tenor from this intense but wonderful ride to this kind of embattled, highly stressful fight.

Your accounting methods were scrutinized by the SEC. In October 2011, an analyst told the Associated Press, “Groupon is a disaster. It’s a shill that’s going to be exposed pretty soon.” How did that manifest in the way you ran the company?
It became a huge distraction. I also want to make it clear that I totally take responsibility for everything that happened. So none of this is meant to be passing the buck in any way. I’m the one that made all these decisions, so it’s totally on me. We were dealing with so much criticism. And the guidance that you get from people who are taking companies public is, “Oh, you just ignore it. Ignore the stock price. Blah blah blah.” Well, you can ignore the stock price all you want, but your employees are going to be paying a ton of attention to the stock price. They are going to be paying attention to all the press, even if you’re not reading it. It’s going to affect whether they decide to stay at the company or leave the company. It’s not something that you can just ignore.

So it got to a situation very quickly where for me and my executive team, 50 percent of our time was spent doing things that had nothing to do with building a great company and had everything to do with managing things that were unique to the fallout of this one decision to go public. It just became chaos.

So that went on for a couple of quarters and then I got fired in the beginning of 2013.

How did you get fired?
A couple of members of the board had been agitating to get me replaced in October 2012, and I didn’t want to go. We were at a board meeting for our end of Q3, and the board decided, “Okay, Andrew, you get one more chance here. Deliver a great Q4 and let’s take it from there. But we still believe in you.” Two weeks later, me and my CFO were in Barcelona meeting with some investors when we get a call from our controller in France. They had forgotten to accrue a profit-sharing tax, and we had just lost $10 million. So that was it. We missed our numbers. That was the end. I called the executive recruiter and said I wanted to recruit a great CEO.

That December, CNBC’s Herb Greenberg named you the worst CEO of the year, and you would soon be posting a $81 million loss in Q4. You knew at that point —
That I was not going to survive. I talked to this executive recruiter about starting a process — I wasn’t talking to the board about any of this. I came to the board meeting with this plan in place saying, “We’re going to hire this CEO, when he comes in, I’ll step aside very peacefully.” And they’re like, “No, we’ve got to let you go today.” It was just me and two board members who were friendly, nice people. The two board members told me, “We’ve got to let you go today, and we’re going to put in these other two board members as co-CEOs.” I didn’t feel like that was the right decision. I said, “If you guys want to make that decision you can, but you’ll have to fire me.” And they said, “Don’t make us fire you. Step aside. You’re going to regret it for the rest of your life if you make us fire you. You say, Blah blah blah, whatever people typically say.” And I said, “No, because it’s not true. Because if this is the decision you’re going to make, you have to fire me and I don’t want to have a story out there that’s not believable or not true.” So that’s what happened.

What were your feelings when they said you were fired?
I was sad. I was crying. I remember I was crying.

Out of anger or sadness?
I mean, it had just been nonstop for however long that had been — five or six years. It had been nonstop, and it was all over. Right at that point, it was over, and I was worried about the company. I was worried about my team. I was just worried about what would happen. But it was, in some ways, a catharsis. Once the company was public, I didn’t enjoy it. I’m much happier now that I’m not there. That said, if I was transported back into that same decision at that same moment and they said, “Do you want to give it another shot, or do you want to do it another way?” I would have kept going just out of a sense of responsibility to the company.

When I first met you, one of the things that everybody said was I had to read your “I got fired” letter.
I would watch these CEOs resign in tumult, when everybody knew they were fired, and yet they still felt the need to put up this façade, as if it was their own choice. I just didn’t want to live with that for the rest of my life. I didn’t want to have to introduce myself to someone and have them know that they’re thinking that I’m this liar.

So they said that if you make them fire you, you will regret it for the rest of your life. Was that correct?

It sounds like it’s the opposite. You’re happy about the letter?
I’m happy about it. I’m not sure I’m happy that it’s the thing I’m best known for. People will meet me and say, “I loved your letter.” I wish people were more like, “I love that you built this great company.” I don’t know what the end is that everybody else is expecting, or what success looks like … That you’re ultimately deified and, you know, you rise into CEO heaven? But for me, this is more than I ever expected. It was a pretty good run. And I’m proud of a lot of what we did.

There was one other part of the letter that says your biggest regrets are the moments that you let a lack of data override your intuition of what’s best for the customers. What did you mean by that?
Groupon started out with these really tight principles about how the site was going to work, really being pro-customer. And as we expanded people in the company would say, “Hey, why don’t we try running two deals a day?” “Why don’t we start sending two emails a day?” And I’d think, That sounds awful. Who wants to get two emails every single day from a company. And they’d be like, Sure, it sounds awful to you. But we’re a data-driven company, so why don’t we let the data decide? Why don’t we do a test? And we’d do a test, and it would show that maybe people would unsubscribe at a slightly higher rate, but the increase in purchasing would more than make up for it. You’d get in a situation where it doesn’t feel right, but it does seem like a rational decision.

The problem was when you’re in hypergrowth like this, you don’t have time to see what is going to happen to the data in the long term. The churn would catch up with you. People would unsubscribe at higher rates, and then, before you know it, the service has just turned into something — if you look at Groupon now, it’s just this vestige of what it once was. There’s no real copywriting. It’s a marketplace of coupons. It’s still a service that a lot of people get a lot of value out of, but it doesn’t have the spirit it once did.

There are certain things you have to be religious about in the company. That’s what I’ve taken away from that: There are some things where you have to say, “I’m sorry. I’m not going to look at the data on that. This is just what we’re going to do. We know that it’s right, and there’s nothing that’s going to shake us from that.”

Until starting this company, I was a journalist and every decision was based on my gut. One of the things I struggle with now is, when do you trust your gut? And, if you’ve got a bunch of people saying your gut is wrong, when do you believe those people? Do you know what I mean?
I don’t know what the answer to that is.

I wish there were an answer.
I’m mostly just listening to you talk and thinking, Man, I’m glad to not be doing that anymore.

This interview has been edited and condensed for clarity.

The Super-Quick Rise and Even Faster Fall of Groupon