Chump Change for Groupon | Bleader

Friday, February 4, 2011

Chump Change for Groupon

Posted By on 02.04.11 at 08:30 AM

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One of the odder episodes in not one but two ongoing local news stories — the state of Illinois' financial collapse and Groupon's surge from nowhere to master of the universe status — was last October's announcement that Illinois was awarding Groupon a "$3.5 million business investment package."

The package combined tax credits and job training funds. Groupon's end of the deal was to create 250 new jobs in Chicago over the next two years and maintain them through 2020. "This investment package," explained Governor Quinn, "will help this fast-growing and cutting-edge company expand in Illinois, creating even more good jobs and great deals."

A few weeks later Groupon made much bigger headlines when it turned down a reported $6 billion buyout offer from Google. This dramatic decision raised a question: Why in the world would our destitute state offer $3.5 million to a company so flush its visionary young leaders could soon say no to $6 billion?

Then again, Quinn was in a tight race for reelection, and who knows how much he thought he could be helped by quality face time with those leaders on TV, sounding a little visionary himself?

The state money and tax credits Quinn promised Groupon will be spread out over ten years, on the condition that Groupon wisely and appropriately allocate it — i.e., in hiring, training, and retention. But according to reports, Groupon is hiring locally at the rate of 150 new employees a month, which means that since October it's already hired twice as many people in Chicago as the state requested it hire in two years.

This week's media story in the Reader is about Groupon — specifically, its policy, until very recently, to require applicants to sign noncompete agreements before it would consider hiring them. It was an eccentric — not to say, outlandish — demand, but when you're young and entrepreneurial and the world seems to be lining up to give you money, eccentric decisions are often made. Perhaps taking Quinn's shilling was one of those.

"Obviously, they don't need the money," said Paul O'Connor, a former deputy director of the Illinois Department of Commerce and Economic Development (in his day the Department of Commerce and Community Affairs), which administers the grant. But because the money's "dribbled out" over a long period, and so many strings are attached, O'Connor turned my question around. He told me, "I'd be more interested to hear why Groupon took the money. The day will come when the Department of Commerce auditors show up, and it'll be, 'Who are these guys? Who called them in?' They're there forever. After the frosting loses its sweetness, you'll still be hearing from Springfield."

Why did Illinois offer Groupon such a deal? "Companies like Groupon can locate anywhere," says a DCED spokesperson. "We're pleased they chose to make this investment in Illinois." Why did Groupon take it? "We don't have anything else to say on the subject," says a Groupon spokesperson.

In ten years, where and what will Groupon be? The basic business idea — the twofer — is as low-tech as a high-tech idea can be, and it's easy to duplicate. Google itself is reportedly preparing to compete with the company it couldn't buy. It's easier to predict where the state of Illinois will be in ten years. In bankruptcy perhaps, but also in Groupon's books.

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