I Almost Sold My Company to Groupon in 2010

Andrew Mason sat across from me at the worn wooden table. His recently hired COO, Rob Solomon, sat by his side. On the other side of the plate-glass window, a wintery Chicago River flowed by our restaurant. “How much would you need to sell Obtiva to Groupon?” Andrew asked. Was I about to sell my company?

Earlier that day I had made a routine visit to my largest and most visible client, Groupon, for a meeting with Andrew Mason, Groupon’s co-founder and CEO. In 2010, Groupon was proclaimed the “Fastest growing company ever,” by Forbes magazine. Its thousands of employees worked the proverbial “last mile” local market of restaurants, massage parlors, dentists, and zipline expeditions. Groupon offered daily deal emails for these businesses with hopes they could fill otherwise empty restaurant tables and dentist chairs. Most deals in the early days were of the “get $40 dollars of x for $20” variety. This meant of course low margins for the participating merchants but plenty of filled seats.

My relationship with Andrew started several years earlier before Groupon was Groupon. The founding team’s original attempt at leveraging group action and tipping points was The Point. One could list a social cause and recruit friends to support it. If enough did, it would trigger a tipping point that caused some group action such as collecting a donation.

The problem was, The Point never tipped.

A pivot was needed. And, so Groupon was born. It used the same group action and tipping point as The Point. Instead of supporting social causes, users purchased deals on discounted pizzas. And, teeth whitenings.

I founded Obtiva in 2005–five years before that conversation with Andrew and Rob. I had a vision of a small group of uber-talented programmers who would parachute into dysfunctional engineering teams and I.T. shops and bring order to the chaos and in turn, improve the skills of the software development industry. I didn’t start out thinking, “I’m going to sell my company in five years.” Let alone to the fastest growing company ever.

Obtiva grew rapidly. Thirty days after launching my one-person company, my sole client at the time, The Pampered Chef, asked me to start building out a team. I hired Tyler Jennings, the best engineer I’ve ever worked with and an eventual Obtiva partner. At the time he was a young gun just a year or so out of college.

Twelve months later Obtiva had about a dozen extremely talented programmers working for several clients.

Dave Hoover, employee number three and my first partner in the business, pulled Obtiva from the mainstream Java programming world to Ruby on Rails. From 2007 onward, budding entrepreneurs would come to us and ask for a “Ruby on Rails website that did x, y, and z.” They didn’t seem to care about the x, y, and z as long as it was built on Ruby on Rails. There was a mystical quality about Ruby on Rails at this time, maybe stoked by the charisma and ego of its inventor DHH.

Ruby on Rails was Obtiva’s wave.

By the time I met Andrew Mason and learned about The Point, Obtiva had grown to two dozen programmers and support staff. We had built a solid reputation in Chicago and the Midwest–with a budding new office in Denver–and that led to Andrew and his CTO Ken Pelletier reaching out to Obtiva in 2008, looking for a code review before The Point went live to the public.

Though The Point failed to lift off, not long afterward we were doing work for Groupon.

We had unknowingly hitched ourselves to a real rocketship. Within two years, Obtiva doubled in size, topping out at 50 programmers and staff, or Obtivians, as we called ourselves.

In the morning of that wintery January day back in 2010, Whitney Jasnoch (our sales lead) and I walked into Andrew’s office at 600 W. Chicago. After a quick smile, the first words out of Andrew’s mouth were, “So, are you interested in selling Obtiva?” I glanced over at Whitney, who had a rather surprised look on his face. Flustered myself (something Andrew took pride in inflicting), I told him we should grab a beer sometime and discuss the idea.

Of course, I thought he was joking. It was…not uncommon.

At 6 pm that evening I made one last check of my email before heading home. One stood out. It was from Andrew. “Let’s grab a beer tonight if you’re available.”

I was. And a few months later Andrew and I had a deal for Groupon to purchase Obtiva.

But, I didn’t sell my company to Groupon in 2010. While the lawyers were drafting the purchase agreement, I went on a long-planned three-week sailing trip across the Atlantic. I was cut off from nearly all communication with home and the world.

But things were moving quickly at Groupon–this was just 18 months before their eventual initial public offering (IPO). Around the time of my sailing trip, Groupon purchased a Silicon Valley startup. With the purchase came a new Executive VP of Technology. This changed everything. Groupon began plans to relocate its locus of software development to SV from its Chicago headquarters where most of its engineers worked.

With new engineering leadership, any technology acquisition–especially one that would bring 50 engineers with it–was put on ice. The new EVP would need to drive an acquisition this large.

How strongly can I say that I was devastated? Our people would have received nice equity grants and raises. We would all have worked to build something much bigger than Obtiva could ever become. And of course, it would be a nice exit for the Obtiva partners–an opportunity to derisk and stash away a nest egg.

After grieving for a few days, both Dave and I came out of the experience more committed to building Obtiva. We were going to pursue our current path with fervor. This was just a part of the ups and downs of entrepreneurship and we knew from experience we had to push through the downs.

I can say that we did do exactly that over the coming year. We grew another 30% from the time the 2010 deal fell apart to when Groupon did eventually buy us 14 months later on August 4, 2011. Yes, this story has a happy ending and next month is the 10-year anniversary of the acquisition.