At Deal Site LivingSocial, Fast Growth And High Risk LivingSocial is one of many companies using daily e-mails to connect customers with local businesses. Despite stiff competition from Groupon, the young company is growing quickly, says CEO Tim O'Shaughnessy.
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At Deal Site LivingSocial, Fast Growth And High Risk

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At Deal Site LivingSocial, Fast Growth And High Risk

At Deal Site LivingSocial, Fast Growth And High Risk

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Every so often, a successful local company takes its business national. We'll report next on a firm that makes its national business local. LivingSocial is one of many websites working to connect local restaurants, stores, beauty shops and other enterprises with more customers. They do it in city after city. The other day, we walked into their offices in Washington, D.C., and we found a lot of people working between the exposed brick walls.

Ms. MOIRE GRIFFIN (LivingSocial): We've been growing tremendously, and already have folks living in the hallways.

INSKEEP: People have just had tables set up out here in the hallway space. We're squeezing past them.

We're walking past the cubicles with LivingSocial's Moire Griffin.

I notice a killer whale here in the space.

Ms. GRIFFIN: Yeah. It's so...

INSKEEP: A couple of giant, inflated killer whale - are they inflated, or some other kind of...

Ms. GRIFFIN: They're inflatable whales. The whale is very important to LivingSocial.

INSKEEP: How so?

Ms. GRIFFIN: If we have a deal that does really, really well, we say it whaled. It's a whale of a deal.

INSKEEP: Much of the workforce toils beneath those whales which hang from the ceiling. The deals may be a cheap restaurant meal, or an entire vacation package. And when we stopped by the desk of LivingSocial's Sean Quill, he brought up the website, showing the cities where the company operates.

Could you just start reading some of them off for me?

Mr. SEAN QUILL (LivingSocial): Sure. We're in Akron, Canton, Albuquerque, Atlanta, Austin, Baltimore, Baton Rouge...

INSKEEP: People in each of these cities get directed to promotions near them.

Mr. QUILL: The consumer, the merchant and LivingSocial have to bring value, as a collective. And if we do that, we all benefit.

INSKEEP: Hundreds of companies have elbowed their way into this swiftly growing market. Groupon is the largest and most famous. LivingSocial says it's growing fast, along with its workforce.

Mr. TIM O'SHAUGHNESSY (CEO, LivingSocial): I think in 2010, we're adding about a person a day.

INSKEEP: A person a day.


INSKEEP: We sat down with Living Social's CEO Tim O'Shaughnessy. He's 29, and his privately run company says it made hundreds of millions of dollars last year. O'Shaughnessy's challenge now is to manage his company's growth without losing focus.

Mr. O'SHAUGHNESSY: The pure hiring process and on-boarding and making sure that everybody understands the culture of the company and the business are difficult tasks. And if you get those wrong, it can be one of the most detrimental things that could occur to the company.

INSKEEP: It's funny. If I think about the company that I work for, they've been around for a few decades. If I start talking about the culture of the company, I may end up talking about something that's evolved over 25 years.


INSKEEP: What is the culture of the company here, given that it is so very new?

Mr. O'SHAUGHNESSY: Well, I think that it's important, especially with so many people coming on so fast, I almost have a stated culture, you know, having a culture of risk taking. I mean, one of the things I like to say around the office is if you're not making at least one decision a month where you are genuinely nervous about it, you're probably not trying hard enough.

INSKEEP: What's an example of a risk that has been taken recently?

Mr. O'SHAUGHNESSY: When we were really starting to grow this business, we actually started to go and advertise and promote our service in markets that we weren't live in. You know, we didn't have a ton of cash in the bank, but we so believed in the model that we said, you know what? We're going to really regret if we don't go and really try and use our balance sheet to acquire as many users and get as many people on the service as we can.

We completely threw our budget out the window. But we, in a very, very short period of time, launched a ton of markets, got a lot of users on the product and service, and basically said we're pretty sure if we get the growth that we think that we can do, that we'll be able to raise more venture capital funding, because the model should work.

INSKEEP: I'm remembering a phrase from back when the economy was better, people talked about the burn rate of different companies, the amount of time that you can survive on the cash you have available. Basically, you drastically shortened your burn rate gambling that you would get more revenue in in time, before you ran out of money.

Mr. O'SHAUGHNESSY: Correct. So we took our burn rate from about a 12-month time frame down to about a month-and-a-half timeframe in the span of about a week.

(Soundbite of laughter)

Mr. O'SHAUGHNESSY: And so it was a risk, and I certainly was nervous about it.

INSKEEP: So you knew that if this didn't work out, in six weeks, you were going to be out of cash?

Mr. O'SHAUGHNESSY: It was kind of a put your chips in the middle of the table.

INSKEEP: And you basically said, this is the moment we're going to go national. That's really what you were saying.

Mr. O'SHAUGHNESSY: That's right. You know, the space was evolving so fast, that it might get away from us.

INSKEEP: Somebody else would capture that space.


INSKEEP: Now that raises the next question, because you've got hundreds of people trying this. You must always be looking over your shoulder in a business like this. Somebody else might come up with something else slightly different, and you end up being the MySpace and somebody else ends up being the Facebook.

Mr. O'SHAUGHNESSY: I think if you are operating your business in a looking-backwards way, as opposed to looking forward, you've essentially changed the mindset from being offensive to being defensive. That's when you - your innovation starts to slip, and that's when you start to change the culture of the organization and really not be able to be driving ahead for market leadership.

INSKEEP: Last question: What's the gong about? There's a gong here in the office with us.

Mr. O'SHAUGHNESSY: When there's a big milestone, the gong gets broken out, and then it reverbs all the way through the office so everybody knows about it.

INSKEEP: I actually wondered if I was going to find out that my time was up for this interview with the gong.

Mr. O'SHAUGHNESSY: Well, would you like to close out with a good gong whack?

(Soundbite of gong)

INSKEEP: The man holding the mallet for the gong is Tim O'Shaughnessy, CEO of LivingSocial, a swiftly growing Web company.

(Soundbite of music)


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