In the three years before it went public, Coupons.com raised $202 million. But not all of that money went to building its business. About 35% of it was used to buy back shares from executives, early investors and other shareholders.
Coupons isn’t unusual. Several other tech companies that filed to go public since 2013, including Twilio and Zulily, spent between 16% and 35% of money raised from late-stage funding rounds buying out earlier shareholders, an Information review of IPO filings shows. Other tech companies, such as Square, accomplished the same objective through a different method. They arranged for outside investors to directly buy out employees or other early shareholders through company-sponsored tender offers. Either way, money that companies could have raised from investors to help pay for expansion was instead spent on buying out early investors or employees.