Bloomberg on Yelp’s Funding Round

Bloomberg writes about the potential $50MM Elevation Partners investment in Yelp:

Yelp is in talks with Elevation Partners LP, the biggest investor in Palm Inc., to raise another funding round, the person said. The deal, which isn’t yet certain, may include an option for employees and investors to sell shares, said the person, who requested anonymity because the talks are private.

The move mirrors agreements struck in the past year by Facebook Inc. and Zynga Game Network Inc., which took investments from Russia’s Digital Sky Technologies. The deals helped fund the companies’ growth while giving investors and employees a way to sell their stock without the scrutiny and distraction of an initial public offering.

Also:

Yelp has so far raised $31 million in funding and was valued at $215 million after a $15 million investment by DAG Ventures in 2008 . . .

And this was interesting:

Yelp was profitable for part of last year before deciding to re-invest its earnings to fuel more growth, the company has said.

Yelp has had tremendous success on the consumer side of things. Notwithstanding the above remark about being profitable it has had less success among SMB advertisers. And the fact that it only sells its own traffic is another potential challenge over time as the Internet fractures and fragments further. Most local sales channels sell a network of sorts that includes O&O properties as well as third party traffic. In this way Yelp and Google are more similar than Yelp and IYPs like Superpages or Yellowbook.

Finally there’s the (remote) possibility that another site/company or collection of sites could become more interesting, sexy, cool, etc. to a core of Yelp users. While FourSquare was unlikely to unseat Yelp or materially threaten it (the way say a Facebook potentially could) Yelp isn’t taking chances, adopting a mobile “check in” feature in its iPhone app upgrade. That feature is also one of the central aspects of FourSquare; however it in fact pre-dates FourSquare.

Like Google but on a smaller scale, Yelp has had great success in making the leap into mobile, which presented an opening for other companies to siphon away users. But that hasn’t happened.

Some investment is coming; some employees may cash out but the question becomes where does Yelp go from here?


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