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Summary:

Yelp, like Facebook and Zynga before it, has taken a large late-stage funding round that includes measures to cash out employee shares. In doing so, the local reviews startup effectively negates internal pressure for a public offering to make early employees rich.

Yelp, like Facebook and Zynga before it, has taken a large late-stage funding round that includes measures to cash out employee shares, effectively negating internal pressure for a public offering to make early employees rich. As had been reported but not confirmed, Elevation Partners announced today it was buying $25 million worth of Yelp’s Series E preferred shares plus up to $75 million more from vested employees and other eligible shareholders.

San Francisco-based Yelp had been in widely publicized negotiations to be acquired by Google in December, but they fell through. Clearly the local reviews company is now setting itself up to take the independent route. Yelp said in a release it had 26 million uniques in December, with its number of reviews doubling last year to top 9 million.

Yelp, which has put much effort into cultivating reviewers and negotiating its tricky relationships with local businesses, was to some extent left out of the recent hype cycle associated with creative uses of mobile location, social connections and reviews by companies like Foursquare and Gowalla. However Yelp recently introduced a mobile check-in function and now surfaces user visits in reviews.

The Elevation funding, which comes along with managing partner Marc Bodnick taking a seat on Yelp’s board, is to be used for growth in Canada and Western Europe as well as for mobile application development.

Yelp’s revenue was reportedly $30 million for 2009, which might not have been enough to excite the public markets. Elevation joins the Russian investor DST, which provided similar rounds for Facebook and Zynga, helping these startups find a middle ground between being acquired and going public. While many had hoped an IPO from a solid consumer Internet startup would liven up the stock market in 2010, Facebook has already declared itself out of the running.

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  1. Didn’t get an IPO, google rejected it (and made his own version) and yet some VC put $25M down in the 5th round?

    Innovation my ass! If there’s word that describes the Valley today that’s INBREEDING

  2. The Next IPO Boom Wednesday, March 10, 2010

    [...] IPO candidates. Yet it seems rather than rush for glory in the public markets, these companies are inclined instead to take in private equity and stay private. Facebook for example took a big slug from a Russian PE firm, and took itself out [...]

  3. Xpert Financial Offers Start-Ups An IPO Alternative: Tech News and Analysis « Thursday, December 30, 2010

    [...] were 119 IPO filings, but that number increased to 263 in 2010, according to Renaissance Capital. Late-stage funding for big start-ups has also helped some of them delay going public. With XPO in their tool kit, start-ups can cash out [...]

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