"Groupon would have never gotten this big without that late-stage money," said Bill Gurley, a general partner at Benchmark Capital, a venture capital investment firm.
But now, some of the big investors who got in early are selling their shares, The Wall Street Journal reported Monday.
Silicon Valley investor Marc Andressen's investment firm Andressen Horowitz is one of those pulling out, selling all 5.1 million of its shares recently.
Andressen Horowitz jumped in before Groupon went public in November, spending $40 million to buy shares at $7.90 apiece.
Despite share values floundering, the firm made $14 million when it cashed out, the Journal said.
In addition, Maverick Capital Ltd. owned 6.3 million shares in Groupon, which it has reduced to less than 2 million shares and Fidelity Management & Research Co., a prominent mutual fund, has unloaded about a third of its Groupon holdings.
Others, such as Kleiner Perkins with 8.2 million shares bought 11 months before Groupon's initial public offering, and T. Rowe Prices are holding onto their shares or increasing their investments.
T.Rowe Price now owns 12 percent of the company and investment bank Morgan Stanley bought 20 million shares in the second quarter of the year.
The bigger pictureincludes Internet giants Facebook and Zynga, where shares are also floundering, sparking concern that Internet firms are doomed to fall short of expectations.
At Groupon, several company directors, including Howard Schultz, the head of Starbucks, have said Groupon went public too soon.
Groupon Chief Executive Andrew Mason thought otherwise.
"Our board unanimously approved engaging investment bankers to explore an IPO, then months later unanimously approved us filing the S1, and then months later unanimously approved us going public," he said in an email.
The S1 is a form used to register a company's securities with the Securities and Exchange Commission. It is also a primary document investors use to research companies prior to an initial public offering.