100% correct and it really makes me wonder what the late round VCs were thinking. The only I can come up with is pure greed - willing to take an enormous risk for future IPO (above and beyond typical VC risk)

Well, If we're wildly speculating, we could also imagine kick-backs and money laundering.

I know nothing of Groupon's financing. I know Digital Sky was a large, late investor in Facebook. And they are controlled by a Russian oligarch.

Wealthy criminals are sometimes willing to invest in unprofitable businesses to launder money, buy influence and hope that a bigger fool will follow them.

If Yuri Milner is the Russian mafia money man. He is f*cked. Most of his investments are going to implode in a double dip recession, and bring down the rest of Silicon Valley elites.

There is one palatable explanation although I have not seen any confirmation: the early payouts assuaged investors and executives who might have preferred the Google deal.

Also, there are many examples of fantastically wealthy folks who remain quite motivated.

Oh, it's way worse than the late round VC's and the 5000 employees. All those small businesses don't get their share of the groupons immediately. When it implodes, and I think it will, thousands of small businesses will have the unenviable decision of whether or not they honor groupons they weren't paid for.

These investors are big boys, so if they wanted to buy out founders then more power to them. Early investors, the ones who would potentially be screwed by this, often have a provision allowing them to sell too. It's not a greed issue (implying morality), it's simply a stupidity issue.