LivingSocial’s storefront at 918 F Street NW. (Photo by Benjamin R. Freed)
If only the deals offered to LivingSocial’s subscriber base were this sweet. The Post reports that Mayor Vince Gray is proposing a revamp of the District’s tax incentives for technology companies that would save the homegrown daily-deals website as much as $32.5 million between 2015 and 2020 in an effort to keep LivingSocial based in D.C.
Currently, LivingSocial’s Washington-based staff of 956 is spread out across six offices, the newest of which is the old Acme Stove building at New York Avenue and Seventh Street NW. But all that office space adds up in the city with the most expensive commercial rents in the country, and LivingSocial has previously expressed interest in consolidating in a building of at least 350,000 square feet. It’s also looking to go public in the future, the Post reports. The company, which posted losses of $588 million last year, is currently owned by its founders and a collection of investors, the largest of which, Amazon, owns one-third.
Gray has talked about LivingSocial a lot this year as part of a mayoral focus on the District’s growing high-tech sector. And keeping the five-year-old company rooted in Washington seems to be one of the key goals. Hence the proposed tech-incentive rewrite, which LivingSocial’s co-founder and chief executive, Tim O’Shaughnessy, told the Post is part of the tradeoff for staying in expensive D.C. rather than moving to cheaper suburban space.
“We’ll make a commitment to the District if the District will make a commitment to us,” O’Shaugnessy told the Post.
LivingSocial’s commitment to the District runs deep. Besides being formed here and taking all that office space, the company in February opened a brick-and-mortar storefront at 918 F Street NW in which it now hosts many of the culinary and artistic packages it sells on its website. (The building also houses one of LivingSocial’s offices.)
Much of the incentive to LivingSocial will come in the form of a change to the tax rate paid by its angel investors, the early funders who give startup firms their financial legs. Under Gray’s proposal, these investors at LivingSocial and other tech companies would pay a 3 percent capital-gains rate on their angel investments rather than personal income tax, which can climb to as high as 8.95 percent.
In exchange for the $32.5 million incentive, Gray expects LivingSocial to create $166 million in tax revenue over the next decade, his office said in a press release today. LivingSocial’s end of the bargain would also include hiring District residents for at least 50 percent of new positions (Gray expects the company’s D.C. staff to double in size), offering “social media classes for small businesses” and participating in the city’s Summer Youth Employment Program.
But this proposal, which will need the backing of the D.C. Council, is a much bigger deal than the last tech company the mayor courted. In January, Fortify.vc, a venture-capital firm that “incubates” web startups, moved from Sterling, Va. to a new office at 16th and K streets NW after a $100,000 grant from the city.
