Living Social valued at $3 billion after capital raising, speculation builds on Google probe

US group buying giant Living Social has raised $400 million for expansion in a capital raising that values the company at $3 billion.

The raising, which included Institutional Venture Partners (which has also invested in Zynga and Twitter), Lightspeed Partners and the companies biggest shareholder, Amazon, could eventually increase to $550 million if shares set aside for existing investors are sold.

Living Social says it will use the funds for “aggressive domestic and international growth and continued product innovation”.

According to a report in the Financial Times, Living Social has told investors it will increase headcount from 1,300 to 3,000 by the end of the year and will expand into 12 countries.

The company’s gross revenue – that is, turnover before the money it pays to merchants is deducted – will be $1 billion this year.

The company says it has 26 million members around the world.

The capital raising is the latest in a string of high-profiled tech capital raisings that have occurred in the last 12 months at bullish valuation.

Facebook raised $1.5 billion at a valuation of $50 billion in late 2010, while Living Social’s great rival Groupon raised just under $1 billion earlier this year at a valuation of about $6 billion.

Amazon invested $175 million in Living Social in late 2010 at a valuation of somewhere around $1 billion, so would appear to have made a solid return on its original investment very quickly.

Meanwhile, Google shares dropped by 3% overnight after reports that the Federal Trade Commission is considering launching a probe into the tech giant’s dominance of the search market.

According to Bloomberg, the FTC will wait to hear news about whether the Justice Department will block Google’s takeover of ITA Software, which is seen as having the potential to reduce competition in the travel search market.

Google is already the subject of a European Commission investigation for its dominance of the European search market.