LinkedIn Gets Cash Infusion
Internet whiz kids Marc Andreessen, Josh Kopelman and Joe Kraus share something besides the jackpots they reaped during the dot-com boom.
All three have invested in LinkedIn, an online networking service that connects people with common friends and work interests. In 18 months, LinkedIn has built a following with an invitation-driven service that encourages members to share their Rolodexes to help find jobs, fill jobs and increase sales.
That the Mountain View, Calif.-based company hasn’t even started to generate revenue isn’t viewed as a problem. “It still has a way to go, but this should be a very profitable business,” said Kopelman, who sold his e-commerce site Half.com to EBay Inc. four years ago.
The enthusiasm for online networking has spawned investments in several variations on the theme, including the companies behind Friendster.com, Tribe.net, Spoke.com, Ryze.com, Hipster.com and DudeCheckThisOut.com. And the fascination with online networking has caused some analysts to wonder whether unrealistic expectations are being raised about a popular but unprofitable Internet niche.
“There is something good about all these networking sites, but the hard part is going to be turning them into real businesses,” said Forrester Research analyst Charlene Li.
In the biggest bet yet on LinkedIn, venture capital firm Greylock last week announced a $10-million investment. Sequoia Capital, one of the venture capital firms that helped launch online search engine leader Google Inc., had previously led a group of investors that anted up $4.7 million to help launch LinkedIn last year.
The latest cash infusion should be enough to ensure the company’s survival for at least 18 months, said Reed Hoffman, LinkedIn’s chief executive.
Hoffman and LinkedIn co-founder Konstantin Guericke believe their 30-employee company will become profitable before 2006 by relying on a mixture of advertising and subscriptions sold to some of the site’s 1.2 million users.
“We already know we have a number of users that are fanatical about the service,” Hoffman said.
