Investors value LinkedIn at $1 billion
LinkedIn Corp. has made a big connection with investors, who are valuing the professional networking company at more than $1 billion.
LinkedIn said Tuesday that it had received $53 million in venture capital funding from Bain Capital Ventures and three existing investors in exchange for a 5% stake in the Silicon Valley company.
LinkedIn has landed one of the richest valuations for a Silicon Valley start-up since Microsoft Corp. handed Facebook Inc. an eye-popping $15-billion valuation late last year.
Facebook’s valuation triggered a social networking gold rush. Ning Inc. and Slide Inc. seized valuations in excess of $500 million, and RockYou came in at $200 million to $300 million.
Amid relentless buyout speculation from the likes of Microsoft and News Corp., LinkedIn executives remained mum on the possibility of an initial public offering but say they’re charting an aggressive course as an independent company. The 5-year-old firm has been profitable since 2006.
With the infusion of capital, LinkedIn is poised to roll out corporate services and explore potential acquisitions as it swiftly adds users, customers and employees, Chief Executive Dan Nye said.
“We have a strong balance sheet and a strong business model,” he said. “Now we have the luxury of being able to focus on building a great company.”
Silicon Valley investors believe that social networks, with their rapidly growing audiences, will capture a growing share of advertising dollars.
But Mountain View, Calif.-based LinkedIn is a little different. It connects professionals with shared contacts and interests.
With 23 million members in 150 countries, more than half overseas, LinkedIn has said it could generate as much as $100 million in revenue this year from premium subscriptions, blue-chip advertisers, job listings and corporate services. It’s all part of a massive shift, dubbed Enterprise 2.0, as corporate America increasingly turns to the Web for software and services.
“There are enormous opportunities to take the company to greater heights,” Bain Capital Ventures partner Jeffrey Glass said.
For months, rumors have circulated in Silicon Valley that LinkedIn would raise a fourth round with a $1-billion valuation rather than go public or be bought out. Before this latest round -- which included previous backers Sequoia Capital, Greylock Partners and Bessemer Venture Partners -- LinkedIn had raised $27.5 million. It did so largely by tapping the vast personal network of its founder, chairman and largest shareholder, PayPal veteran Reid Hoffman.
“Now the pressure is on us,” Nye said. “We have to build a company worth many times that.”
An invitation-driven service, LinkedIn boasts it averages a new user every two seconds. Research firm Nielsen Online says LinkedIn is pulling in 146% more unique visitors year over year.
In May it was the fourth-most-popular social network, with 7.7 million U.S. visitors. Its audience stats are the kind that impress advertisers: The average user is 41 years old and makes about $110,000 a year.
LinkedIn also has drawn publicity for featuring questions posted by Microsoft founder Bill Gates (“How can we do more to encourage young people to pursue careers in science and technology?”) and presumptive Democratic presidential nominee Sen. Barack Obama (“How can the next president better help small business and entrepreneurs thrive?”) that elicited thousands of answers from its users.
CEO Nye has been a driving force behind LinkedIn’s rapid growth. The Harvard Business School graduate got his start in the management training program at Procter & Gamble Co. before making his mark at Advent Software Inc. and Intuit Inc.
Since Nye joined LinkedIn in February 2007, he has added top executives and increased the company’s size to 310 employees from 60.
David Sze, a general partner with Greylock who is also a Facebook investor and board observer, bet on LinkedIn when it had just 30,000 members. Now that it has become a dominant player, he said, “this is an exciting point in the company’s history.”
LinkedIn faces rising competition from a bevy of formidable rivals, including publicly traded German professional networking site Xing.com as well as niche players in all segments of its business.
But it appears to have the momentum in professional networking with none of its competitors boasting such robust revenue streams, said Forrester Research analyst Jeremiah Owyang.
“LinkedIn has already demonstrated it has the market know-how to provide a business utility,” he said. “It is one of the few social networks to have done it.”