LinkedIn Closing $13M Venture Round at $250M Valuation

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581610_dollars_in_focus.jpgLinkedIn is in the process of finalizing another venture round for $13 million, valuing the company at a reported $250 million post-financing valuation. Linkedin is projecting revenues of $45M to $60M next year and expects to hit $100M in 2008. A valuation of 5x sales is excellent (but certainly not over-inflated), and demonstrates the faith investors have both in the future of social networking as a whole and specifically in LinkedIn’s management team and demonstrated execution to-date.

Some comments from around the web:

Brian Balfour at Social Degree asks the obvious question and speculates on the answer:

So why would LinkedIN want to raise another $13 Million? I think there are two possible reasons:

1. LinkedIN is just trying to publicly display their valuation for a possible acquisition.

2. LinkedIN has plans to go balls to the wall in 2007.

I agree on both counts — two very, very good reasons for a 3-year-old company that has proven it can execute its business model, but has still only tapped a fraction of its potential market.

Valleywag is a bit more cynical:

The planned round, of $13m, seems at once too much and too little. I’m not quite sure why the Sequoia portfolio company needs more external funding if…LinkedIn truly turned profitable in March this year. And, if the company’s seeking to build up a hoard of cash while investors are ravenous for social networks, why not raise more?

Steve Safran at Lost Remote:

On my annual list of Stuff I Got Seriously Wrong was LinkedIn. I joined up a few years ago, and then didn’t really hear from anyone. So I thought it was passe. Classic journalist mistake: assume your experience is universal. All of a sudden, I started getting a ton of invites…

A number of journalists and bloggers have made the same mistake about LinkedIn. Bloggers tend to be even worse than journalists about assuming that their personal experience or situation applies to everyone, or actually that the experience of them and their immediate echo chamber is universal. The thing is, there are so many LinkedIn success stories available out there — they’re not hard to find if you look for them.

Cory Bergman at Lost Remote:

Which makes LinkedIn so valuable, in my opinion, is the feature that suggests open jobs to you, then points out people you have in common with the hiring manager. This has to be the most powerful feature I’ve seen on any job site.

I agree – very powerful feature that’s been available on LinkedIn going on two years now, and still many people haven’t discovered it. It’s worth noting that a few other startup services actually have that functionality, but without LinkedIn’s 9 million users to fill in the holes in the network, it’s not very valuable.

Zale Tabakman on the value of LinkedIn to the placement market:

Lets do some of the math.
If you are placing a 75K employee.
How much is LinkedIn worth to you? A 1,000 [per placement] seems reasonable and lets say you land 5 placements a year.
That means you are willing to spend 5000 a year on Linkedin.

Lets say there are 10,000 headhunters/companies willing to do that.

Therefore 10,000 x 5,000 = 50,000,000 in annual revenue and thats just the placement market.

I’m not sure this napkin-math would hold up in a business plan, but the order of magnitude seems plausible.

Zale also gave a great list of eight other ways LinkedIn is useful besides getting a job which I’ll cover in a separate post.

And for the “I’m not quite sure what to think of this” take on it…

Shixi Xie on Snow World:

It’s about time.. LinkedIn is an SNS that puts the technology and concept into very good use, unlike the pioneers which are most of the time, being used by people to scam and rape other people, especially the unsuspecting youngsters.

I presume he’s talking primarily about MySpace, since that’s the only one I know of that’s been in the news much about this (and I think most of the concern is perhaps not misplaced, but certainly disproportionate). If so, they’ve got the timing off, because LinkedIn actually launched about the same time as MySpace — mid-2003. But that’s another topic for another blog.

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4 Comments

  1. Scott, thanks for putting these tidbits here with your commentary. Very interesting.

    I think the most intriguing thing to me is how low this seems compared to Skype, MySpace, and YouTube. Its like LinkedIn is getting valued as a traditional business as opposed to the other three which seem to have been valued more as internet bubble-type companies. I’m not basing that on any particular evidence or research, just my impressions.

  2. Being profitable now is different to being the market leader tomorrow.
    LinkedIn did good in raising another round; I hope that they use this money to crack Germany and start building a presence in Asia as well (..but please stay with only one language; English)
    LinkedIn will also need to adapt to the key strength of XING/openBC, ‘interaction’ with its customer base;
    LinkedIn is not a passive network as claimed by a few bloggers but is a great tool I use on a daily basis;
    check out my blog on http://janmeise.blogspot.com/2006/12/linkedin-versus-xingopenbc.html

    thx Jan

  3. Most of its traffic from MLM’ers? LOL! OK… Sorry, Mark, but you clearly know not of what you speak. That’s an impression that has no basis in fact.
    First of all, since LinkedIn’s business model isn’t advertising-based, traffic doesn’t matter — it’s paying customers that matter.

    Secondly, MLM?!? Haven’t seen it on LinkedIn. The largest single segment of paying customers are recruiters, both internal and 3rd-party ones. But there are thousands of other customers paying to use it for lead generation, business development, sales acceleration, and so on.

    Web 1.0? If you think Web 2.0 means Ajax, and mashups, maybe, but Web 2.0 isn’t about that — it’s about social interaction. Anyway, SO WHAT?!? The service provides real business value to millions of people — Web 1.0 vs. Web 2.0 doesn’t matter. People pay because it delivers value that nothing comparable is capable of delivering right now. And with 9 million members, they have such a huge head start over anyone else even attempting to go after that segment that I don’t expect them to be going away any time soon.

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