High hopes: VCs betting LinkedIn worth $1 billion

High hopes: VCs betting LinkedIn worth $1 billion

By MICHAEL LIEDTKE, AP Business Writer
June 16, 2008

pileofmoney.jpgFour venture capital firms are betting Internet startup LinkedIn
Corp. is worth $1 billion, highlighting the lofty hopes riding on
online services that connect people with their friends, family and
business associates.

The 10-figure valuation is implied by a $53 million investment being
announced Wednesday from Bain Capital Ventures, Sequoia Capital,
Greylock Partners and Bessemer Venture Partners.

The investors received a combined 5 percent stake in Mountain
View-based LinkedIn, whose 5-year-old Web site helps people use the Web
to advance their professional careers.

It’s one of the richest appraisals for a Silicon Valley startup
since Microsoft Corp. paid $240 million for 1.6 percent of Facebook
Inc. late last year. That deal valued Palo Alto-based Facebook and its
online hangout at $15 billion.

The Facebook financing in turn helped several other startups that promote online socializing to promote themselves.

Ning Inc. and Slide Inc. wrangled implied valuations ranging between
$500 million and $560 million when investors poured more money into
them earlier this year, while RockYou was valued between $200 million
and $300 million in a deal completed last week.

Venture capitalists are counting on the services to mine more
advertising revenue from their rapidly growing audiences even as much
of the U.S. economy is withering.

But finding an effective advertising approach has been tricky for the top social networks.

Privacy complaints prompted Facebook to rein in a marketing tool
that tracked its members’ activities on other Web sites. Even Internet
search and advertising leader Google Inc. has had trouble peddling
products and services to denizens of the Web’s largest social network,
News Corp.’s MySpace.

LinkedIn believes its emphasis on connecting executives, other
ambitious employees and deal makers gives it a demographic edge over
more recreational Internet networks that cater to students and other
less-affluent consumers.

"If LinkedIn is able to achieve its goals and objectives in the
coming years, this valuation of a billion dollars will be looked upon
as very cheap," predicted Mark Kvamme, a Sequoia Capital partner and a
member of LinkedIn’s board of directors.

Sequoia, Greylock and Bessemer invested in LinkedIn prior to the
latest financing round. Including the latest infusion, LinkedIn has
raised a total of $80 million.

About 23 million people in 150 countries have set up profiles on
LinkedIn so far, with another 1.2 million members signing up each month.

Relying on a mix of advertising and fees, LinkedIn hopes to generate
as much $100 million in revenue this year. Management says the
privately held company is profitable but won’t provide figures.

Facebook, by comparison, has more than 70 million members worldwide
and is aiming for revenue of about $300 million in revenue this year.

Both Facebook and LinkedIn are expected to go public within the next
two years if they don’t sell to a larger company before then.

Some industry analysts have touted LinkedIn as a logical fit for
Microsoft now that the software maker has abandoned its efforts to buy
Yahoo Inc.

News Corp. also has been mentioned as a suitor.

But co-founder Reid Hoffman, LinkedIn’s largest shareholder, has indicated he prefers remaining independent.

The latest round of venture capital gives LinkedIn more control over its destiny, said Dan Nye, the company’s chief executive.

"We love the idea of continuing to innovate in a private environment
without worrying about all the pressures and costs that come along with
being a public company," Nye said.

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