LinkedIn Joins the Billionaires' Club

New funding by Bain, Bessemer, Sequoia, and Greylock values the professional-networking site north of $1 billionand big plans are afoot

LinkedIn is joining the Web 2.0 high rollers' club. The professional networking site, home to some 23 million affluent users who sign up to find jobs, hire talent, and connect on projects, is about to become one of the select few social-media companies to attain a valuation of more than $1 billion.

On June 17, LinkedIn announced a $53 million round of funding led by Boston's Bain Capital Ventures. LinkedIn's previous investors, Bessemer Venture Partners, Sequoia Capital, and Greylock Partners, were also part of the latest round. The companies are acquiring a 5% stake that values LinkedIn at $1.015 billion.

The investment represents a vote of confidence in one of the rare Internet companies introduced in recent years that relies on user-generated content but has also come up with a sustainable way to make money. On track to generate $100 million in sales this year, LinkedIn is experiencing a growth surge. It logged 7.7 million unique viewers in May, a 146% increase from a year ago, according to a June 17 report by market researcher Nielsen Online. Among LinkedIn's peer group, the only companies to have attained as high a valuation are YouTube, which was purchased by Google (GOOG) for $1.65 billion in 2006, and Facebook, valued at $15 billion by a $240 million investment by Microsoft (MSFT).

"Our Members Are Asking Us to Build"

LinkedIn plans to use the funding round both for acquisitions and to add technology that can better help the site's members find, communicate, and collaborate with one another, says CEO Dan Nye: "We have a long list of things our members are asking us to build and a list of investments we need to deliver that functionality,". LinkedIn is expanding internationally, adding its application to mobile phones, and rolling out new premium features.

Nye, whose brother, Benjamin, is a partner at Bain ("That was convenient in terms of an introduction," he notes), says LinkedIn didn't need the funds for day-to-day operations. In fact, the company hasn't yet spent a $12.8 million investment it took in January, 2007 (BusinessWeek, 1/29/07). The company is on track to hit about $100 million in sales this year and is preparing for an initial public offering, (BusinessWeek, 3/6/08) possibly in 2009. The new venture round, LinkedIn's fourth, brings total funding to $80 million.

LinkedIn expects to have 30 million to 35 million members by the end of 2008. The tally of registered users may double, to as high as 70 million by the end of 2009, executives say. And LinkedIn's audience demographics are gold-plated. The average user is 41 and has a household income of $109,000. The site commands some of the highest ad rates on the Web.

To draw more revenue from those users, LinkedIn is expanding in Europe and is eyeing China as well. It's also adding premium features such as a new product called LinkedIn Research Network, designed to help investors, lawyers, and other professionals find experts in various subjects to help with their projects (BusinessWeek, 3/06/08). (LinkedIn has a partnership with BusinessWeek.

com that includes a tool that lets users find LinkedIn connections at companies mentioned in BusinessWeek articles). The site is also letting other software companies develop applications that run on LinkedIn. Mark Kvamme, a partner a Sequoia Capital, says the new funding will help the company expand overseas, hire more rapidly to produce features for the site, and acquire small technical teams. "We wanted to give ourselves the flexibility to make significant investments should opportunities arise," says Kvamme, a LinkedIn board member.

Competing with Facebook

The expansion and new features may come in handy as LinkedIn vies to hold the attention of users who are trying out other sites, such as Facebook, to handle tasks they might otherwise tackle on LinkedIn. A portion of Facebook's 80 million members network with peers, set up conferences, and conduct other professional activities (BusinessWeek, 6/06/07) on the site.

LinkedIn's $1 billion valuation comes amid a venture-capital funding environment that's pushing the paper value of a handful of successful Web startups sky-high. Slide, a maker of add-on "widget" software for social networks Facebook and MySpace (NWS), in January took $50 million in funding from Fidelity Investments and T. Rowe Price (TROW) that values the company at more than $500 million (BusinessWeek, 1/18/08). Slide is also planning a 2009 public offering. On June 9 widget software maker RockYou announced it had taken a $35 million round of funding, its third, led by Sand Hill Road venture capital firm DCM.

VCs who want to cash out of the latest Internet boom have their sights fixed on initial public offerings by Facebook, Slide, and LinkedIn. Institutional investors weren't able to buy into stars like MySpace or YouTube before they were sold to News Corp. and Google. So LinkedIn could be among the first wave of companies to deliver broad returns from the new, consumer-oriented Web.

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