LinkedIn drawing venture capitalists

Business-oriented networking site has $1 billion valuation

Associated Press

June 18, 2008

SAN FRANCISCO - Four 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 to be announced today from Bain Capital Ventures, Sequoia Capital, Greylock Partners and Bessemer Venture Partners.

The investors received a combined 5 percent stake in Mountain View, Calif.-based LinkedIn, whose five-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, Calif.-based Facebook and its online operation at $15 billion.

The Facebook financing in turn helped several other startups that facilitate 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 this year, while RockYou was valued at 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 officials say its emphasis on connecting executives, 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.

Sequoia, Greylock and Bessemer invested in LinkedIn before 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 as $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 mentioned 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.