LinkedIn connects with $1-billion valuation

Meet the $1-billion start-up and its maker.

Hot professional networking site, LinkedIn has received $53 million in venture capital funding from Bain Capital Ventures and three existing investors -- Sequoia Capital, Greylock Partners and Bessemer Venture Partners -- in exchange for a 5% stake in the Silicon Valley company.

And investors are gushing. LinkedIn has more than 23 million users and growing. It's profitable and it has a diversified revenue stream with new corporate services about to come online.

As LinkedIn catches on with more people and companies, David Cowan, a Bessemer managing partner, predicts $1 billion will be seen as a bargain.

Much of the credit goes to LinkedIn's pioneering founder, chairman and largest shareholder: PayPal veteran Reid Hoffman (pictured above). Many of the original investors came from his vast personal network. So great is Hoffman’s influence on LinkedIn that it is often referred to as "Reid’s brain."

"We knew from our experience that Reid is a special guy with special talents. We also knew of his networking prowess," Sequoia Capital partner Mark Kvamme said. "That’s what we really liked about LinkedIn: He basically built it for himself. He saw an opportunity to create a tool to build your network in a more effective way. Most great Internet companies are built by people for themselves not for fabulous economic gain."

You can read the full story here.

-- Jessica Guynn

Photo by Tony Avelar / Associated Press

Comments

[Tom OKeefe]

Based on revenues of $100 million (with zero costs) LinkedIn is valued (according to Bizak Calculator) at $399,999,984 - 40% lower than their recent valuation of $1 billion.
Using the Bizak Calculator with 20 million subscribers you get earnings of $0.42 per subscriber. Computing EPV for the 5.6 million active visitors then LinkedIn earns $1.49 per visitor.

As we know Facebook was recently valued at $15 billion. The Facebook valuation may be a bit extreme but they’re a premium brand that will be a force for years to come. LinkedIn on the other hand is not a premium brand, however I assume that LinkedIn will be easier to monetize than Facebook. The main reason being LinkedIn knows my entire work history whereas Facebook only knows who my friends are. With my work history Bain likely has a iron clad plan to convert my connections into a cash cow for LinkedIn. However, even with this profitability I don’t think LinkedIn will ever become a premium internet brand, but they’re probable a safer bet for investors.