labels: Infotech, Financial services
VCs bet strongly on business networking site LinkedIn, value it $1 billion news
19 June 2008

Silicon Valley social networking firm for business professionals LinkedIn Corp has announced that its equity backing had nearly doubled with a $53 million investment from four venture capital firms.

The VC firms backing the online social networking firm, led by Bain Capital Ventures, include Sequoia Capital, Greylock Partners and Bessemer Venture Partners, and the new round of funding, on top of $27 million in three previous rounds of investment, values LinkedIn at $1 billion, and affords it with vast resources to expand its user base and revenue sources advertising, subscriptions, job listings and corporate recruitment services. LinkedIn says it plans to introduce several new lines of business.

 The financiers have received a combined 5 per cent stake in LinkedIn, whose 5-year-old web site helps connect its members with their friends, family and business associates, or just enhance their careers.

Though LinkedIn has has thrice the the online traffic of rival Plaxo Inc, its 23 million user base from 150 countries (with another 1.2 million registering each month) is far smaller than that of recreational social networks like Facebook and MySpace.

LinkedIn hopes to generate $100 million in revenue this year from a mix of advertising and fees. Facebook, by comparison, has more than 70 million members worldwide and is targetting about $300 million in revenue this year.

However, LinkedIn says its emphasis on connecting executives and other ambitious professionals and deal makers gives it a demographic advantage over the recreational networks that count students and other less-affluent consumers as its users.

Moreover, the demographic background of LinkedIn's users and the detailed professional information they provide when they register themselves, allows the site to offer advertisers a highly targeted audience and creates potential for other revenue opportunities, factors that weighed in its favour in attracting high profile financiers.

For instance, LikedIn can provide business audiences to advertisers, for instance,  people's titlesor or sub target by size of the company they work for the their geographical location, among others, that offer advertisers a better 'click-per-mil' opportunity than mass-target campaigns.

More inportant, LinkedIn is already profitable and has demonstrated the ability to steadily increase revenues. Plus the bulk of its investment have come up-front in the development of its core technology and establishing a successful viral network ability.

Reid Hoffman, Chairman and President, ProductsBoth Facebook and LinkedIn may go public in the next two years unles they agree to a takeover by a larger company and it is being speculated that after its aborted attempt to win over Yahoo, Microsoft may find strong synergies through LinkedIn.

However, LinkedIn's largest shareholder and co-founder Reid Hoffman has indicated his preference for remaining independent and the latest round of financing  may give it better control over its destiny. Either way, LinkedIn Corp faces the stiff challenge of delivering the revenue growth its financiers and recent valuation expect from it.


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VCs bet strongly on business networking site LinkedIn, value it $1 billion