The Linkedin Money

LinkedIn is the social network that is focused on business and professional career minded individuals.  As result, the demographic is smaller and more focused affluent crowd away from the hype, buzz and noise of the more socially loose and extrovert friendly sites of myspace and facebook.  I would describe the analogy of a highschool popularity contest and yearbook signing efforts.  Remarkably, the social networks are gaining traction on email as a preferred form of communication.  Linkedin specializes in the domain of professional networking and creates a valuable social network.    The site is dream for professional recruiters and job career recruitment.   The value diminishes with expanded networks or the 500 group, although maybe a listing service and broadcast might be useful for some.   You will probably not sell consumer advertising for body spray on the site.  The company has announced a   recent round f funding   of 53M and, as result, the LinkedIn has reached billion dollar in valuation.

Linkedin has 23M million users and is adding 1.2 M users a month.  The site has over 7M unique viewers a month.  While the numbers seems small relative to larger social networking sites, the demographics  of average age  of 41 and household income of 110k is a very attractive audience and leads to higher  advertising revenues. 

The NYTimes article on LinkedIn  has an interesting comparison chart for social networks

 The company was founded by Reid Hoffman known as a “well connected” entrepreneur in Silicon Valley and involved in a number of very promising firms involved Second generation web entrepreneurs.

Linkedin started 5 years ago and became profitable in 2006.  The company has raised 80M in previous rounds.  

“We haven’t even touched the money we got from our last funding round,” which secured $12 million, Nye of Linkedin  said. “We raised the money primarily to strengthen our balance sheet and to take advantage of whatever opportunities that comes around. Acquisitions are an obvious possibility, but we’re not announcing anything around that.”

LinkedIn announced a $53 million round of funding led by Boston’s Bain Capital. LinkedIn’s previous investors, BVP, 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 company plans to use money increase efforts in the international markets.

Commenting on the Valuation

“Compared to most startups, LinkedIn’s valuation is very high, but compared to what we think LinkedIn’s future valuations will be, it’s a bargain,” said David Cowan, partner at Bessemer Venture, in a prepared statement.