Updated three times: After I published the initial version of the story last night, two sources have told us they’ve heard that LinkedIn has raised or is raising a new round of funding. Techcrunch now says it has been hearing similarly. More details below.
Something’s up at business social network LinkedIn. The Mountain View, Calif. company’s board meeting last week went way over its scheduled time, and sources tell us there’s some “good” news coming. The details are still hazy [but getting less so], and worth noting because of the ongoing rumors swirling about the company’s long-term plans.
Last fall, reliable sources said that News Corp was negotiating to buy LinkedIn. The purpose of that acquisition, we heard then, would have been to integrate LinkedIn’s network with News Corp. newspapers like the Wall Street Journal. Hopefully, this would help New Corp to revive its declining print-media ad revenue through online initiatives.
However, we’re told that deal was dead of last week, because of News Corp.’s purchase of Newsday. Its stockholders would likely look down on yet another purchase. It’s possible, however, that that the deal has been resurrected.
Here’s why LinkedIn may be considered valuable to a suitor. Its user base doubled last year to more than 20 million active users worldwide, and it claims that 1.3 million new members are joining per month. The average user is 41 years old and makes around $110,000 — which the company says allows it to charge advertisers $75 per thousand impressions (which is exceptionally high).
In recent months, the company has rolled out a developer platform for integration with third-party applications and web sites, an expert research network, company profile pages, and other features that may help it make more money. It is already projecting total revenue of between $75 million and $100 million this year.
This past January, cofounder and board chairman Reid Hoffman (pictured) told the Sydney Morning Herald that the company will most likely file for an IPO before 2010 if “he isn’t first tempted to sell to one of the suitors that have inquired about buying LinkedIn. Hoffman wouldn’t identify the suitors.”
LinkedIn representatives have either declined to comment or not responded after we contacted them yesterday.
Update: A new source has heard that the company is raising more money, which would imply that it is burning through the aforementioned revenue without making substantial profit. LinkedIn has previously raised $27.5 million from venture firms Sequoia Capital, Greylock and Bessemer Venture Partners. Also, the company’s developer platform has yet to publicly launch, as Dave McClure and others were quick to point out.
Update Two: Another new, well-placed source says they’ve heard that the company has raised a new round. Considering the company’s size, revenue and market position, my guess is that a private equity firm has stepped in with many tens of millions of dollars — just as PE firms have recently done for ad network Federated Media, IM aggregator Meebo, widget maker Slide, DIY social network creator Ning and other web companies. The general rationale behind these companies’ decisions to raise funding is that they’re neither large nor profitable enough to justify an IPO, yet too large and ambitious to sell. With the current economic problems, large chunks of late-stage funding will allow these companies to grow and figure out their business models until IPO and M&A markets improve.
Update Three: Techcrunch hears that investment bank Allen & Co. is helping LinkedIn to raise a venture round that would value the company at $1 billion.
And a bonus update: David Cowan, a managing partner at Bessemer, who sits on LinkedIn’s board, said no comment because it was a private board matter.
Matt Marshall contributed to this article.
[Photo via USA Today]
13 Comments
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Albert said:
Wow now this is interesting news. I was waiting for the business social network giant to finally get an offer out there.
I never realized that they were making up to $100MM annually also. That’s quite amazing off ad revenue. Is that their only stream of income? I look forward to the updated news on LinkedIn, considering that I am an avid user of it.
Good post Eldon - are you the replacement now in LA instead of MG? See you at the events.
-Albert
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dave mcclure said:
fyi, past tense on developer platform not quite accurate — it has yet to be rolled out publicly in full production, altho likely coming sometime soon.
also if they’re getting acquired then Reid is going to be getting a VERY big check… LinkedIn is profitable & growing.
aside from News, not that many players who can pull the trigger on that one. (Goggle, Yahoo, Microsoft are obvious options).
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Joel Cheesman said:
I spoke at a recruiting event last week and asked how many attendees were on LinkedIn. All hands went up vs. much fewer who were on Facebook and MySpace. No doubt there is value there.
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Andrew said:
It’s comical to see LinkedIn, Ning, RockYou, Slide, Meebo, and Facebook raise money at insane valuations. The fact that none of these companies is able to find an acquiror at a reasonable price nor are they able to go public highlights the fact that raising these new rounds of financing only adds to that initial problem they were trying to overcome.
It’s somewhat hilarious that with that much revenue, LinkedIn can’t turn a profit.
Each time they take on new investment, they set a higher bar for a potential exit making it more and more difficult to attain that exit. The latest round of investors won’t sell if they aren’t in the money and they will have the first right at a liquidation to take their preference.
This basically means that all these companies are like an ugly, fat, unintelligent girl who has a really inflated opinion of her looks. A somewhat nice guy asks her out and she says no thinking she’s above him. Her ego grows by turning him down and then she turns down an even nicer guy. She just goes through life inflating her ego and remaining single.
That my friends is what will happen to all of the aforementioned start-ups. They will go unacquired with little liquidity for anyone but the founder who got to take a few mil of the table in the latest insane round but the founder would have been better off in the end by not taking it.
Stay single you fat, ugly, dumb girl.
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LGgeek said:
Albert,
I only read that they had 100M in revenue not that had made that much. Didn’t see anything on how much they actually made. -
Eric Eldon said:
@LGgeek You’re right. I was referencing another article where LinkedIn said it is projecting that it will make between $75M and $100M this year.
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Varangy said:
What are their major expenses that make up roughly $75m-$100m?
Bandwidth?
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dave mcclure said:
@andrew: um, i think you’re the fat, ugly, dumb girl at this party my friend — or at least the dumb one.
>>… hilarious that with that much revenue, LinkedIn can’t turn a profit…
yo doofus: just cuz they’re raising money doesn’t mean they’re losing money. fact is they’ve been profitable for over a year. they’re raising money because they can, and probably so that Reid & a few of their venture investors can liquidate a handsome return on some of their equity.
that said, you can be certain they’re not selling that much equity, since the company could very likely go public in next 12 months… and will probably be worth quite a bit more than $1B at that point.
PayPal Mafia conspiracy theorists — anyone wanna bet they go public at > $1.6B? (the magic # for all PayPal Alumni these days… altho Reid doesn’t probably care as much as the rest of the clan).
@andrew: i don’t know about you, but maybe you should listen to more harry belafonte, & “make an ugly woman your wife” ;)
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Chris Grayson - GigantiCo said:
@ dave mcclure
Zing! Ha.Nice article.
FYI:
David J. Hinson told me of this article by posting the link to his Facebook network. -
Andrew said:
@ Dave McClure and other Web 2.0 sycophants/schmucks
Lookie here, we have Dave McClure, the internet’s version of Sideshow Bob showing up to call me a doofus. Please learn to spell please Dave. You don’t have the slightest clue about business either since you’ve never ran one for yourself.
Raising more money because you can only makes sense if it’s worth giving up the equity. If you’re a founder taking money off the table, you’re only doing so because you’re not very certain about the future prospects of the business. Reid is sending a terrible message to the rest of his team too as there isn’t likely to be a tag along provision for employees.
You also fail to address the issue of the return hurdles. The higher the valuation you raise money at, the higher the required return hurdle to actually have a successful exit.
Please learn business, math, finance, and common sense before you pollute the world with your awful writing, grammar, and logic.
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Private Equity said:
Given Allen & Co. were recently able to get $850 mil for Bebo, I can see how they’re confident with Linkedin at a $1 billion.
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Manski said:
Eric/all
Not sure if you saw that NewsCorp dropped there bid for Newsday. That acquisition would have been the only barrier to a LinkedIn acquisition.
This is very interesting, and will be interested to see your reporting on it…
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Mikey said:
Nice article
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