Yes, LinkedIn Is Worth $1B

I've already criticized blogs that fall all over themselves for a scoop that's not in any way newsy or surprising. But at least they are telling you news. Even worse are blogs that re-purpose news without any additional insight or analysis. In the name of good karma, I won't link or call anyone out. But I don't think it's too much to ask to give people a reason to read your blog.

I am not giving people the news that LinkedIn is raising a round of capital and wants a nosebleed valuation. Again, like Twitter, not a surprise they can. Like Ning, Slide etc, not a surprise they are using Allen & Co. to do so. Like everyone else in the Web scene: LinkedIn is making a statement it's going it alone versus pimping for an acquisition, so put them in the column with Ning, Slide, Facebook, etc. (All of which are in my book, so Go Team Once-You're-Lucky-Twice-You're-Good!)

But I am giving you more than the wishy-washy "We'll-all-find-out-together!" analysis: Yes, LinkedIn is worth $1 billion.

LinkedIn will never be as big or as valuable as Facebook, IMHO. But what LinkedIn does have is one of the best business models in Web 2.0. They have a diversified revenue stream that includes fees for premium services around job hunting and messaging, and these are not easily replicated premium services. In addition, they've got a pretty nice base to advertise to. The disadvantage with the checks and balances around LinkedIn not turning into a spammy, meat market is that it has grown slowly, it has never been "cool" and it has always been somewhat underrated. But the advantage is building something more solid, stable, predictable and lasting.

As I write in my book, LinkedIn is also one of the few companies where no one is pressing for a quick flip. The investors know they have a solid company on their hands, and I would wager one of the few $1 billion-plus companies that will come out of the Web 2.0 wave. Founder Reid Hoffman has also seemed to navigate the CEO transition reasonably well, interviewing more than 70 candidates and bringing in Dan Nye, an unlikely Web 2.0 hero, but one that I hear from insiders is doing a great job. And unlike so many other of the Web 2.0 wunderkinds Dan is one of those old school valley guys who wants to take a company public. Imagine that!

There's this whole question of what a company is "worth" that needs it's own post, and perhaps I can get to that later today. But in the venture world of "value" and the environment we are in when Slide and Ning are worth half a billion and Facebook is worth $15 billion, yeah, duh, LinkedIn can get a $1 billion valuation. Unless of course the recession is taking some toll on that solid business model or growth is deteriorating. Like all the names above, I think it's a smart move. Now is a good time to bulk up on cash, and going the Allen & Co. route seems to be the savviest way to get a lot, without having to give a lot up. Plus, you're also getting investors in it for the long haul, and a big hit, not a temporary gain to take back to antsy LPs.

Comments

[Michael Langner]

Honestly, LinkedIn mostly is a distributed address book for me... the only business contact I am getting from it are calls from head-hunter

[Nathan]

LinkedIn is doing it right. They're one of the few that are.

Did nobody learn from the '90s. The reason we had the web crash was because VC firms were writing multi-million-dollar checks to people with little to no business model and without even the most minimal vetting of the business being funded.

Slow growth is good. It's too easy to flare out by trying to do too much too quickly.

[sarah lacy]

@michael: i don't disagree with you. linkedin is not a service that you use daily, like facebook or twitter. but when you need a job, recommendation or to find someone through your network there is no other service as effective. it's like the business person's triple A card more than it is a business facebook. so in aggregate the engagement stats won't be as high, but it's a more valuable relationship when people do engage and over millions of users, it's a nice critical mass at any given time. anecdotally, i know way more people who find jobs on linkedin than ever found them on monster or hotjobs

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[Shafqat]

We can argue all day if it merits a 1B valuation, but at the end of the day a company is worth whatever people are willing to pay for it.

But you are right - LinkedIn is a real business with real revenues. More than anything, they have a wide moat, and no amount of money/resources can change that fact.

[sarah lacy]

exactly right, shafqat. valuations in the valley have less to do with fundamentals and more to do with promise and who holds the most power at any given time. it's like housing values. Is a trailer in SF "worth" more than a mansion in memphis? not in building materials, no. in potential returns? probably. but more it's a factor of what others are willing to pay, and the price the seller needs to part with it. all the complex venture dynamics usually boil down to that.

[Arin Sarkissian]

LinkedIn provides a good service that makes sense.

I used to work at Spoke Software back when both companies were relatively new. At the time there was a sense of competition between the 2 companies. The companies were taking 2 different approaches so we weren't really competing.

I remember having a hard time explaining what Spoke is/was to friends and maybe 5 of 'em signed up. However just about all the friends/colleagues that didn't bother w/ Spoke signed up for LinkedIn. They've got a clear value prop & have built a great professional network w/ services we care about.

Either way; fact is I use LinkedIn now and never log in to Spoke even though I wrote a good chunck of that site.

LinkedIn makes sense. They provide a great service and deserve their success

-arin