Allen & Co. Managing Director Dave Wehner is out pitching a LinkedIn venture capital round at a whopping $1 billion valuation, multiple sources say. This is a story we’ve been working on and isn’t fully baked yet, but VentureBeat started speculating about a potential buyout and so we’re going with what we have now.
Wehner is one of the senior guys at Allen & Co. and isn’t new to big deals – he supposedly led the sale of Bebo to AOL for $850 last month on behalf of Allen & Co. If it’s accurate that he’s pitching a LinkedIn round at a $1 billion valuation, it will be one of the most expensive private venture deals in recent history.
Like many investment bank led deals, the rumor is that this started off as an attempt to sell the company and moved to a funding round when there were no takers. Late last year TechCrunch UK reported that News Corp. may have been in talks with LinkedIn around an acquisition in that price range.
To date LinkedIn has raised $27.5 million over three rounds. They have said publicly they will reach $100 million in revenue in 2008.
You have to aim high .. If you ask for $1B you may get $500M .
Why do they need VC capital now if they revenue is 100m? I’d not think their expenses are very high?
They may want to go from $100M to $200M
This seems like more of a public shopping of perceived value of the company….Hmmm.. several analysts are asking the Yahoo does something with their $2.3b cash. InYa anyone?
Seems like a reasonable valuation to me. In the last 6 months it has become the de-facto standard for biz networking and seen tremendous growth. If FB is worth 15B and Ning is worth $500M LI has to be worth north of $1B.
My anecdotal experience has been that LinkedIn has been becoming less and less valuable as more and more of my “business” contacts start using Facebook. It used to be everyone I knew through work used LinkedIn and everyone I knew in my personal life used FB.
But now everyone just uses FB for all networking… I haven’t been to LinkedIn in months.
I agree with the same view that #2 has, it concerns me a bit when start-ups keep asking for more funding after having secured previous rounds of financing, it’s almost as if they haven’t figured out how to be self-sufficient.
No, I’m sorry, I’m going to have to rant about this, having just left a start-up which chased the dream that all these other start-ups are chasing.
Correct me if I’m wrong, but when I see a web 2.0 business, their business strategy briefly seems to be “develop a cool product, get popular real quick, sell to GYM”. As for the burning questions of “how do you make money?” and “What will you do if no one acquires within a certain time period”?, these questions don’t seem to be addressed whatsoever.
Ok I lie, they have thought about how they make money? Can you guess the answer?
Adbucks save the daaaayyyyyy!!!
Just because Google makes a shedload of cash and you can’t imagine anyone wanting to pay for software these days, it seems like all web 2.0 start-ups are now all suckered into chasing the same revenue stream, and I don’t necessarily believe that this is a good idea. Can every web 2.0 start-up out there survive on Adbucks?
On the topic of making money, the whole monetization of a site seems to be the job of whoever forks out a wedge for the company. For me it seems wrong to do that, because it suggests that the start-up can’t survive for a business unless someone buys it, and if you’ll excuse the pun, it’s kind of passing the buck.
Secondly, the ‘getting acquired’ part of the start-up always seems to be the most important part of the business. Please don’t shoot me (until after you’ve read the explanation)…
I blame the VCs.
This focus on a successful exit strategy above all else seems to gear start-ups towards achieving the best RoI for their investors above all else. This short-termist view can be detrimental especially in cases where no one buys the start-up, and the start-up then has to think about plan B, which seems to be “let’s get more financing” rather than “let’s try to become a profitable business”.
Now, as much as I bitch about these start-ups, you do get the success stories; Skype, YouTube, Last.fm, Bebo, and others. That said, I don’t think everyone is going to fall into the same boat, and I’m just waiting for a really well-known or popular service to go into the deadpool before I announce that the web 2.0 bubble has officially burst.
I think that when that happens, it will be a painful but necessary shock to the system, and get businesses back to the basics, so that we can learn to build sustainable businesses, rather than just chase numbers on the whim that it’ll be us who get lucky.
In my situation, I was working as a code-monkey for an open-messaging, social-networking start-up whose investor ran into some serious financial problems, and so a whole bunch of us weren’t paid for a month (along with a long list of creditors), and the investor wanted to execute a Phoenix, and displayed such optimism that he actually suggested that we may have a rosy future and even get acquired by Twitter, which to me just seemed absurd.
I decided at that point to leave. The uncertainty combined with the plan to close the company down and start a new coCompany in its place just didn’t sit right with me, so that’s why I decided to go.
Anyways, it’s late here in England, all the best to you web 2.0 start-ups. Enjoy the adventure, I certainly did.
I think Justin has it right. LinkedIn has peaked. I use the site less and less each day. It’s a good place to recruit but useless otherwise.
If Bebo can get $850 million, I don’t see why $1 billion is unrealistic. After all, I’d consider LinkedIn’s user base a lot more valuable than Bebo’s.
I also think that since they are the clear leader in the market, they should just keep on chugging and increasing their valuation before making a sale.
Cheers,
Aidan
http://www.MappingTheWeb.com
If anyone reads the whole thing, could someone please summarize what Paul wrote?
For the same reasons that I gave up the mullet back in 1985 I try to keep my Linkedin contacts separate from Facebook contacts. I don’t need business hyloka meeting party hyloka…no worlds colliding for me.
This is more of a PR move than anything.
The reality is, once you take that VC dollar, you are on a path to exit or else.
I don’t see how Yahoo couldn’t replicate something like this.
LinkedIn is one of the most valuable online networks online.
$75cpm is real. It’s all about demo.
The 41 year old, $100k+ demo:
1 – buys cars and mortgages, not iPod shuffles and ringtones.
2 – makes decisions on what law firms and investment banks to hire, not what stupid facebook app to add.
3 – actually pays attention to ads because they’re not consuming 200 pages sending fluff friends and deciding who has a better smile, buffy
or cindy 
?
$1B is real.
I would buy shares in LinkedIn at a $1 B valuation way before I’d think Facebook (which, er, doesn’t have revenue to speak of) was worth $15 big ones. “someone who knows” (post 13) does actually know something.
A $1 billion dollar valuation is insane. They have a user base of roughly 20 million people. The key is that this user base is very affluent. The average age demographic is about 41 years and most people are well educated, making over $110,000. That’s a lot of money that these people can spend on products and service. Whoever purchases linked in has a great audience to target for advertising.
For more useful information and commentary check out this blog gothamtechminute.blogspot.com
@7 and 10. Though oddly out of place, Paul makes some good points about getting back to business basics. Oh wait, I thought that was what we supposedly learned in Bubble 1.0. But I do agree, Bubble 2.0 is very real, unless these companies can diversify their sources of revenue. Ironic given Paul’s rant, LinkedIn is probably the only non-bubble social network. They have a nice combination of ad revenue and paid services.
@6 and 8. I’m sorry I can’t imagine using FB for my professional network. I’m not going Vampire bite my boss. Sure there are a lot of overlap in contacts, but LinkedIn has a pretty sweet spot.
@ SutroStyle: True that. What’s the biz plan that justifies fresh VC money at all when your actual revenues are so healthy? If I was an employee, I’d not be too pleased at this level of dilution or limitation of exist options. Just go public for goodness sake -
Facebook – about $15 billion,LinkedIn – $1 billion. What’s the 3d social giant?
@paul – FRAT
I tend to agree with Justin, and not just because we share the same first name
Valuation seems fair to me. WebEx got $3.2 billion for $300 million plus revenue….$1 billion for $100 million plus on-demand revenue is fair.
they should put 1Billion dollar on the table and see how much that is, then look at the site and see if it really worth that much.
or they can spend 1 billion buying GM cars and sell it at 95% off, they may end off making more.
It is worth well over a billion.
Facebook is not that much more valuable. Added to which LinkedIn has more than one revenue stream. It has actual, real, tangible business value. Facebook does not.
Do you really envision yourself using Facebook in 20 years? No. But I bet you will be on LinkedIn…that’s your career and reputation. In my opinion, that will be more lasting than doing movie compatibility surveys.
is it really that worth ?
wow
Is anyone even using LinkedIn? I stopped connection with people on LinkedIn 8 months ago and started all my networking on Facebook and I was a heavy paid LinkedIn user. LinkedIn lost it appeal about a year ago. They are just rallying around membership numbers and revenue . The user experience and retention is really bad on LinkedIn. I don’t understand how venture capitalist or investors are so oblivious and out of touch. Well…although it will take a while for LinkedIn to join the deadpool…they are slowly heading there.
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.
Allen & Co. are the used car dealers of venture capitalists. There are plenty of used cars around.
Hey ExJournalist,
Last I heard, even Facebook was at $100M in revenue. I still think Facebook may be stronger because of the larger/wider appeal, they can easily branch into so many more things.
Heck, if Facebook really wanted to start a “professional/recruiting” division or section – it would be easy to do.
I’m not sure I’m buying the $1B valuation – but hey, who cares what I think
- Mystery CEO
@5 Steve – Agreed.
@25 Chris S – What? Your post takes the cake.
@26 Andrew — do you just cut and paste your same “fat little girl” piece?
Sounds like you are bitter about something.
LinkedIn is lacking stickiness, ruling out any kind of high valuation as far as I’m concerned. They haven’t shown a great ability to build apps and tools to make people spend more time on the platform (who besides the 78 year-old John McCain has used LinkedIn Answers?)
Anyways, if I were LinkedIn, I’d probably work hard to build user loyalty to my platform rather than rely on the fact that users will come back only because of the network. Here is why: http://www.face...p?id=5894318459
Once they have an answer for this, they can go back out pitching high dollars…
Mystery CEO – If they can start a professional whatever section, or branch into many more things, why don’t they do that and increase their legitimacy as a multi-million dollar website (yes) instead of being poster boys for a pile of inflated fail?
linkedin definitely dominates the business social network. i’m just curious if they can create enough new features to keep people coming back. not a lot of new features added over the past few years. regardless, their valuation is closer to reality than facebook.
of all the nosebleed-valuations that Allen & Co. has been pimping lately, this one is probably the most reasonable. with the growth, demographic, & monetization they’ve been delivering lately, it actually seems very believable.
and i daresay i’m eating my own harsh words from last year when i was wringing my hands over Facebook eating into LinkedIn’s business… i fully admit i was dead WRONG, and there’s just no way in hell that’s happening now.
congrats Reid & Dan & team… you’ve built a very solid, useful, valuable business over the past 5-6 years. happy anniversary, and happy cinco de mayo
- dave “linkedin user #1306″ mcclure
Agreed with Dave. I don’t see people abandoning LinkedIn for Facebook. I had the same thoughts about a year ago.
Hasn’t happened.
Yes, Facebook is more social for me. LinkedIn is more important to me.
FYI, if it was easy to build a social or professional network of substance, than more names would appear when they compare LinkedIn and Facebook.
These two have ownership of their respective markets.
@Dave
You think Microsoft is a prospective buyer?
Sorry, the demographic that uses LI is valuable & makes the valuation pretty reasonable. I, like many other LI users, also tend to get a lot of potential job offers from recruiters looking for passive talent (the number of job offers for me via Facebook = 0). I also seriously doubt that LI won’t look at other sources of revenue down the road…
Do I think Facebook poses a risk? Absolutely. But I don’t see anything on the Facebook site right now that poses a severe risk to LI’s business model.
Disclaimer: I used to work with some of the folks at places like PayPal and SimplyHired.
@Pierreloic: Here’s LinkedIn’s Answer – 236 daily active users, 1% of total, 19 friends.
@Paul Jensen: You raise valid points, but the context is strange. LinkedIn has actually taken a relatively conservative play at the social networking market and has build an incredibly solid business based on paid memberships and is getting a second paycheck with ads.
My half-baked theory:
The fact that LinkedIn’s memberships are largely based on recruiting (which would take a hit in a recession) and job hunting (which would increase in a recession), is an interesting aside. I would guess that more recruiters use linkedin’s paid service then job seekers, but the base for a “recession-proof business” is theoretically there, if they can dial in more services or options for job seekers (who have skinnier wallets, but also skinnier needs).
My guess is that LI sees a possible recession coming, and is contemplating an IPO in the middle of it (2009, by most speculations). Continuing to grow the business at this pace in the middle of a recession would certainly be a way to demonstrate immense value.
If having some extra money in the bank will let them find that equilibrium earlier (and continue refining the formula in times when they would otherwise be forced to stay lean), I can see them being pretty eager to take it.
@damon: right on target.
@manski: well, they’ve got $40B of dry (?) powder burning a hole in their non-Yahoo pocket… i’m sure they could spare $2-5B for LinkedIn. (not sure that’s the exact property they need, perhaps more valuable to someone else… but i don’t think Monster/TMP could come up with the cash.
btw, surprised that no one has been reporting that LinkedIn is PROFITABLE (a year ago)… they didn’t raise the $$$ because they had to. they did it because they prob want to liquidate some equity for investor returns.
@Dave
Monster makes good sense. But I don’t think they have the cash. That’s an acquisition that could save their business.
How about Yahoo? Or are they just gonna die on the vine?
Google makes sense but Google seems jaded on the social networking space right now. Guess that happens when you build a shit&y product (Orkut) yourself.
As one of the advertisers on LinkedIn I’d have to say that this valuation seems a bit high. Its a bit like Yahoo! having all the users but not being able to monetise them through search or other advertising.
In my opinion they need to improve the way that they allow advertisers to target potential customers. They have a wealth of information however they are reluctant to make the most of the advertising opportunities.
Best of luck to LinkedIn with raising more money.
I may have a profile on LI, but I’m not sure. I haven’t been to the site in over a year.
wow FYI, if it was easy to build a social or professional network of substance, than more names would appear when they compare LinkedIn and Facebook.
They have 100Mil in revenue and still need cash? What the heck are they spending 8mil a month on?
This doesn’t seem surprising at all. Salesforce.com’s price/sales is 11X.
comparisons with facebook
what actual use is facebook – seriously? So far the only one I have found is/was playing scrabulous. Communication in any way/shape/form is so hard as to be worthless. There is so much noise/clutter that it is a waste of time. Real world value is almost zero.
LinkedIn on the other hand has led to new positions, real consulting work, valuable business connections and the opportunity to share the work out to a wider circle.
There is no comparison. I’d value Linked in at well over $1 bill and facebook at well UNDER $1 bill
Specifically re LinkedIn Answers – sure there is a lot of garbage there – but the signal to noise ratio is still good and there is a huge amount of free and valuable advice being passed on constantly. IT could use more and better categories. It could use tighter policing to remove stupid questions, but again – far better than anything else out there.
Biggest thing LinkedIn needs to do is work hard on an API and REAL apps that add value – and remember to avoid the stupidity that is killing facebook
LinkedIn is not worth $1bn. Arguably, no company in a recessive market with total revenues of only $100m is worth $1bn. Add the context of its European rival Xing having a market cap of $300m on total revenues of $44m from just 4m members (1/5 the size) and it looks even more overpriced.
Ultimately though, both are just job sites rather than marketplaces for B2B. The only companies that place a value on LinkedIn are recruitment firms – there are thousands of those in good times, but they disappear with the jobs when times get tough. It the demographic of LinkedIn offered so much potential, why has it not been realised in the 5 years they have been going?
I am quite sure Allen & Co will find someone to buy in, but they’ll be dumb for passing up a much cheaper alternative with Xing and its multi-language support.
Ian Hendry
WeCanDo.BIZ
http://www.wecando.biz
So many professional networks, so little time. One thing you can do is create a VisualCV (http://www.visualcv.com) and then link to your personal VisualCV from LinkedIn, Facebook, Xing, your blog, or anywhere you have an online presence. VisualCVs give people a much richer bio than the sparse text-based profiles found in most social/professional networks. And you can do your updates in one place and have it show up in all your networks. It doesn’t have to be LinkedIn vs. Facebook vs. whatever – use a VisualCV as a common profile across networks. Full disclosure – http://www.visu...com/scottherman
Hey check out Virtudex.com it’s the best Business Social Network…