LinkedIn Supposed to get a $250M Valuation !?

So many people around me have a LinkedIn profile that I couldn't let this news pass by without posting !

Although I also have a LinkedIn profile, I don't make such a great use of the service (in fact, most of my  c100 connections have been requested by others), but it has definetly spread very rapidly in French professional circles.

Rumor has it that company is closing a $13M financing round valuing the company at a health $250M pre-money...

We do know they have 70 employees, 8.5M members with 30 to 40% active users, 1.5M unique visitors and 36M page viewed monthly (in the US). It's by far the leading network of its kind.

For the other key metrics, sales and profit, we have little hint ! CEO predicts company will generate $100M by 2008, so some analysts assume it should make around $50M next year. Company has claimed to be profitable since last March.

It that's true, the pre-money valuations represents 5 times next year sales. This hefty multiple underscores how investors are still hungry (if not mad) about communities and networks, after Google's acquisition of YouTube for $1.6bn and NewsCorp's acquisition of MySpace for $900M.

However, if we believe eMarketer, advertisers should spend $2bn across all social networks by 2010, up from $350M in '05. Sure, there's a significant stream of advertising money which will be poured into social networks in the future, but competition to get these $ will be intense. YouTube, MySpace, FaceBook, among many others, want a big share of these money !

However, LinkedIn today makes most of its money from other sources, subscriptions (45% of sales, not really from individuals but from companies which pay between $10.000 and $100.000 to access LinkedIn database) and job listings.

Comments

[Julien]

Discussing about valuation is always a little difficult if we do not have all the cards on the table.

I remember that we had a discussion about the fact that EBITDA was the only real thing to look at : who cares selling 100M$ if he doesn't make a cent of it? I am sure that linkedin's "pure-internet" margin is pretty higher than the ones in e-commerce, don't you think so?

Indeed, VCs are really concerned only by one multiple, the one they will make when they will exit the company from their portfolio! No matter they pay 100 times sales, if they can multiple the investment by 5 in 2 years!

So, when, you look at deals such as MySpace, Youtube, or other recent ones, a 250M$ valuation might transform in a very few years in a great multiple, and a pretty nice IRR! I would bet Linkedin will go public, in 2008/9!

Still, what I really do not get, is why 13M$? Linkedin is the biggest, by far, it seems to be cash-flow positive, why would they raise money? Working capital issues? Acquisitions? What do you think?

[Michel de Guilhermier]

Indeed, a social network model is pretty different than an e-commerce one !

Different margins, different cost structure, different model sustainability, different key success factors, etc...

[Phentermine]

So when , i tell her favorite man.