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LinkedIn IPO Filing: Financials, Ownership

28 January, 2011

LinkedIn is the first social networking company to file for an IPO. The Mountain View, California-based company plans to raise upto $175 million form the offering.

Here is a ring-side view of the company, along with its operational and financial details, as documented in the SEC filings. We also take a look at LinkedIn’s corporate strategies, and do some crystal-ball gazing into the company’s future.

Financials

LinkedIn revenues doubled in the first nine months of 2010 from $80.8 million in 2009, to $161.4 million in 2010. The company has turned in profits in the first nine months of 2010 with $10 million as against loss of $3.3 million in the first nine months of 2009. The company had full year revenues of $120 million in 2009, $78.7 million in 2008 and $32.4 million in 2007. The net loss for these years were $3.9 million, $4.5 million and $328,000, respectively.

LinkedIn Ownership

A 21.4% (or 19,066,032 shares) is owned by Reid Hoffman, the co-founder of LinkedIn, and Michelle Yee (Hoffman is married to Yee, who he met in college), the trustees of the Reid Hoffman and Michelle Yeh Living Trust dated October 2009. Hoffman retains sole voting and dispositive powers over these shares.

Hoffman, incidentally, was also a founding member of the board of directors at Paypal, where he also worked as a full-time employee for a bit. Currently, Hoffman is a partner at Greylock Partners, a Silicon Valley venture capital firm, besides being an executive chairman with LinkedIn.

Hoffman is also connected to some of the hottest Internet real estate currently available. He is a board observer at Gowalla, advisor to Groupon, and director at Zynga, Mozilla Corp. and kiva.org. He is also an angel investor in companies like Facebook and Zynga, according to his Greylock profile. As a matter of fact, if you turn to ‘The Facebook Effect’ written by David Kirkpatrick, seems it was Hoffman who had arranged the first meeting between Zuckerberg and Peter Thiel, which led to Thiel’s $500,000 investment in the company.

Hoffman invested in and joined the board in Zynga’s first round of funding. Not only that, Hoffman co-owns the Six Degrees Patent along with Zynga CEO Mark Pincus. (The Six Degrees patent, a method and apparatus for constructing a networking database and system, was auctioned off in 2003, along with related intellectual property rights and software, according to a CNET story). 

Other LinkedIn owners

The company has secured four rounds of financing till now. Entities affiliated with Sequoia Capital hold a 18.9% stake in LinkedIn. Sequoia wrote one of the first checks to the company. In November 2003, it invested $4.7 million in Series A financing.

A 15.8% is held by entities affiliated with Greylock Partners. In 2004, Greylock Ventures invested $10 million in the company in Series B round. Hoffman, co-founder and executive chairman of LinkedIn, is also a partner with Greylock Capital, as mentioned earlier, but he has no voting or dispositive rights with respect to LinkedIn shares held by the outfit.

Bessemer Venture Partners, and entities affiliated with it, own 5.1 % stake in LinkedIn. In 2007, Bessemer and European Founders Fund invested $2.8 million in Series C. In 2008, Bain Capital, Goldman Sachs, McGraw Hill, SAP Ventures, and Bessemer Venture Partners invested $75.7 million in Series D round. After this, the company hasn’t raised any venture round.

LinkedIn’s Revenue Model

LinkedIn generates revenues from enterprises and professional organizations by selling its hiring and marketing solutions offline through the company’s field sales organization or online on the website. It also generates revenue from members, acting as individuals or on behalf of their enterprises, subscribing to LinkedIn premium services.

Last year, LinkedIn solutions were used by nearly 3,900 companies, including 69 of the Fortune 100, and some 33,000 customers, according to company documents filed with the SEC. Its proprietary software applications and technologies enable the company to perform large scale real-time data and computational analyses, says the company. It also categorizes and queries large sets of structured and unstructured data to personalize relevant information. For example, one of its key personalized recommendation features typically involves the processing of over 75 terabytes per day.

LinkedIn lists six key points as part of its core company strategy. These include: viral growth, serve as the professional profile of record, be the essential source of professional insights, and also expanding internationally.

Expand International Presence: The company says that it has seen significant growth in the international member base and have established operations in Australia, Canada, India, Ireland, the Netherlands and the United Kingdom. It adds that it intends to expand sales, technical and support operations in additional international locations, and expand the international member base by supporting local languages.

Most LinkedIn members are based out of United States, around 40 million plus. But then again, around 50 million and over members are spread worldwide. Expect LinkedIn to focus on local advertising and marketing initiatives to capitalize on this user-base.


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LinkedIn IPO Filing: Financials, Ownership

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