LinkedIn, the popular business-oriented social network, recently announced its intention to sell common shares to public investors. LinkedIn’s January filing with the U.S. Securities and Exchange Commission marks the latest pure-play Internet company to go public, joining business-to-business companies like Salesforce, NetSuite, and Constant Contact, to name three. According the filing, LinkedIn hopes to raise up to $175 million.
The fast-growing LinkedIn was launched in May 2003 in Mountain View, Calif. by Reid Hoffman, a Standard and Oxford educated entrepreneur and “angel” investor. He originally served as CEO and now serves as chairman of the board. According to news reports and public data, during the period between 2003 and 2007, LinkedIn raised approximately $30 million in venture capital, including investments from Sequoia Capital, Greylock Partners, Bessemer Venture Partners and European Founders Fund.
According to the January SEC S-1 filing, by 2005 LinkedIn had gross annual revenue of $1.1 million with 32 million registered users. In 2008, Jeff Weiner, a former Yahoo! executive, took the reins as CEO and helped the company raise close to $75 million in additional venture capital, from many of the same, previous venture firms, as well as from Goldman Sachs, McGraw-Hill Companies and SAP Ventures. Fast-forward to 2010, and LinkedIn generated roughly $215 million gross revenue and had approximately 90 million registered users. LinkedIn’s revenue, according to the filing, comes from three principal sources: employment listings, banner and text ads, and premium subscriptions. Since its founding, the company has posted annual profits just twice, in 2007 and in 2010.
LinkedIn has a dual-class stock structure, with founders and insiders controlling the company — even after the completion of the public offering — via their ownership of “Class B” shares. The public offering is for “Class A” shares, which carry one-tenth of the voting rights of Class B shares. While the public offering is for up to $175 million, the overall valuation of the company is much higher. SharesPost, an online marketplace for illiquid stock, valued LinkedIn at $2.47 billion on Feb. 4, 2011.
LinkedIn is comparable in size to NetSuite, the hosted business platform, with an estimated $184 million in gross revenues in 2010, and Constant Contact, the email service provider, which recently reported 2010 revenue of $174.2 million. But, it’s much smaller than Salesforce, with fiscal 2010 annual revenues of over $1.3 billion, and Internet giants like Google, with roughly $29 billion in 2010 gross revenue, or Amazon.com, with $34.2 billion in 2010 gross revenue.