LinkedIn

LinkedIn - A Brief History of LinkedIn

Silicon-Valley based LinkedIn had pretty much the same iconic start that high-tech legends are made of. The only differences were that rather than being a college dropout, its major founder and current chairman, Reid Hoffman, was an Oxford-trained philosopher, and it was started in his living room, and not his garage.

Sitting in the living room in 2002 at the birth of the concept of a professional social network were Hoffman, Allen Blue, Jean-Luc Vaillannt, Eric Ly and Konstantin Guericke. Hoffman had prior to that time worked in Apple, Fujitsu, and as its executive vice-president, helped sell PayPal to ebay in 2002.LinkedIn went live on May 5, 2003, a day cheekily renamed by its staff as Cinco de LinkedIn, with its five founders and 350 of their friends. By month end, it had 4,500 members. The momentum continued unimpeded and in less than 6 months of its start, it had secured its first external investor.

Mark Kvamme, partner of well-known Silicon Valley venture capital firm, Sequoia Capital, explained that their $4.7 million financing was motivated by the “patented and effective technology that has the power to transform hiring”, in a leading edge manner reminiscent of the way PayPal re-engineered the transfer of money. By the end of 2003, LinkedIn’s membership had grown to 81,000, and a staff of 14 employees.

LinkedIn - An Era of Rapid Growth

LinkedIn achieved its first major milestone, boasting a roll call of half a million members in April 2004, just a little shy of its first birthday. Its second round of financing, of $10 million, was led by Greylock, an early-stage investor that has a reputation of leading the most number of its investments to IPO status. Other LinkedIn investors at this stage looked like a who’s who of Silicon Valley including Netscape co-founder Marc Andressen and Peter Thiel, co-founder of PayPal.

From 1.6m members at the end of 2004, half of which were internationally based, LinkedIn catapulted to reach a membership count of 4 million at the end of 2005. Many firsts were launched in 2005: -

LinkedIn Jobs, its first premium service, which leverages members’ networks to finding job opportunities, was introduced in March

A paid subscription service open to recruiters, headhunters, personnel directors, sales firms and businesses to find the best talent.
By 2007, LinkedIn had reached the tipping point, with more than 9 million members, a presence in 120 different types of industries, huge strides that led USA Today to describe LinkedIn as “a giant” in the networking industry.
Its community included 3,200 publicly traded companies and 4,400 private businesses, testifying to the business world’s recognition of how LinkedIn had revolutionized the business of hiring and recruiting.

Another milestone: LinkedIn became profitable with earnings derived from ad revenues, premium subscriptions and corporate solutions, where companies can create their own profiles.

LinkedIn - Flip-Flop

The following year, 2008, was a year of many changes and leaps forward. It formed several strategic alliances with New York Times, CNBC and Business Week to distribute news content tailored to their members’ profiles, opened its first international office in London, launched a French version, and ended the year with 33 million members.

However, it was also a year when Facebook’s tremendous popularity raised questions about LinkedIn’s future. Facebook was seen as the poster child of social networking, a perception accented by Microsoft’s purchase of a tiny 1.6% stake for $240 million.

There was a schism in public opinion about LinkedIn’s prospects which was echoed by the New York Times. Just as one of its reports in August 2008 was questioning if LinkedIn was “socially relevant”, another report described it as “the ultimate rodolex” at a time when the financial and economic tsunami was leaving millions stranded and unemployed.

LinkedIn itself was not spared from the aftermath of the economic recession. In November of that year, it laid off 10% of its staff to refocus on revenue growth and to maintain positive cash flow. However, several rounds of financing totaling $75 million from investors such as Goldman Sachs and Bessemer Ventures, placed LinkedIn in a strong position which Business Week described as “Recession Ready”.

Between December 2008 and July 2009, LinkedIn went through three changes of CEOs, as the company flip-flopped as to what it wanted to be – a Facebook for the working professional or a network for experts.

With a new CEO, Jeff Weiner of Yahoo, refocusing on its revenue formula, (revenues were up 50% over the previous year), LinkedIn continued to its spree of releasing new applications - for Palm, IBM Lotus, Microsoft, a global application for Blackberry. It also launched a German version, and opened an office in Amsterdam.

Importantly, it partnered with Twitter to share information across platforms. For LinkedIn, its end goal was to lasso in the professional information that was shared on Twitter to its user base, and to be seen as the hub of professional conversation. Tweets now appear next to the LinkedIn profiles, as the two collaborate to take relationship building to the next level.

LinkedIn - Going Forward

LinkedIn is now firmly acknowledged as the go-to destination for professionals, a sentiment echoed by Fortune Magazine which, in its March 2010 cover story, featured LinkedIn as the only social site to “fire up your career.”
The CEOs of the Fortune 500 companies have their profiles on LinkedIn, members now number 65 million in 170 countries and a new LinkedIn profile is created every 2 seconds.LinkedIn remains a private company, but Sharespost, which creates a secondary market in private equity stakes, recently valued the company at approximately US$1.3bn, compared with US$1.4bn for Twitter and $11.5bn for Facebook. Not too bad for a seven year old company conceived on “the theory of small gifts” which is a belief dear to Reid Hoffman.

In a past interview, Hoffman, who switched from academia to business to make the world “a nobler place” said, “When you're embedded in an ecosystem, it makes sense for you to think of little tiny things you can do for other people, things that can have huge value for them.”
“If you can create structures where the interests of millions of align with the group's interest, then you can actually create things that generate a lot of value in the system.”