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Venture firms gambling LinkedIn is worth $1b

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Associated Press / June 18, 2008

SAN FRANCISCO - Four venture capital firms are betting LinkedIn Corp. is worth $1 billion, highlighting the lofty hopes riding on online services that connect people with their friends, family, and business associates.

The 10-figure valuation is implied by a $53 million investment being revealed today by Bain Capital Ventures, Sequoia Capital, Greylock Partners, and Bessemer Venture Partners.

The investors received a combined 5 percent stake in Mountain View-based LinkedIn, whose five-year-old website helps people use the Web to advance their professional careers.

It's one of the richest appraisals for a Silicon Valley start-up since Microsoft Corp. paid $240 million for 1.6 percent of Facebook Inc. late last year. That deal valued Palo Alto-based Facebook and its online hangout at $15 billion.

The Facebook financing in turn helped several other start-ups that promote online socializing to promote themselves. Ning Inc. and Slide Inc. wrangled implied valuations ranging between $500 million and $560 million when investors poured more money into them this year, while RockYou was valued between $200 million and $300 million in a deal completed last week.

Venture capitalists are counting on the services to mine more advertising revenue from their rapidly growing audiences even as much of the US economy is withering. But finding an effective advertising approach has been tricky for the top social networks.

Privacy complaints prompted Facebook to rein in a marketing tool that tracked its members' activities on other websites.

Even the Internet search and advertising leader, Google Inc., has had trouble peddling products and services to denizens of the Web's largest social network, News Corp.'s MySpace.

LinkedIn believes its emphasis on connecting executives, other ambitious employees, and deal makers gives it a demographic edge over more recreational Internet networks.

"If LinkedIn is able to achieve its goals and objectives in the coming years, this valuation of a billion dollars will be looked upon as very cheap," predicted Mark Kvamme, a Sequoia Capital partner and a member of LinkedIn's board of directors.

Sequoia, Greylock, and Bessemer invested in LinkedIn prior to the latest financing round. Including the latest infusion, LinkedIn has raised a total of $80 million.

About 23 million people in 150 countries have set up profiles on LinkedIn so far, with another 1.2 million members signing up each month.

Relying on a mix of advertising and fees, LinkedIn hopes to generate as much $100 million in revenue this year.

Facebook, by comparison, has more than 70 million members worldwide and is aiming for revenue of about $300 million in revenue this year.

Both Facebook and LinkedIn are expected to go public within the next two years if they don't sell to a larger company before then.

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