Interesting article; read here!
The big news tonight is business social network LinkedIn raised $53 million in Series D funding at a valuation of $1 billion. The new round is led by Bain Capital (the same genius investors who also funded Vonage) brings the total money raised by the company to about $80 million. I wasn’t going to write about this, given everyone had already jumped on the story.
Anyway the valuation of $1 billion -not as insane as the valuation placed by Microsoft on Facebook – was jaw dropping. Sure, LinkedIn has more value than plain vanilla me-too social networks but is it really worth a billion dollars?
The question of over-valuation had first popped up when I read about this round in May 2008 on Venturebeat . Techcrunch then reported that Allen & Co, the New York bank was helping Reid Hoffman’s company raise fresh capital at the $1 billion valuation.
So I decided to do a back-of-the-envelope comparison with XING with some of the publicly available data on XING, a European Social Network that is publicly traded in Frankfurt. It is a pretty good proxy for a business-focused social network, such as LinkedIn.
It has a market capitalization of about $300 million. It has has 5.71 million subscribers. XING had revenues of around $11.6 million at the end of first quarter 2008; about 70 cents per month per subscriber. That works out to about $52.30 per subscriber. For sake of comparison, Facebook’s reported $15 billion valuation works out to $125 per subscriber.