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Some LinkedIn Math and Suggestions


I thought I’d let the fervor over LinkedIn’s IPO die down a bit before throwing in my two cents. LinkedIn’s stock at the moment is trading just over $88 per share. They’re at a $375M run-rate in sales and have a enterprise value of $6.6B. That 17.6X EV / Sales multiple. To put that nosebleed multiple in perspective, Apple trades at 2.78X EV/Sales. Now LinkedIn grew revenues 111% over the comparable period last year and Apple only grew 83% but all know that it’s much harder to grow revenues when you are larger…a lot larger with revenues approaching a $100 Billion.

The ripple effect is that every one of my prospects and customers now think they are valued higher. I never thought I would long for the days when companies compared themselves to Salesforce.com with its 9X EV / Sales multiple. Nosebleed valuations aside, LinkedIn is only marginally useful to even the most active of users. Here are some observations and suggestions:

1. Don’t force users to use your messaging system – it’s awful. I get an email and I have to click a link to go on the site just to reply. I’d much prefer to hit that ‘reply’ button that is so conveniently located just above in Outlook.

2. Please alert users that although I’m a second level connection to Barack Obama, I can’t provide them with an introduction. Same goes for the Queen of England, etc.

3. Buy Plaxo or ZoomInfo so you can integrate people’s correct contact data to their profiles. BTW, ZoomInfo charges $1,000 per year for access to that data and their customer base is mostly recruiters – sound familiar?

4. You’re not a social networking company if people don’t interact on the site. I’ve got far greater interaction (business related) on Facebook and Twitter despite the fact that I’ve got 4X the number of contacts on LinkedIn. Case in point: I asked for an introduction to the Tech Practice of Ropes and Gray recently. Only one of my 1,077 contacts replied (and she offered to introduce me to someone who unfortunately had passed away).

If LinkedIn is ever going to grow into that massive valuation, the site has to be useable and useful. If you’ve got other suggestions for LinkedIn, feel free to comment.

Tim O’Loughlin

Eastward Capital Partners

432 Cherry Street

West Newton, MA 02465

o: (617) 762-3611

c: (617) 947-6272

http://www.eastwardcp.com

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Eastward Capital Partners – providing $1 – 10 million venture debt, growth capital and equipment financing to venture-backed, emerging growth companies since 1994. We also provide expansion capital to non venture backed companies.

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Tim O’Loughlin

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