LinkedIn Share Sale Likely to Be First In Wave of Social-Networking IPOs

Posted by | Posted on 23-02-2011

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LinkedIn Share Sale Likely to Be First In Wave of Social-Networking IPOs

LinkedIn Corp.’s plan to raise as much as $175 million in an initial public offering may be the first in a wave of share sales for U.S. social-networking companies.

The largest professional-networking site plans an IPO after turning a profit in the first nine months of last year and more than tripling revenue between 2007 and 2009, it said in a filing yesterday with the U.S. Securities and Exchange Commission.

Other companies that foster online interaction may follow suit. LinkedIn is at the forefront of social-Web startups that aim to replicate the successes of Internet pioneers, such as Google Inc. and Amazon.com Inc., and avoid the fate of sites like Pets.com Inc., which shut less than a year after its IPO.

“LinkedIn is bringing the very hot concept of social networking to the practical business world,” said Dixon Doll, co-founder of venture-capital firm DCM, based in Menlo Park, California. “The whole social-networking phenomenon may be in the fourth or fifth inning and none of these have gotten public yet.”

Social deals site Groupon Inc., which rebuffed a $6 billion takeover approach from Google, is in talks with banks about a public offering this year, while Facebook Inc. may pursue an IPO in 2012, three people familiar with the matter said last year.

Earnings, Facebook

For the nine months that ended in September, net income attributable to common shareholders was $1.85 million, LinkedIn said. Revenue was $161.4 million, almost double the $80.8 million a year earlier. Total revenue in 2009 was $120.1 million, and the company had $89.6 million in cash and equivalents as of Sept. 30.

LinkedIn is dwarfed by Palo Alto, California-based Facebook, the most popular social network, which has more than 500 million users. It had revenue of $1.2 billion in the first three quarters of last year, up from $777 million, according to a person who has viewed documents pertaining to its results and asked to remain anonymous because the company is private.

Even with that growth, Facebook isn’t worth the $50 billion valuation it derived from a recent round of financing led by Goldman Sachs Group Inc., according a poll of 1,000 Bloomberg customers who are investors, traders or analysts.

Of investors polled, 69 percent say Facebook is overvalued, the poll showed. Only four percent said it’s worth more.

‘Lot to Like’

LinkedIn could draw strong demand in the public markets because it has steadily boosted sales from advertising, subscriptions and hiring services, said Tom Taulli, an independent technology analyst.

“There’s a lot to like if you’re an investor,” said Taulli, who is based in Los Angeles. LinkedIn is “growing quickly, it has multiple revenue streams and there’s global potential here,” he said.

LinkedIn’s biggest shareholders include co-founder Reid Hoffman and his family and trust, with 21 percent; Sequoia Capital, with 19 percent; Greylock Partners, which holds 16 percent; and Bessemer Venture Partners, with 5.1 percent. LinkedIn Chief Executive Officer Jeff Weiner owns 4.1 percent.

Some of the shares sold to the public will be from existing shareholders and some stock will be issued and sold by Mountain View, California-based LinkedIn, according to a post on the company’s blog. The company didn’t say how many shares would be sold in either case, or at what price.

‘Always Danger’

LinkedIn hired Morgan Stanley, Bank of America Corp. and JPMorgan Chase & Co. to lead the offering, according to the SEC filing. Allen & Co. and the investment banking division of UBS AG are also working on the sale.

Jim Breyer, a managing partner at venture capital firm Accel Partners, said if it was up to him he wouldn’t take LinkedIn public now. There’s “always danger” of a social- networking bubble, he said today in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland. Accel was an early investor in Facebook and Groupon.

LinkedIn has more than 1,000 employees and 90 million users in more than 200 countries. Members use the site to search for jobs, recruit employees and find industry experts. While users can create personal profiles for free, LinkedIn introduced paid subscriptions in 2005, giving recruiters more access to job candidates and providing business professionals ways to communicate with one another. The company also makes money by selling ads on the site.

As LinkedIn’s membership has grown, investment firms have been clamoring for a piece of the company.

$3 Billion Valuation

Tiger Global Management LLC, a hedge fund founded by Chase Coleman, paid $20 million for a stake in the company in July, at a valuation of about $2 billion, according to two people familiar with the matter. SharesPost, a private exchange, is now trying to auction LinkedIn shares at a valuation of almost $3 billion, three people familiar with the matter said last week.

Pricing of LinkedIn’s stock in its IPO won’t be affected by trading on speculative markets for private company shares, the company said in its SEC filing.

LinkedIn was founded in 2003 by former PayPal Inc. executive Hoffman, 43, and received its first round of funding that year from Sequoia, the venture firm behind Google Inc. and Yahoo! Inc. Sequoia’s Mike Moritz is on LinkedIn’s board. The company has raised more than $100 million from firms including Greylock, Bessemer and Bain Capital Ventures.

On Jan. 25, in the first venture capital-led U.S. IPO of 2011, Web content company Demand Media Inc. sold 8.9 million shares at $17 each after originally offering 7.5 million shares for $14 to $16 apiece. New York-based Goldman Sachs Group Inc. and Morgan Stanley arranged the IPO.

LinkedIn “is just one of what we view as dozens of high- quality private companies that represent strong venture capital- backed, technology IPO candidates,” said Paul Bard, director of research at Greenwich, Connecticut-based IPO researcher Renaissance Capital LLC. “You’re going to see momentum continue, and we could end up with some pretty big numbers in terms of IPOs in 2011.”

By Douglas MacMillan and Ari Levy, Bloomberg.net

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Zappos CEO Tony Hsieh Happy Making $36,000 A Year Working For Amazon

Posted by | Posted on 14-02-2011

Category : Entrepreneur Success Stories

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Can a small business really create a plan on a postcard?

“Yes! An effective small business plan that covers no more than a postcard is more than possible, it’s practical and effective”

=> Business Plan Australia

Zappos CEO Tony Hsieh Happy Making $36,000 A Year Working For Amazon

One of the most striking Internet success stories in recent years is Zappos, the $1+ billion e-commerce business which was bought last year by Amazon.

But, as is often the case, the Zappos empire was not created overnight. Ten years ago, the online retailer known for selling shoes was actually desperate for sales. It wasn’t until a young Tony Hsieh came aboard in 1999 — as a business consultant and investor — did that all begin to change.

Hsieh’s unorthodox approach to company culture turned Zappos not only into a very lucrative business, but one beloved by customers and employees alike. He was named CEO in 2000 and attributes Zappos’ success to sticking by the company’s core values, which were designed to make employees happy.

“Our number one priority at Zappos is company culture. Our belief is that if we get the culture right most of the other stuff like delivering great customer service or building a long-term enduring brand for the company will happen naturally on its own,” says Hsieh who is also the author of a new book “Delivering Happiness: A Path to Profits, Passion and Purpose.”

Hsieh, 36, has stayed CEO of Zappos, despite making a salary that one would normally associate with an entry-level customer-service rep–$36,000 a year. Hsieh has been so successful as an entrepreneur that money no longer motivates him. What does, he says, is continuing to develop the company and culture that the Zappos team built over the past decade. And, so far, Amazon has allowed him to do that.

He must be on to something: Fortune magazine named Zappos #15 on its annual ranking of “Best Companies to Work For” at the beginning of the year.

Born for business

Hsieh, a first-generation Taiwanese-American, was only in his mid-20s when he joined the Zappos team. He may have been fresh out of college, but he certainly was no stranger to creating and cultivating multi-million dollar businesses.

From a very young age, he had the entrepreneurial instinct. At just nine years old, he had started his very first business – a worm farm. A few years later came his mail-order make-your-own button company. Then while studying computer science at Harvard he started making his peers what every college student demanded more than anything: pizza.

His first “real” company

Shortly after college in 1996 at the age of 24, Hsieh co-founded LinkExchange a website development business from the comfort of his own basement. Two years later Microsoft paid him $265 million – yes, nine figures – for his creation.

Of course Hsieh needed another challenge and to feed his insatiable entrepreneurial appetite. That challenge would be Zappos. His goal was to make the company – at the time fighting for financial stability – the largest online shoe retailer.

Zappos named him CEO and he did what he set out to do. Hsieh grew the company that had nearly non-existent sales when he started, to over $1 billion in sales today.

His guiding principle: Happiness. When you enjoy what you do and where you work, great things will happen.

“We have 10 core values at Zappos. We try to do is hire people whose personal values match their corporate values,” says Hsieh while also stressing the importance not hiding or holding back who you are outside of the office. “It is about being yourself in the office because we found that when true friendships are formed, that is when creativity really blossoms (in our employees) and great ideas come out, which is what has driven our growth.”

The company will not hire anyone who does fit within their corporate culture.

“One our values is to be humble, and that is the one that trips us up most during the hiring process. There are a lot of smart people out there that are also egotistical and for us it is not a question, we just won’t hire them,” says Hsieh.

In the same vein, the company will fire employees who do not live up to those standards.

Often, when growing companies are acquired by much-larger ones, such cultures are destroyed, as the acquirer seeks to wring out the “synergies” used by financial folks to justify the acquisition.

But that’s not so in this case, Hsieh says.

Before Amazon and Zappos agreed to their deal, Amazon signed a document saying it would let Zappos continue to do its own thing. And Hsieh says Amazon has honored that commitment.

Basically, the only thing that has changed, Hsieh says, is that Zappos has swapped its old board of directors for a new one–at Amazon. Zappos still runs its own show, and that has enabled it to maintain the culture that it so carefully cultivated in its years as an independent company.

by Henry Blodget

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Clearance Sale: Barnes & Noble Didn’t Evolve Enough

Posted by | Posted on 25-08-2010

Category : World Economy

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How did Barnes & Noble (NYSE: BKS – News) fall so far so fast?

The giant bookstore chain, whose superstores once struck fear into the hearts of independent booksellers everywhere, put itself up for sale this month, rendering it the corporate equivalent of the remaindered books it sells at a discount.

The company said it made the move because its shares are undervalued, but to me there was an air of desperation about it.

The simple explanation for Barnes & Noble’s decline is the Internet, which spawned Amazon.com (Nasdaq: AMZN – News), e-readers and digital books. But that didn’t have to be the end for B&N, which had a dominant market position and should have out-Amazoned Amazon, leveraging its brand and innovating when it began marketing and selling books online.

I know exactly when B&N lost me as a customer. Some years ago, to compete with Amazon, B&N began offering free same-day delivery in Manhattan if you placed your order over the Internet by 11 a.m. I did so several times — and not once did the books arrive when promised. Everything I have ordered from Amazon has arrived on time or earlier. Then came Amazon’s game-changing Kindle, and instant delivery. Nothing I’ve read about B&N’s belated rival Nook has tempted me to try it.

My hunch is that B&N never really embraced the Internet or e-books, tied as it was to the old-fashioned world of physical books and stores. As B&N focused on managing decline, a much more nimble Amazon could concentrate exclusively on the new world it was forming. B&N needed to destroy its business model to prevail. Now it is probably too late. There is a lesson for all businesses here.

Now I’m using Apple’s (Nasdaq: AAPL – News) iPad, and while I predicted the demise of the Kindle in a previous column, I may have been premature. I like reading on the iPad, especially in bed at night and in other places where the device’s back-lighting comes in handy. So far, it hasn’t bothered my eyes at all, unlike the indistinct pages of the Kindle. But the Kindle is better outdoors.

I also suspect there may be a place for a dedicated reading device. When I open the iPad to read a book, I’m confronted with a dizzying array of options, from the latest episode of “Mad Men” to the current action in Asian stock markets. Is this information overload? Too often I find myself distracted by information I don’t really need.

I can’t say I miss physical books. My shelves are already groaning and can’t accommodate any more. I do miss the bookstore I grew up with in the Midwest and the small stores that once dotted my neighborhood. Could B&N’s decline pave the way for the return of the independent bookseller?

Despite the array of suggestions tailored to my interests (or at least to my recent purchases) that appear when I open the Amazon site, I still yearn for someone intelligent who can recommend a good book. I enjoy the community of other people who love books. I like talking to someone both before buying a book and after reading it. I think independent bookstores may be able to provide these services even while selling over the Internet. Their overhead should be lower, since they don’t need to carry huge inventories of physical books and don’t need huge retail spaces. Maybe I’m naive, but I’d like to think there are new opportunities for booksellers.

As for B&N, I give them credit for democratizing books, boosting sales and getting people to read. As an author, I feel I’ve benefited from their aggressive marketing and in-store promotions. But I feel that world already has disappeared. Maybe dissident B&N shareholder Ron Burkle has some bold ideas for reinventing book retailing. If so, more power to him. But as an investor, I’m staying clear of B&N shares. (I do own Amazon, as I’ve reported.)

B&N shares sank below $12 a share in July, less than half their high for the year. They jumped more than $3 after news of the sale, suggesting some investors think a bidding war might break out. The company says it is selling because shares are cheap. But in my experience, most companies sell when they believe their shares are expensive.

– James B. Stewart, a columnist for SmartMoney magazine and SmartMoney.com, writes weekly about his personal-investing strategy. Unlike Dow Jones reporters, he may have positions in the stocks he writes about. For his past columns, see: www.smartmoney.com/commonsense.

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