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October 13, 2004

LinkedIn pulls in another $10M

By Charlene Li

LinkedIn announced that it was closing its B round of financing -- $10 million lead by Greylock and with the participation of 14 angels (among them, Mark Andreessen, Joe Kraus, co-founder of Excite and CEO of JotSpot, Peter Thiel, CEO of Paypal.com, and Josh Kopelman, founder of Half.com). This follows an A round of $4.7 million last November.

There's been a lull in the press hype about social networking and this announcement is sure to raise questions again about the viability of social networking business model. Wait, what business model, you say?

One of the most compelling pieces of LinkedIn's success is that it's grown its network to 1.2 million members, half of them from outside the US. That's over a million connected, high quality professionals who believe enough in the power of connections to have posted a profile. Moreover, these people are connected via a two-way confirmation -- both believe it's worthwhile being connected. While the connections are great, I believe that it's the profiles that are the gold behind social networking.

Here's an example: LinkedIn is used by many job seekers and employers to find each other. In fact, they have a partnership with Direct Employers that shows how many people in your LinkedIn network is employed by a company (you can then contact that personal as a "warm" referral into the company).

The only problem is the current version of LinkedIn allows you to see only people who are within your network. What if as an employer or recruiter, you could see and search the entire LinkedIn network -- and with sophisticated filtering tools? This wouldn't be much different from any of the job boards' resume databases -- but the quality of the people would be much, much higher. Another example -- LinkedIn has 10,000 IBM employees and 7,000 Microsoft employees in its network. I think that companies would definitely pay for such a privilege -- and if nothing else, IBM and Microsoft should use LinkedIn as an employee referral and retention tool.

A few problems remain with LinkedIn and other business social networking models. I've been on LinkedIn for over a year and have a decent network (here's my profile). But I realize that some connections are much strong than others -- and some that I early on had added that I'm now realizing I don't want in my network.

What happens if a relationship goes sour? Or if one of my connections turns out to be a poor, unreliable one? Today, there's no obvious way to denote the nature of the relationship or to severe one. Just one of the issues that I hope LinkedIn will use it's new financing to address.

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