LinkedIn Corp’s founder Reid Hoffman and its three top venture backers will own a combined stake of about $2.5 billion after an eight-year wait for the first initial public offering by a major US social-media site.
Venture capitalists have led more than $100 million in investments in Mountain View, California-based LinkedIn since 2003, with Sequoia amassing a $757.8 million holding and Greylock Partners a $632.2 million stake. Hoffman, LinkedIn’s chairman and its biggest shareholder, holds $858 million and Bessemer Venture Partners has a stake worth $206 million.
The almost decade-long wait for a LinkedIn windfall compares with less than five years for the biggest investors in Google Inc and just a year for top backers of Yahoo! Inc.and EBay Inc LinkedIn’s debut on the New York Stock Exchange today at $45 a share, for a valuation of about $4.25 billion, brightens prospects for the venture capital industry, which has lost money over the past 10 years amid a dearth of IPOs.
“Any solid returns like this are clearly a great thing and there’s been too few of them in the past decade,” said Eric Risley, founder of Architect Partners, a technology merger-and- acquisition advisory firm in Menlo Park, California. “This was not an overnight success by any means.”
LinkedIn was valued at about $15 million when California-based Sequoia first invested in 2003. LinkedIn’s current valuation indicates a return of more than 280 times.
Venture investors are barred from selling shares during a so-called lockup period that lasts for six months after an IPO. Venture capital firms typically keep 20 per cent to 30 per cent of profit for their partners after portfolio companies get acquired or go public. They distribute the rest to the pension funds, endowments and foundations that invest in their funds.
Hoffman, a former PayPal Inc. executive, is selling less than 1 per cent of his stake. Hani Durzy, a spokesman for LinkedIn, declined to comment, as did Mark Dempster, who heads marketing for Sequoia.
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LinkedIn surges in first day of trading after share sale
LinkedIn Corp, the largest professional-networking website, more than doubled in the first day of trading after its initial public offering. The stock surged as much as $47.99 to $92.99 and traded at $81.76 at 10:18 am on the New York Stock Exchange. The Mountain View, California-based company sold 7.84 million shares at $45 each.