LinkedIn Series D Opportunity - Investment Recommendation

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LinkedIn Series D Opportunity - Investment Recommendation

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  • Have general—Xing and Viadeo. Regional
    Order: media, recruiting/general/research
  • - COGS as % of revenues: ’07 – 26%, ’08 – 20%, ’09 – 14%; ’10+ – 11%
  • Assumes $3B exit in ‘10
  • To be confirmed by Legal during DD
  • LinkedIn Series D Opportunity - Investment Recommendation

    1. 1. Series D Opportunity – March 2008 Total round size: $85-125M
    2. 2. 2 Why LinkedIn? • Large “exit ready” social network for professionals • One of three elite social networks and clear leader in their demographic • MySpace – Teenage and younger; $25B implied valuation • Facebook – College and young professional; $15B actual valuation • LinkedIn – Professional / business user – post college demographic • Current growth very high: Revenues: ’05 $1.2M, ’06 $9.9M, ’07 $32.3M, ’08E $82.3M • Very high room for increased growth, current asset under utilized; strong roadmap • Large scale advertising yet to be rolled out; Additional $100M+ recurring revenue untapped (referencing Facebook data) • Almost no sales or marketing resources • Yet to turn on OpenSocial platform for applications (similar application platform released prior to and responsible for Facebook’s largest spike in growth) • Yet to sell into enterprises who are very hungry for professional social network solution • Yet to fully sell into conferences, who are also hungry for solution • Yet to roll out formal corporate recruiting solution • They have the right team and technology, the timing is ripe to be more aggressive
    3. 3. 3 Executive Summary Company Information – Founded in 2002 and launched in 2003 • HQ in Mountain View, CA • Revenues: ’05 $1.2M, ’06 $9.9M, ’07 $32.3M, ’08E $82.3M • EBITDA positive since March 2006 • IPO Candidate: Equipped for exit within one year LinkedIn is the largest professional-oriented social network platform: – Network effects: network between users, network between business lines – Huge markets: recruiting, media, services, sales, productivity software and others • Google for finding professionals • eBay for Labor Markets • Microsoft and Google for Internet productivity Members & Traffic – Members: 20 million, adding 1M+ per month at ~$0 CPA – Monthly Unique Visitors: 6.6 million / 2.8x y-o-y – 260M “Connections” Funding – Series A → $4.7M (Nov’03) - Sequoia – Series B → $10M (Oct’04) - Greylock – Series C → $12.8M @ $237M pre-money valuation (Dec’06) – Bessemer and European Founders – Other investors include Marc Andreessen and Peter Thiel Investment Proposal – Seeking approval for: – Leading the deal at pre-money valuation of no greater than $1.1B post – [INVESTOR X] to invest $85-125M of $125M raise • Use of proceeds: Expansion capital – Potential warrant coverage from advertising revenue driven by [INVESTOR X] (direct/indirect ad spend) – Expected return: >2X
    4. 4. 4 Valuation and Exit Potential Valuation and Deal Terms • Exit very likely to be IPO, not likely to raise another round unless it’s a pre-IPO strategic round (company is cash flow positive + this round of extra cash); expansion of biz model elements presents risk/opportunity • Syndicate already done (led by Sequoia), prior to [INVESTOR X] disruption – Multiple sources pricing the round between $1.5-1.7B; High investor interest • Minimum Protective Terms if [INVESTOR X] leads deal at $1.5B+ • QIPO min of 1.2x – protects min return on IPO • Senior 1.5-2x preferred liquidation preference on series D – protects min return upon acquisition • Redemption rights on the series Exit potential • Already at point for rich M&A, if desired – Leader in space, many potential suitors. • Company is currently not interested in M&A, feeling they have a lot of growth in the short term that they will be able to capitalize on later during IPO exit in ’10-11. Significant upside opportunities still untapped. • Valuation is very high - company would need to exit at $3B+ for this to be an interesting investment – embedded ‘leadership premium’ Risks
    5. 5. 5 Management Team Reid Hoffman Chairman and President, Products • Founding CEO • EVP of PayPal • BoD for SixApart and Mozilla Dan Nye CEO • EVP and GM at Advent • VP and GM at Intuit Steve Sordello CFO • CFO of Tivo, Inc • CFO at AskJeeves Jean-Luc Vaillant CTO and Co-Founder • Director of Engineering at Logitech • Director of Software Development at Spotlight • Strong management team with prior successes • Second or third startup for most of the team • Chairman/President very methodical and well connected. High integrity • Team fully hired - http://www.linkedin.com/static?key=management Grade: A
    6. 6. 6 LinkedIn Facts • Largest professional networking site • High profile users – Avg user income $140K – Avg user age 35 years old • 1.4M+ users are senior executives; All Fortune 500 companies have executive level employees as members • 20M registered users spanning 150 industries & 400+ economic regions • Traffic increased 323% YoY; Adding 1M users every 25 days • Selective open API platform (revenue share) • Reached profitability in Mar’06 with $10M ’06 revenues; expect ~$90M revenue in 2008 and pending IPO • 240+ employees; Executive Team: Dan Nye (CEO), Steve Sordello (CFO), Reid Hoffman (Founder/Chairman) • Investors include Greylock, Sequoia, Bessemer, European Founders Fund; Raised total of $27.5M
    7. 7. 7 LinkedIn Business Framework – Just the Beginning Software licensing Contextual advertising Marketplace Subscriptions Job ads search Classifieds General advertising Experts Recruiting Media Research Services Sales/BD Individual productivity Enterprise applications
    8. 8. 8 Large Addressable Market Segment Users of social networks: 506 million monthly unique visitors in 20071 Advertising on social networks: $2.5 billion by 20112 1 comScore, November 2006/2007, worldwide statistics; business websites include: Yahoo! Finance, NYTimes.com, Forbes.com, CNN Money, WSJ.com, BusinessWeek.com, Bloomberg.com, MarketWatch.com, TheStreet.com, Google Finance 2 eMarketer 3 US Central Intelligence Agency, World Factbook 4 US Census Bureau; US professional force calculated as males and females of the labor force with greater than $50,000 income 5 UN ILO labor stats; defined as total professionals, technicians and associate professionals in 2006 6 Corzen 7 IDC, worldwide figures 8 Wall Street research US labor force: 151 million in 20063 US professional workforce: 57 million in 20064 US employers with >500 employees: 17,000+4 Online recruiting spend: $4.5 billion by 20106 2006 page views1 Social networking 24% General Internet 76% 2007 page views1 Social networking 40% General Internet 60% HRMS spend: $6.2 billion by 20107 CRM spend: $12.7 billion by 20107 Business intelligence: $11.5 billion in 20068 Global labor force: 3 billion in 20053 Global professional workforce: 171 million in 20065 Top 10 business news sites: 2 billion monthly page views in 20071 Global Recruiting Advertising: $16B in 2007 Global Staffing spend: ~$75B in 2007 Social networks Professionals Enterprises
    9. 9. 9 LinkedIn vs. Facebook Types of uses and/or applications Photo Sharing Top Friends Super Wall Movie Tastes Bumper Stickers Play Scrabble Compare People Super Poke Texas Hold ‘em Share Music Taste 20 million People search Check References Get Introduced Post a job Recruit Get Valuable News Get Advice Recommend someone Conduct research Send a message 60 million Business model Advertising Advertising Subscriptions corporate job postings Ad rev per 000 page views Total rev per 000 page views $0.42 $7.68 $0.42 $31.55 4+ million 1+ million 87M installs of Top 5 Social apps 870K installs of Top 5 Bus apps Members Monthly growth
    10. 10. 10 Opportunities: Disruptions to Landscape? $0 CPA User-generated content (scale) Profiles for best ad products User to User ad productsMedia Future of recruiting Access to “passive” job seekers Resume v2 Network Effects Online recruiting Massive user scale International reach Unique products Research
    11. 11. 11 FINANCIAL ANALYSIS
    12. 12. 12 Company Financials Year % Growth FY05 FY06 FY07 FY08 FY09 FY10 FY06 FY07 FY08 FY09 FY10 Revenue Online Subscriptions 382$ 4,716$ 14,629$ 28,003$ 48,657$ 81,456$ 1135% 210% 91% 74% 67% Online Jobs 412 2,016 5,821 14,184 29,641 57,670 389% 189% 144% 109% 95% Advertising 296 2,053 7,827 27,658 64,825 123,909 594% 281% 253% 134% 91% Corporate Sales 105 1,090 3,881 12,495 48,587 103,637 938% 256% 222% 289% 113% Total 1,195$ 9,875$ 32,159$ 82,340$ 191,711$ 366,673$ 726% 226% 156% 133% 91% Total Spending 6,271$ 10,621$ 30,402$ 80,272$ 144,454$ 239,816$ 69% 186% 164% 80% 66% EBITDA (5,076)$ (746)$ 1,758$ 2,068$ 47,257$ 126,857$ -85% -336% 18% 2185% 168% EBITDA Margin -425% -8% 5% 3% 25% 35% Depreciation 513$ 663$ 1,435$ 5,026$ 9,953$ 16,825 29% 116% 250% 98% 69% Other Income 120 720 815 780 1,174 1,618 500% 13% -4% 50% 38% Taxes - - - - 11,543 39,078 NA NA NA NA 239% Net Income* (5,469)$ (689)$ 1,138$ (2,178)$ 26,934$ 72,572$ NA NA NA NA 169% Headcount 31 68 197 370 550 700 119% 190% 88% 49% 27% Revenue/Head 51$ 199$ 244$ 290$ 417$ 587$ 292% 22% 19% 43% 41% Bookings Online Subscriptions 711$ 6,321$ 17,283$ 33,033$ 59,300$ 99,798$ 789% 173% 91% 80% 68% Online Jobs 458 2,122 6,286 15,098 32,360 61,028 363% 196% 140% 114% 89% Advertising 296 2,134 7,783 30,063 72,028 137,677 621% 265% 286% 140% 91% Corporate 105 1,771 7,855 34,451 82,093 155,536 1587% 344% 339% 138% 89% Total 1,570$ 12,348$ 39,206$ 112,646$ 245,781$ 454,040$ 686% 218% 187% 118% 85% New Signups 2,782 3,930 9,377 18,267 31,437 36,205 41% 139% 95% 72% 15% % Warm 80% 69% 65% 65% 65% Member Base 4,381 8,291 17,480 35,252 65,744 100,331 89% 111% 102% 86% 53% Page Views (M) 477 830 2,672 8,304 17,919 29,749 74% 222% 211% 116% 66% Unique Visitors 1,117 1,803 5,460 13,406 25,001 29,484 61% 203% 146% 86% 18%
    13. 13. 13 LT Forecast - Sensitized Income Statement ($M) 2007 2008 2009 2010 2011 2012 Revenue $32.2 $72.6 $192.0 $330.6 $379.9 $437.4 Revenue Growth % 125.8% 164.5% 72.2% 14.9% 15.1% Cost of Revenues $8.4 $14.9 $26.4 $36.4 $41.8 $48.1 Gross Profit $23.7 $57.7 $165.6 $294.2 $338.1 $389.3 Gross Margin % 73.8% 79.5% 86.3% 89.0% 89.0% 89.0% Total Operating Expense $23.4 $52.9 $139.8 $240.7 $276.6 $318.5 Operating Income $0.3 $4.9 $25.8 $53.5 $61.5 $70.8 Other Income $0.8 $0.8 $1.2 $1.6 $1.6 $1.6 Taxes (30%) $0.0 $1.7 $8.1 $16.5 $18.9 $21.7 Net Profit $1.1 $3.9 $18.9 $38.6 $44.2 $50.7 Profit Margin % 3.5% 5.4% 9.8% 11.7% 11.6% 11.6% EBITDA $1.8 $8.1 $34.4 $68.3 $78.5 $90.3 EBITDA Margin % 5.5% 11.2% 17.9% 20.7% 20.7% 20.7% ** Bottoms up COGS as % of revenues: ’07 – 26%, ’08 – 20%, ’09 – 14%; ’10+ – 11%
    14. 14. 14 CF Forecast - DCF Cash Flow Statement ($M) 2007 2008 2009 2010 2011 2012 Net Income $1.1 $3.9 $18.9 $38.6 $44.2 $50.7 Depreciation & Amortization $1.4 $3.2 $8.6 $14.8 $17.0 $19.5 Changes in Net Working Capital: $2.4 $5.2 $14.1 $15.9 $5.9 $6.9 Cash Flow from Operations $5.0 $12.3 $41.6 $69.2 $67.1 $77.1 Acquisition of Property & Equipment ($8.7) ($0.8) ($3.8) ($7.7) ($8.8) ($10.1) Cash Flow from Investments ($8.7) ($0.8) ($3.8) ($7.7) ($8.8) ($10.1) Cash Flow from Financing $16.4 $125.0 $0.0 $0.0 $0.0 $0.0 Net Increase/(Decrease) in Cash Flow $12.7 $136.6 $37.8 $61.5 $58.2 $67.0 Beginning Cash Flow Balance $4.1 $16.7 $153.3 $191.1 $252.6 $310.8 Ending Cash Flow Balance $16.7 $153.3 $191.1 $252.6 $310.8 $377.8 Cumulative Cash Burn $12.7 $149.2 $187.0 $248.5 $306.8 $373.8 Free Cash Flow ($3.7) $11.6 $37.8 $61.5 $58.2 $67.0 DCF Valuation ($M) 2008 2009 2010 2011 2012 Terminal Value Free Cash Flow $11.6 $37.8 $61.5 $58.2 $67.0 $1,474.1 Discount Rate 15% LT Growth Rate 10% DCF Valuation $783.0 Free Cash Flow $11.6 $37.8 $61.5 $58.2 $67.0 $7,370.3 Discount Rate 15% LT Growth Rate 14% DCF Valuation $3,332.1
    15. 15. 15 Comps (M&A/Funding Activity) Company Name Acquirer Date Price ($M) Revenue ($M) Uniques (M) Monthly Page Views (M) Valuation/ Unique Revenue Multiples Valuation/ Page View Youtube Google Aug'06 $1,650 $15 16.0 1,055.0 $103.13 110.0x $1.56 aQuantive Microsoft May'07 $6,000 $94 N/A N/A N/A 63.7x N/A LinkedIn Funding Mar'08 $1,500 $32 6.8 65.6 $221.51 46.6x $22.87 Facebook Funding Oct'07 $15,000 $154 33.7 40,000.0 $444.51 97.4x $0.38 Facebook ('08 Est.) Funding Oct'07 $15,000 $400 33.7 40,000.0 $444.51 37.5x $0.38 FriendsReunited ITV Dec'05 $320 $24 15.0 N/A $21.33 13.3x N/A DoubleClick Google Apr'07 $3,100 $300 N/A N/A N/A 10.3x N/A Club Penguin Sony May'07 $450 $60 4.3 N/A $104.65 7.5x N/A ivillage NBC Mar'06 $600 $91 4.0 260.0 $150.00 6.6x $2.31 Flickr Yahoo 2005 $16M - $22M N/A 17.0 80.0 $1.11 N/A $0.20 Neopets Viacom Jun'05 $160 N/A 25.0 N/A $6.40 N/A N/A Myspace NewsCorp Jul'05 $580 N/A 12.0 7,080.6 $48.33 N/A $0.08 IGN NewsCorp Sep'05 $650 N/A 28.0 120.0 $23.21 N/A $5.42 Grouper Sony Aug'06 $65 N/A 8.0 N/A $8.13 N/A N/A Xing IPO'd Dec'06 $200 N/A 4.5 N/A $44.44 N/A N/A MyBlogLog Yahoo Jan'07 $10 N/A 0.2 N/A $50.00 N/A N/A Bolt GoFish Feb'07 $30 N/A 7.3 N/A $4.11 N/A N/A Stumbleupon eBay Apr'07 $75 N/A 0.9 6.0 $83.00 N/A $12.50 Photobucket News Corp May'07 $300 N/A 20.0 1,619.0 $15.00 N/A $0.19 last.fm CBS May'07 $280 N/A 8.5 N/A $32.94 N/A N/A Flektor News Corp Jun'07 $20 N/A 0.13? N/A $153.85 N/A N/A Median $46.39 25.42x $0.38
    16. 16. 16 Implied Valuation - Forecasts Valuation ($M) 2007 2008 2009 2010 2011 2012 Conservative Forecast Comp Median Price/'07 Sales $295.4 $621.2 $963.6 $1,229.2 $1,398.6 $1,494.9 Comp Median Price/'08 Sales $213.6 $449.1 $696.7 $888.7 $1,011.2 $1,080.9 Comp Median Price/Unique $3,381.7 $7,110.2 $11,029.7 $14,069.9 $16,009.0 $17,112.1 Comp Median Price/Pg View $424.7 $893.0 $1,385.3 $1,767.2 $2,010.7 $2,149.3 Comp Median TEV/Unique $3,302.1 $6,942.8 $10,770.1 $13,738.7 $15,632.1 $16,709.3 Comp Median TEV/Pg View $520.5 $1,094.3 $1,697.5 $2,165.4 $2,463.9 $2,633.7 Google Price/Sales $295.4 $621.2 $963.6 $1,229.2 $1,398.6 $1,494.9 YouTube Price/Sales $3,537.5 $7,437.7 $11,537.9 $14,718.1 $16,746.5 $17,900.5 Facebook Price/'07 Sales $3,132.4 $6,586.0 $10,216.6 $13,032.6 $14,828.7 $15,850.5 Exit Price/Unique ** $314.1 $660.5 $1,024.6 $1,307.0 $1,487.1 $1,589.5 Median $472.6 $993.7 $1,541.4 $1,966.3 $2,237.3 $2,391.5 Medium Forecast Comp Median Price/'07 Sales $295.4 $816.6 $1,969.0 $4,191.9 $7,978.1 $13,742.7 Comp Median Price/'08 Sales $213.6 $590.4 $1,423.6 $3,030.9 $5,768.4 $9,936.3 Comp Median Price/Unique $3,381.7 $9,347.2 $22,538.4 $47,984.1 $91,323.0 $157,309.0 Comp Median Price/Pg View $424.7 $1,174.0 $2,830.8 $6,026.8 $11,470.1 $19,757.9 Comp Median TEV/Unique $3,302.1 $9,127.2 $22,007.8 $46,854.5 $89,173.2 $153,605.8 Comp Median TEV/Pg View $520.5 $1,438.6 $3,468.8 $7,385.1 $14,055.2 $24,210.8 Google Price/Sales $295.4 $816.6 $1,969.0 $4,191.9 $7,978.1 $13,742.7 YouTube Price/Sales $3,537.5 $9,777.9 $23,576.8 $50,194.8 $95,530.5 $164,556.6 Facebook Price/'07 Sales $3,132.4 $8,658.1 $20,876.8 $44,446.4 $84,590.2 $145,711.3 Exit Price/Unique ** $314.1 $868.3 $2,093.6 $4,457.2 $8,483.0 $14,612.4 Median $472.6 $1,306.3 $3,149.8 $6,705.9 $12,762.6 $21,984.3 ** Comp companies include Google, Yahoo!, Microsoft/MSN, eBay, Amazon, VMWare, Facebook, aQuantive & DoubleClick
    17. 17. 17 SUMMARY OF VALUATION ANALYSIS • P/S metric (median of comp – SocNW segment): – ’08 forecast implies valuation of $1.75B (21.2X NTM; 46.6X TTM) – Median is 23.1X TT M and 21.2X NTM • Median range (using various commonly accepted metrics) – $993M - $1.3B (through ’08); – ~$2.4 - $22B by ’12 • DCF Valuation – 10% growth rate – $783M – 14% growth rate - $3.3B
    18. 18. 18 Exit Analysis M&A $1,800.0 $2,100.0 $2,400.0 $2,700.0 $3,000.0 $3,300.0 $3,600.0 $3,900.0 $4,200.0 $4,500.0 $900.0 22.69% 29.76% 36.20% 42.16% 47.70% 52.90% 57.81% 62.47% 66.90% 71.14% $1,050.0 16.75% 23.48% 29.61% 35.28% 40.55% 45.51% 50.18% 54.61% 58.82% 62.85% $1,200.0 11.77% 18.21% 24.08% 29.50% 34.55% 39.29% 43.77% 48.01% 52.04% 55.90% $1,350.0 7.50% 13.69% 19.34% 24.56% 29.41% 33.97% 38.27% 42.35% 46.24% 49.95% $1,500.0 3.78% 9.76% 15.21% 20.25% 24.94% 29.34% 33.49% 37.43% 41.18% 44.76% $1,650.0 0.51% 6.30% 11.58% 16.46% 21.00% 25.26% 29.28% 33.09% 36.73% 40.19% $1,800.0 0.00% 3.21% 8.34% 13.07% 17.48% 21.62% 25.53% 29.23% 32.76% 36.12% $1,950.0 0.00% 0.44% 5.43% 10.03% 14.33% 18.35% 22.15% 25.76% 29.19% 32.46% $2,100.0 0.00% 0.00% 2.79% 7.28% 11.46% 15.39% 19.10% 22.61% 25.95% 29.15% $2,250.0 0.00% 0.00% 0.38% 4.77% 8.85% 12.69% 16.31% 19.74% 23.00% 26.13% ROI 1.1x 1.3x 1.5x 1.7x 1.8x 2.0x 2.2x 2.4x 2.6x 2.8x 12/31/2010 M&A Exit ($M) - ICAP IRR% Pre-MoneyValuation($M) IPO $1,800.0 $2,100.0 $2,400.0 $2,700.0 $3,000.0 $3,300.0 $3,600.0 $3,900.0 $4,200.0 $4,500.0 $900.0 13.14% 19.66% 25.60% 31.09% 36.20% 41.00% 45.53% 49.82% 53.91% 57.81% $1,050.0 7.67% 13.87% 19.52% 24.75% 29.61% 34.18% 38.49% 42.57% 46.46% 50.18% $1,200.0 3.07% 9.00% 14.42% 19.42% 24.08% 28.45% 32.57% 36.48% 40.21% 43.77% $1,350.0 -0.87% 4.84% 10.05% 14.86% 19.34% 23.54% 27.51% 31.27% 34.85% 38.27% $1,500.0 -4.29% 1.22% 6.25% 10.89% 15.21% 19.27% 23.10% 26.73% 30.19% 33.49% $1,650.0 -7.31% -1.98% 2.89% 7.39% 11.58% 15.51% 19.22% 22.73% 26.08% 29.28% $1,800.0 -10.01% -4.82% -0.09% 4.27% 8.34% 12.16% 15.76% 19.17% 22.42% 25.53% $1,950.0 -12.43% -7.38% -2.78% 1.47% 5.43% 9.14% 12.64% 15.97% 19.13% 22.15% $2,100.0 -14.62% -9.70% -5.21% -1.07% 2.79% 6.41% 9.82% 13.06% 16.15% 19.10% $2,250.0 -16.62% -11.82% -7.43% -3.39% 0.38% 3.92% 7.25% 10.42% 13.43% 16.31% ROI 1.1x 1.3x 1.5x 1.7x 1.8x 2.0x 2.2x 2.4x 2.6x 2.8x IPO Exit ($M) - ICAP IRR% Pre-MoneyValuation($M) 12/31/2010 Likely IPO range at $3B - $6B in ’10-’11
    19. 19. 19 Deal Summary Other names and brands may be claimed as the property of third parties LinkedIn’s Desires [INVESTOR X] Proposal $1.5-1.7B pre-money $1.5B or lower valuation Clean terms for lower valuation IPO must be >1.2X post money >1x Non-Participating Preferred? 2x participating preferred No class voting Series voting; seniority Open on board seat, observer BoD seat/observer & blocking rights All other rights mirror series C Drag along carve out, redemption, time de-limited full ratchet (18-24 months) QPO 3x: $250M minimum raise [INVESTOR X]Fallback Positions $1.5-1.6B pre-money ceiling 1.5x non part. pref Weighted Average Anti-Dilution Class voting
    20. 20. 20 Recommendation Proceed to due diligence & negotiate/issue term sheet for [Investor X] lead of $85-125M as part of $100-125M Series D round funding at TBD pre-money valuation (not to exceed $1.6B)
    21. 21. 21 Backup
    22. 22. 22 Board of Directors Reid Hoffman (Chairman) Mark Kvamme (Sequoia Capital) Software and services investments at Sequoia Capital; Chairman of USWeb/CKS and Chairman and CEO of CKS Group prior to the merger with USWeb; Director of International Marketing for Wyse Technology; President and CEO of International Solutions; Founding member of Apple France Dan Nye (CEO) David Sze (Greylock) General Partner at Greylock; SVP of Product Strategy at Excite; Product marketing and development at Crystal Dynamics and Electronic Arts; Boston Consulting Group and Marakon Associates
    23. 23. 23 Business Models – A Comparison Licensing/subscriptions 40% Operating margins Digital goods—no inventory Massive scale Network effects Low user acquisition costs Marketplace/transactions Contextual advertising Licensing/subscriptions 40% Operating margins Digital goods—no inventory Massive scale Network effects Low user acquisition costs Marketplace/transactions Contextual advertising
    24. 24. 24 Subscription Offerings
    25. 25. 25 The LinkedIn Value Chain* *Based on January 2008 run-rate - Monthly growth relative to December 2007
    26. 26. 26 Why Will LinkedIn [Continue To] Win? NEW BUSINESS LINES Key Differentiation: • New Businesses grow organically from the network • Value scales with entire network (network effects) • individuals, businesses • Growing in every industry, globally • Base new businesses off organic growth THE NETWORK Key Differentiation: • Business focus: features, brand, network • Viral growth: entirely by individuals’ actions • Value scales with entire network (network effects) • Growing in every industry, globally • Organic growth into every business MEDIA Key Differentiation: • User generated content • Best of class demographics • Unique targeting capabilities • Organic growth in every industry, globally • Ability to scale across the web • Future possibilities with self- service, B2B lead gen RECRUITING Key Differentiation: • Passive Recruiting: the recruiting of the future • Resume v2.0 • Linkedin or Leftout • Value scales with entire network (network effects) • Organic Growth in every industry, globally
    27. 27. 27 Largest Professional Network Domestic Growth Days 0 to 1MM members 477 1 to 2MM members 181 5 to 6MM members 102 9 to 10MM members 60 18 to 19MM members 28 199 of top 200 markets grew 70%+ in 2007; 155 grew 100%+ 0 5 10 15 20 May-03 Jul-04 Sep-05 Nov-06 Jan-08 Domestic International Millionsofmembers Globally 4x larger than nearest competitor; 50x larger in the U.S.
    28. 28. 28 Best and Broad Demographics School: 58K HBS: 17K School: 50K GSB: 8K 13K 32K 19K 13M University Alumni 31K Employees: 58K Alumni: 23K 19K Employees: 15K Alumni: 12K Employees: 116K Alumni: 71K 1.9M F500 Employees 41 27% $109,762 Demographics Average Age Average HHI HHI >$150K 78%College Grad Portfolio $250K+ 28% 1.2M Small Business Owners 2.2M Senior Executives VPs at every F500 company Source: @plan Winter 2007/2008, internal data 13K Employees: 13K Alumni: 9K
    29. 29. 29 Growing Across Industries 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Largest sectors continuing to grow while base broadens 57 industries with over 100K members Computer SW Telecom Financial Svcs Marketing and Advertising IT and Service Members(000s) Fastest growing among top 50 TTM growth Entertainment 273% Health, Fitness 267% Education 245% Medical Practice 212% Government Administration 211% Share 5 Largest Industries TTM growth IT and Services 83% Computer Software 69% Telecom 74% Financial Services 155% Mktg/Advertising 106%
    30. 30. 30 Best of Class Audience Property Average Age % Comp College Grad Average HHI %Comp EVP/SVP/VP % Comp Business Decision Makers % Comp That Read Business Magazine Last 30 Days 41 78% $109,762 5.2% 46.5% 29% 47.4 71% $101,039 6% 38.4% 44% 46.7 66% $96,665 5.2% 39.9% 50% 47.3 68% $96,414 5.5% 37.5% 50% Source: @plan Winter 2007/2008 A younger, more affluent, more influential and harder-to-find audience than the leading business sites
    31. 31. 31 Recruiting Bookings Bookings tripled from $5.7MM in 2006 to $17.3MM in 2007 Forecast bookings of $32.7MM in 2008 Revenue growth from $14.5MM in 2007 to $27.7MM in 2008 Bookings tripled from $1.8MM in 2006 to $7.9MM in 2007 Forecast bookings of $31.8MM in 2008 Revenue growth from $3.9MM in 2007 to $12.1M in 2008 Bookings tripled from $2.1MM in 2006 to $6.3MM in 2007 Forecast bookings of $15.1MM in 2008 Revenue growth from $5.8MM in 2007 to $14.2MM in 2008 Subscriptions JobsCorporate $0 $2 $4 $6 $8 $10 $12 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 $0 $1 $2 $3 $4 $5 $6 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 New product intro $0 $2 $4 $6 $8 $10 $12 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08
    32. 32. 32 Platform for New Businesses Subscriptions business serves broad set of needs outside networking and recruiting • Sales • Business development • Market research • Business intelligence • Knowledge management • Conference Management $0 $1 $2 $3 $4 $5 $6 $7 $8 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Millions Bookings Criteria for launching dedicated offerings • Low investment • Leverage network • High margins • Large market size • Quick time to market
    33. 33. 33 $28.37 $26.68 $23.86 $4.45 $30.08 $24.04 $9.13 $7.32 $13.73 0 5 10 15 20 25 30 35 40 45 $100 Dice Career Builder M onster 51Jobs HotJobs eBay Yahoo! Google Xing M ixi LinkedIn Revenue Upside $86.91 Mean: $34.05 Mean: $21.08 Mean: $10.52 Upside revenue opportunity Current revenue projections Job boards Internet leaders Business/ social networking Revenue/worldwide unique visitors $0 $200 $400 $600 $800 $1,000 2007 2008E 2009E ($34.05 Ave Rev/User) x 5.5MM Uniques) ($34.05 Ave Rev/User) x13.4MM Uniques) ($34.05 Ave Rev/User) x25.0MM Uniques) LinkedIn potential revenue
    34. 34. 34 Summary of Prior Preferred Terms
    35. 35. 35 [sensitized]LT Balance Sheet Forecast Balance Sheet ($M) 2007 2008 2009 2010 2011 2012 Assets Cash & Cash Equivalents $16.7 $153.3 $191.1 $252.6 $310.8 $377.8 Accounts Receivable $5.5 $12.3 $32.6 $56.1 $64.4 $74.2 Prepaid Expenses & Others $1.1 $2.4 $6.4 $11.1 $12.8 $14.7 Current Assets $23.3 $168.0 $230.1 $319.8 $388.0 $466.7 Other Receivable $2.6 $2.6 $2.6 $2.6 $2.6 $2.6 Property & Equipment $8.7 $0.8 $3.8 $7.7 $8.8 $10.1 Total Assets $34.6 $171.4 $236.5 $330.1 $399.5 $479.5 Liabilities Accounts Payable $2.5 $5.3 $13.0 $21.7 $24.9 $28.7 Accrued Liabilities & Other $2.2 $4.6 $11.3 $18.8 $21.6 $24.9 Notes Payable, Short Term $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Deferred Revenue & Others $6.5 $14.6 $38.6 $66.4 $76.3 $87.9 Total Liabilities $11.1 $24.5 $62.9 $106.9 $122.9 $141.5 Total Shareholders' Equity $23.5 $147.0 $173.6 $223.2 $276.6 $338.0 Total Liabilities & Equity $34.6 $171.4 $236.5 $330.1 $399.5 $479.5 Net Working Capital $12.2 $143.6 $167.2 $212.9 $265.2 $325.3 Control Box LinkedIn Comps Accounts Receivable as % of Revenue 17.0% 19.1% Prepaid Expenses & Others as % of Revenue 3.4% 0.7% Accounts Payable as % of Expense 7.8% 10.3% Accrued Liabilities as % of Expense 6.8% N/A Deferred Revenue as % of Revenue 20.1% 8.1% Property & Equipment as % of Net Income 20.0% 71.0%
    36. 36. 36 Sensitized Forecasts and Implied P/S ratios 2007 2008 2009 2010 2011 2012 Sensitized MU Growth% 220.5% 110.3% 55.1% 27.6% 13.8% 6.9% Revenue ($M) $32.2 $67.6 $104.9 $133.8 $152.2 $162.7 Price/Sales ($1.5B) 46.6x 22.2x 14.3x 11.2x 9.9x 9.2x Price/Sales ($1.0B) 31.1x 14.8x 9.5x 7.5x 6.6x 6.1x 2007 2008 2009 2010 2011 2012 Sensitized MU Growth% 125.8% 164.5% 72.2% 14.9% 15.1% Revenue ($M) $32.2 $72.6 $192.0 $330.6 $379.9 $437.4 Price/Sales ($1.5B) 46.6x 20.7x 7.8x 4.5x 3.9x 3.4x Price/Sales ($1.0B) 31.1x 13.8x 5.2x 3.0x 2.6x 2.3x 2007 2008 2009 2010 2011 2012 Revenue Growth Rate 408.5% 233.5% 117.6% 92.5% 72.8% Implied Revenue ($M) $32.2 $163.5 $545.5 $1,186.7 $2,284.2 $3,946.1 Price/Sales ($1.5B) 46.6x 9.2x 2.7x 1.3x 0.7x 0.4x Price/Sales ($1.0B) 31.1x 6.1x 1.8x 0.8x 0.4x 0.3x 2007 2008 2009 2010 2011 2012 Revenue Growth Rate 219.5% 158.3% 137.7% 194.8% 76.9% Implied Revenue ($M) $32.2 $102.8 $265.4 $630.8 $1,859.9 $3,290.9 Price/Sales ($1.5B) 46.6x 14.6x 5.7x 2.4x 0.8x 0.5x Price/Sales ($1.0B) 31.1x 9.7x 3.8x 1.6x 0.5x 0.3x GoogleFacebookMediumConservative
    37. 37. 37 Price/Sales Comps 2007 2008 Price/Sales Comp Median** 9.2x 6.6x Conservative Valuation ($K) $295,429.6 $449,109.5 Medium Valuation ($K) $295,429.6 $590,412.7 Price/Sales Google 9.2x 6.6x Conservative Valuation ($K) $295,429.6 $449,109.5 Medium Valuation ($K) $295,429.6 $590,412.7 Price/Sales Facebook 96.9x 37.5x Conservative Valuation ($K) $3,114,650 $2,535,594 Medium Valuation ($K) $3,114,650 $3,333,367 Price/Sales Ad Agencies 10.5x N/A Conservative Valuation ($K) $338,516.4 N/A Medium Valuation ($K) $338,516.4 N/A ** Comparable companies include Google, Yahoo!, Microsoft/MSN, eBay, Amazon, VMWare, Facebook, aQuantive & DoubleClick
    38. 38. 38 Comps - Ratios Valuation Price/'07 Est Sales Price/'08 Est Sales Price/ EBITDA Price/ Earning Price/ Unique Price/Pg View TEV/'07 Est. Sales TEV/'08 Est. Sales TEV/ EBITDA TEV/ Earnings TEV/ Uniques TEV/Pg Views Aggressive Comps Google 9.2x 6.6x 25.2x 36.3x $1,191.2 $8.8 8.3x 6.0x 22.8x 32.9x $1,080.1 $7.9 Yahoo! 5.4x 6.7x 27.8x 57.0x $275.9 $1.2 5.2x 6.5x 26.8x 55.1x $266.8 $1.1 Amazon 2.1x 1.6x 33.9x 64.2x $517.6 $14.8 1.9x 1.5x 31.9x 60.4x $487.6 $14.0 eBay 4.9x 4.3x 14.5x 108.9x $481.2 $4.2 4.3x 3.8x 12.7x 94.8x $419.0 $3.7 VMWare 16.3x 10.8x 63.8x 99.3x N/A N/A 15.7x 10.4x 61.5x 95.7x N/A N/A Facebook 96.9x 37.5x 347.2x 815.7x $443.0 $1.2 N/A N/A N/A N/A N/A N/A Microsoft/MSN 4.5x 4.3x 10.3x 15.3x $2,835.0 $29.1 4.1x 4.0x 9.5x 14.2x $2,626.1 $27.0 aQuantive 11.0x N/A 67.3x 103.7x N/A N/A 11.0x N/A 67.3x 103.7x N/A N/A DoubleClick 10.0x N/A 185.4x 107.3x N/A N/A 10.0x N/A 185.4x 107.3x N/A N/A LinkedIn (Asking) 46.6x 18.2x 853.4x 1318.5x $221.5 $22.9 N/A N/A N/A N/A N/A N/A LinkedIn (Implied) $295.4 546.9 59.6 112.9 3,381.7 $424.7 217.8 412.3 51.7 88.3 $3,302.1 $520.5 Average 17.8x 10.3x 86.1x 156.4x $957.3 $9.9 7.6x 5.4x 52.2x 70.5x $975.9 $10.7 Median 9.2x 6.6x 33.9x 99.3x $499.4 $6.5 6.8x 5.0x 29.4x 77.6x $487.6 $7.9 High 96.9x 37.5x 347.2x 815.7x $2,835.0 $29.1 15.7x 10.4x 185.4x 107.3x $2,626.1 $27.0 Low 2.1x 1.6x 10.3x 15.3x $275.9 $1.2 1.9x 1.5x 9.5x 14.2x $266.8 $1.1 Price/'07 Est Sales Price/'08 Est Sales Price/ EBITDA Price/ Earning Price/ Unique Price/Pg View TEV/'07 Est. Sales TEV/ EBITDA TEV/ Earnings Social Networking Site Comps MySpace 7.3x 4.9x 76.3x 128.9x $37.4 $0.1 N/A N/A N/A Facebook 96.9x 37.5x 347.2x 815.7x $443.0 $1.2 N/A N/A N/A Bebo N/A N/A N/A N/A $229.6 $0.6 N/A N/A N/A Mixi 23.1x N/A 53.7x 109.9x N/A N/A 22.0x 51.2x 104.8x CyWorld N/A N/A N/A N/A $0.0 N/A N/A N/A N/A StudiVZ N/A N/A N/A N/A $132.0 N/A N/A N/A N/A TenCent 23.1x N/A 52.0x 59.9x N/A N/A 22.1x 49.7x 57.2x Xing 11.1x N/A 140.3x -441.0x N/A N/A 9.2x 115.5x -363.1x LinkedIn (Asking) 46.6x 18.2x 853.4x 1318.5x $221.5 $22.9 N/A N/A N/A LinkedIn (Implied) $742.5 $1,746.2 $134.1 $125.0 $893,850.7 $40.4 $708.1 $90.1 $65.1 Average 32.3x 21.2x 133.9x 134.7x $168.4 $0.6 17.8x 72.2x -67.0x Median 23.1x 21.2x 76.3x 109.9x $132.0 $0.6 22.0x 51.2x 57.2x High 96.9x 37.5x 347.2x 815.7x $443.0 $1.2 22.1x 115.5x 104.8x Low 7.3x 4.9x 52.0x -441.0x $0.0 $0.1 9.2x 49.7x -363.1x
    39. 39. 39 Ratio Analysis Liquidity Ratio Profitability Ratio Ratio Analysis C urrentR atio Q uick R atio C ash Flow R atio N etW orking C apital/Total A ssetsD efensive Interval G ross M argin % EB ITD A M argin % ProfitM argin % R eturn on A ssets R eturn on Equity A /R TurnoverA /P Turnover Inventory Turnover D ays R e LinkedIn 2007 Actuals 2.1x 2.1x 0.5x 0.4x 363 73.8% 5.5% 3.5% 3.3% 4.8% LinkedIn'08 (Sensitized) 6.9x 6.9x 0.5x 0.8x 1,160 79.5% 11.2% 5.4% 2.3% 2.7% LinkedIn'09 (Sensitized) 3.7x 3.7x 0.7x 0.7x 601 86.3% 17.9% 9.8% 8.0% 10.9% LinkedIn'10 (Sensitized) 3.0x 3.0x 0.6x 0.6x 485 89.0% 20.7% 11.7% 11.7% 17.3% LinkedIn'11 (Sensitized) 3.2x 3.2x 0.5x 0.7x 512 89.0% 20.7% 11.6% 11.1% 16.0% LinkedIn'12 (Sensitized) 3.3x 3.3x 0.5x 0.7x 535 89.0% 20.7% 11.6% 10.6% 15.0% Google 8.5x 8.5x 2.8x 0.6x 1,300 59.9% 30.7% 25.3% 16.6% 18.5% Yahoo! 1.4x 1.4x 0.8x 0.1x 344 59.3% 11.5% 9.5% 5.4% 6.9% Microsoft 1.7x 1.7x 1.0x 0.2x 594 80.0% 40.7% 29.3% 25.2% 49.2% VMWare 2.4x 2.4x 0.8x 0.3x 671 83.5% 17.8% 16.5% 8.1% 16.3% Ebay 2.3x 2.3x 0.9x 0.3x 666 77.0% 28.8% 4.5% 2.3% 3.0% News Corp 1.5x 1.4x 0.4x 0.1x 813 36.5% 19.7% 10.9% 4.8% 9.6% Viacom 0.9x 0.7x 0.6x 0.0x 367 44.9% 25.5% 13.7% 8.2% 25.0% Xing 4.1x 4.1x 1.1x 0.5x 1,231 59.1% 8.0% -2.4% -0.8% -1.0% Mixi 8.1x 8.0x 1.7x 0.7x 754 91.7% 38.0% 20.2% 15.4% 17.3% Average 3.4x 3.4x 1.1x 0.3x 749 65.8% 24.5% 14.2% 9.5% 16.1% Median 2.3x 2.3x 0.9x 0.3x 671 59.9% 25.5% 13.7% 8.1% 16.3% High 8.5x 8.5x 2.8x 0.7x 1,300 91.7% 40.7% 29.3% 25.2% 49.2% Low 0.9x 0.7x 0.4x 0.0x 344 36.5% 8.0% -2.4% -0.8% -1.0%

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