LinkedIn, the professional networking site, has raised an additional $53 million in capital. The infusion helps peg the company’s valuation at about $1 billion.
This latest round of financing is led by Bain Capital Ventures, with contributions coming also from existing LinkedIn backers Sequoia Capital, Greylock Partners and Bessemer Ventures.
LinkedIn had raised $27 million in previous rounds of financing.
The lofty valuation comes at a time when many in the tech industry are struggling to figure out where the business model is in the social networks. But LinkedIn, which generates revenue from a mix of advertising and premium subscription fees, has been profitable since 2006.
In a video discussing the investments, the principals at the venture funds said that LinkedIn is uniquely positioned around an enduring business model of helping people manage their careers by facilitating professional networking.
“Compared to most startups, LinkedIn’s valuation is very high,” said David Cowan, managing partner of Bessemer Ventures. “But compared to what we think LinkedIn’s future opportunities valuation will be, it’s a bargain.”
Sequoia’s Mark Kvamme agreed, declaring LinkedIn a “multibillion dollar market opportunity.”
With 23 million users, LinkedIn is dwarfed by Facebook and MySpace, whose memberships each number about 115 million. But LinkedIn is not in the business of providing entertainment or a forum for self-expression.
“You take a look at LinkedIn and you compare that to some of the other social networks, the mindset of the user is totally different,” said Jeffrey Glass, a partner at Bain. “The look and feel of the site is night and day.”
MySpace and Facebook have both had difficulty monetizing their sites through advertising.
Google, which is in the middle of a three-year ad-serving deal with MySpace, has repeatedly said that the ad revenue has been disappointing. Facebook has been tinkering with its own ad strategy after setting off an uproar in its community late last year with the Beacon program that tracked and reported users’ activities on third-party sites.
News Corp acquired MySpace in 2005 for $580 million. In October, Microsoft spent $240 million for a 1.6 percent stake in Facebook, valuing the company at a staggering $15 billion.
A central part of the ad dilemma with social networks is advertisers’ concern about placing branded messages alongside a mixed bag of content.
The venture companies are betting that LinkedIn has found a way around that with a company ethos that seems to apply in equal parts to its professional community and its carefully selected business partners.
“One of our fundamental beliefs at LinkedIn is that the company you keep is one of the most credible reflections of who you are and what you have to offer,” Dan Nye, LinkedIn’s CEO, wrote in a company blog post.
