A big IPO and a slow Caltrain, I guess that’s the formula to get me blogging again. As I am writing this Linkedin is currently killing it, trading at $86 a share on the NYSE. This puts the market cap somewhere over $8B. All over the internet, people are either a) rejoicing in a strong IPO and the return of the big internet IPO or b) claiming bubble louder than ever that since Linkedin is trading at 800x earnings. I think the one clear truth here is that this is watershed moment for the bay area internet startups, for a couple of reasons
1) The IPO is again a real option for a company to exit. I have listened to this debate for 4 years, this pretty much proves it. This is not like the year 2000 IPO window, but more like 2004. In 2000 companies like webvan, pets.com and etoys.com went public, in 2004 companies like Salesforce and Google went public. Linkedin is a mature, dominant, company with growing revenue that is stacking up every quarter. This will open the door for other companies with similar qualities (Facebook, Zynga, Groupon). What it won’t do is enable mediocre companies, with stale revenue curves to “sneak out” and raise a couple hundred million in the public markets. Linkedin showed there was huge pent up demand for a quality internet company. And for the naysayers talking about earnings, take a look at Amazon’s earning the first half of the last decade, it can take awhile to build a huge, profitable, enterprise.
2) It’s all about revenue, and options. Looking at their S-1 again this morning their revenue growth is more solid. They did 60M in Q3 2010, in internet terms that is a decade ago. I know firsthand they have been beefing up their data and professional services area, which means that it’s working. At this point I would guess they are $30-40M a month which puts their offering valuation at 10x revs, a very doable number for solid company. And the best part is that currently Linkedin is just expanding their current products. New products could provide a whole new revenue stream once they get their toehold in the enterprise – application tracking, talent management and others tradeshow services. There are still a lot of fresh tracks available in their domain.
3) More money into the valley ecosystem. The Linkedin IPO just returned a couple funds (that were already doing great), created some more millionaires, and provided Linkedin with an easy-to-value currency to buy up and coming startups in their space (Jobvite, Branchout and Quora are looking pretty good right now). Whether or not the valley needs it, this will add to the frothiness. Overall I think it’s great though, it’s hard to build the great companies we aspire to do without the support (monetary and professional) that companies like Linkedin provide.
My train’s about to pull into the station so that’s all I got. Is Linkedin worth $1039 a share? (it went up while I was writing this). I am not really one to say, one day for sure, but I think today’s activity is a result of the recent hype created around new tech companies by the media and private secondary markets getting investors all worked up.
