Raja Jasti’s Blog - Renaissance Thinking

CNN Money has the story on how LinkedIn got started and became one of the success stories of social networking.

LinkedIn founder Reid Hoffman

After we sold PayPal to eBay (EBAY, Fortune 500) and I kicked free, I decided to start LinkedIn because the professional space was really interesting. I already had money from PayPal, so I was financing the early portion of it. When there isn’t capital in the bank, there is some anxiety over, “Is this thing going to fly at all? Are we going to get enough money to even to go to the venture capitalists?” I personally bankrolled LinkedIn at the start, so that wasn’t as much of a concern.

I have a strong belief that starting businesses during an economic downturn is the exact right time to do it because it gives you runway. It’s harder to raise capital, but if you can do it, it gives you an advantage.

The mood in the valley in 2002 was dot-com winter. Consumer Internet ventures were scoffed at, but that just added to the competitive advantage. We could show them we had something interesting.

We started slowly in the first few days because we wanted to make sure the systems worked. I think the 13 people associated with the company invited 112 people.

We had this initial challenge of, “How do you get a million people?” The first challenge was getting enough people so that functions like searching for people or sharing information had enough people in it to be valuable. The year 2003 was all about tuning and viral growth.

I’m a huge believer in getting a million people, getting them engaged, and then building a business model on top of that. I knew I wasn’t planning on really trying to work on a business model until later.

We launched three revenue streams in 2005. The first was job listings. The second one we figured would help us get to profitability fast: We launched subscriptions, which was enhanced communications and search capability. People need to talk to people they don’t already know in order to get the job done. That’s the plural majority of our business today.

We had originally not even thought about doing advertising. But two things persuaded me to launch advertising as well. One of them was that our demographic was so good. The second one was that we began to realize we could build unique business products.

In the summer of 2006, I realized I had two serious problems. One was I needed to scale the company. The other one was I needed to move our product group from being mono-threaded to multi-threaded. Have these guys on search and profile, these guys on platforms, these guys on groups, these guys are on address books — we couldn’t do one at a time. We needed to do them all at the same time.

I said, “Which of these challenges is it going to be harder to get a person who knows what to do?” I decided it was going to be harder on the product side, so I would step over to the product side and I would hire someone for the CEO side. I went through the whole process and hired Dan Nye.

Then by luck and hard work and fortune, we ended up hiring Deep Nishar from Google (GOOG, Fortune 500) to be vice president of products. [Less than two years after Hoffman took over the products job, Nishar's hiring relieved him of that responsibility.]

Part of the way I make my own personal decisions is, “What are the areas I can make the most personal impact on the world?” I decided LinkedIn is that thing, more than investing, more than anything else. What I want to do is lead more with LinkedIn and help drive innovation. When Dan and I were talking about it, he said, “You standing right behind my elbow and going ‘Do that and do that…’ We should make this more effective, more efficient.” It was a joint decision for me to come back and be CEO and chair.