What if biotech could learn something from social media start-ups and vice versa?
Biotech and ICT are often linked together in terms of start-up categories: small cap technology stocks. Coming from a biotech background usually I’ve been at great pains to distance hard working biotechnology from the frivolous dotcom’s. But now that I’ve researched the development journey of LinkedIn, I’ve come to see some fascinating parallels that I think biotech’s should know. LinkedIn is the kind of company start-ups dream of becoming – including biotech’s.
Trading today on the NYSE at $233.34, with over 300 million users worldwide, in just over ten years, LinkedIn is a runaway success. The curious thing about LinkedIn is that it started in 2002, a couple of years just after the dotcom bubble burst.
Led by Reid Hoffman and a group of founders from PayPal, LinkedIn went live in 2003. It is one of a rare group of social media start-ups to survive ten years. In the early years Hoffmann found venture capitalists not particularly interested in LinkedIn. The feedback was along the lines of: not a natural leader in terms of technology or markets, no revenue (and no current plan on how to achieve revenue) and didn’t have substantial organic growth. The professional business networks LinkedIn was targeting were considered ‘niche’ and ‘limited’. Instead of appealing to the digital natives looking for friends or dates, LinkedIn focussed on 40+ professionals who had extensive and deep business networks that already existed. Not a compelling pitch at all.
What LinkedIn cleverly identified and tapped into was the network focused and aspirational behaviour of professionals. Professional networks carried value so being able to demonstrate those networks and nurture them would deliver increased value, motivating the professional sector around the world to engage with the developing platform. The adage ‘It’s not what you know, its who you know’ became LinkedIn’s foundation stone. LinkedIn’s first goal was to get to one million users. At the end of week one they had 2,500 users and at the end of the first month 6,000 users had opened accounts.
Only a couple of months after going live with LinkedIn, Reid and his group started looking for Series A funding, eventually finding Sequoia Capital in a $4.7 million deal. Only eleven months later Reid secured Series B funding of a further $10 million led by Greylock (and including Sequoia). Reid marked LinkedIn’s 10th anniversary, by publicly sharing the slide deck LinkedIn used in the Series B funding, warts and all, in an effort to help other start-ups.
It’s a very rare thing to see the original Series A and B pitches of successful companies. Reid in releasing the slide deck acknowledges that some of the assumptions and plans were at best naïve, but its important to share the real deck to illustrate that you just don’t have all the answers at that stage and hindsight is a wonderful thing.
LinkedIn hits a critical milestone in 2006 achieving profitability for the first time, thanks to its job search and post function that still delivers a significant revenue stream for the company. Reid doesn’t suffer ‘founders disease’ like most tech start-ups, demonstrating this by bringing in a new CEO in 2007 to grow the company. Reid steps aside to bring in Dan Nye to deliver in the hyper-growth phase of the company’s evolution. He then traded up again in 2009 bringing in Yahoo executive Jeff Weiner to deliver LinkedIn from a ‘product focussed to a complete company.’ You can read Hoffman’s own analysis of this value-packed stage on his blog http://reidhoffman.org/if-why-and-how-founders-should-hire-a-professional-ceo/
Jump ahead to 2010 when LinkedIn really hit its straps, acquiring companies, picking up intellectual property and technology to enhance the platform. One of the key acquisitions LinkedIn made is SlideShare. In May 2011 LinkedIn went to IPO on the NYSE raising $103 million with a market valuation of $1.575 billion, just eight years after it launched.
LinkedIn has changed they way we network for business and is a core tool in business development strategies. Australia is one of the biggest adopters of LinkedIn, fitting in very easily to our business culture that has typically been built on personal and professional networks. All start-ups can teach other start-ups a thing or two regardless of the sector they are in. Be it biotech or social networking technologies, there are always common threads to see in those that are blazing a trail.