LinkedIn Worth $500 Million?

Eric Eldon has been pulling sources out of his hat today. The latest one claims that LinkedIn employees have been given a similar agreement to Facebook in which they can sell up to 20 percent of their shares at a $500 million valuation. I’m guessing that a source came out of the woodwork after they saw the earlier story about Facebook letting employees sell their shares.

This is an interesting phenomenon as it has become more challenging for web start-ups to go public. It’s now more challenging to keep the top tier employees working at valley start-ups as the exit period has become extended. Enabling employees to sell some of their shares is supposed to provide employees an incentive to stick around. Unfortunately I don’t have more details on how this plan works

LinkedIn should generate $100 million in revenue this year in comparison to the $300 million that Facebook publicly stated they would generate this year. If you were to value the two companies strictly on revenue, it would appear that Facebook is extremely overvalued even at a $4 billion valuation. The differing valuations could be a result of opportunity cost as well as unknown internal valuations that both the companies produce when filing reports with the SEC.

However this new system works, it is definitely interesting to see employee liquidity opportunities prior to the companies having liquidity events. I’d wonder if it’s only employees and not the venture investors that have an opportunity to sell shares as well. For now, all we know is that this is options for employees according to Eric Eldon’s sources.

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