VV Show #40 - Reid Hoffman of LinkedIn
Real business networking takes place in the country club, at the chamber of commerce and on the golf course. After all, the Internet is just for friending strangers on MySpace and poking friends on Facebook. If you said all that to Reid Hoffman, he might think twice about adding you as a contact in LinkedIn, the business networking site he started that connects over seven million professionals. Although his Palo Alto-based company is now profitable and growing rapidly, Reid still thinks he has yet to hit the tipping point. Reid’s goal wasn’t always to be an entrepreneur: He just wanted to change the world. His original career choice was “public intellectual”. Hear if his career switch is paying off.
1:00 Surprising beginnings
- "When I graduated from Stanford what I wanted to do was be a public intellectual, and at the time I thought it was someone who writes essays for the 'New York Review' or 'The Atlantic Monthly'"
2:00 Advancing career
- "And what I realized was if you actually look at software and online services as media objects that could do this, you could go create really valuable media objects that would have a much deeper transformative effect on society..."
- "So I went and talked to a few VC's in the fall of '93 when I first came back [from school at Oxford] and they said
- 'Go get a job and then when you've learned some things come back and talk to us.'"
- "So I went to Apple computer"
- "And did my first startup, Socialnet, in 1997"
6:00 On financing a start-up
- "Basically if you can't get enough capital to get your business off the ground, and usually it's a successive set of influxes of capital, your business fails, and it goes away"
- "Venture investment is like marriage, on two power point presentations and a dinner"
8:00 Paypal, lessons learned
- "There was a time at Paypal where we were growing at five percent of transactions per day, and we had three customer service people"
- "We were going in the hole about 8000 e-mails a day in terms of e-mails we weren't responding to."
- "We had people find out the address, and drive to our office in as far away as Arizona...to deal with customer service."
14:00 On LinkedIn
- "Part of the theme of the internet is essentially power to the people."
- "Enabling individuals to have the best possible lives they can is one of the things that's really interesting with the net"
- "And LinkedIn, it's every person as a professional can hang a shingle to the web and they can say what kind of business they're interested in doing and then they can find other professionals either that they already know or they wanna get to know in order to connect with them and build business."
18:00 Business model advice
- "One of the things that I tell entrepreneurs and investors, especially if you're in consumer internet, is I have yet to see a series A business model be the business model at the end of the company"
20:00 Target market
- "Our principal customer base is kinda like 27, 28, plus"
- "So unlike for example Myspace, or Facebook or Friendster which is 'Wow! A place to play with my friends and I have lots and lots of spare time...' its a 'Prove to me you're valuable.'"
27:00 Delivering value
- "If you go up to your average professional on the street right now and you say 'Well you should have a profile out on the web, stating who you are and what kind of things you do,' most professionals are gonna look at you like, 'Huh, really?' Like it hadn't really occurred to them."
- "People care a lot more about their professional contacts than they do about their social contacts"
"Take the word networking. To most people, networking is a vaguely negative cause it connotes people who say
- 'Can I have your business card? Can you help me?' As opposed to 'Can we help each other?'"
36:00 How LinkedIn works
- "What reference is supposed to be is I refer you to someone based on what I know about you, on my ability to say 'Oh he's a good person, he's hard working, he's trustworthy, he's honorable, he's diligent, he's a close friend of mine, do me a favor...'"
- "Better people should be able to create shinier shingles"
- "The people that you think are smart and interesting, there's a much higher percentage of the people that they're hanging with are smart and interesting. So, same principal on LinkedIn."
41:00 Web 2.0
- "Launching something is a lot cheaper than it used to be"
- "But, on the other hand there's lots more interest."
- "Actually if you have a thousand people going out launching shit, for 100k or 200k, the one that can raise 5 million and deploy that effectively has a huge competitive advantage."
43:00 Advice to entrepreneurs
- "Entrepreneurs: it's never a sit in a room and create something by yourself, you're out there in the flow"
- "Your idea isn't anything until it starts going, right? Ideas are great -- but traction, reality, launch something, get customers. So LinkedIn is useful for finding all the right people that will support your effort."
- "In Silicon Valley, my guess is 95% plus of the people who are pitching venture people are in LinkedIn."
Thanks to Jason Brady of Play Entourage for helping me find this file after it went missing for over a year.
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Great interview! One of your best.
Posted by: Dan Koifman at November 12, 2006 9:38 PM
This was one of the best podcasts I have ever heard. A couple things I found very interesting from this podcast:
1. LinkedIn is a working example of a profitable application of social networking geared towards professionals. They must be doing 4.5-5M in annual revenues.
2. Your business model will be different at the end than it was in the initial stages...so be flexible
3. Launching a startup is easier/cheaper than it used to be but that means there are a lot more startups so you have to plan to spend more to rise above the clutter and get attention.
4. Linkedin's releases planned for next year sound very interesting. It seems that they are planning to give users a way to rate their contacts or some way to distinguish between a truly trusted contact and someone you have met on an occassion.
Posted by: Jade Koyle at December 2, 2006 10:33 PM
Greg - excellent podcast.
I found Reid to be fascinating. I am very impressed with his success in monetizing his online retail product.
I am also a fan and user of his product. I have paid for some of the premium features.
Posted by: anthropocentric at January 16, 2007 2:43 AM
This is a great interview.
The inside perspective on Reid's Paypal experience was great.
The insight on the propoesed direction and final direction of a business idea were interesting.
Some new uses for LinkedIN were great.
I am looking forward to the new features upcoming, definitely a shortcoming currently (strength of connection).
I really loved the advise to someone jumping into a new venture. Something like: Choose the things with really big up sides, you are going to put the same large amount of blood and sweat into a new business, you might as well choose the one that can change the world.
Posted by: Scott Fisher at January 16, 2007 3:04 PM