LinkedIn

"BranchOut Takes on LinkedIn In June of 2010 Rick Marini had a problem. He needed to track down a contact at a particular company—he was certain he knew someone there but just couldn’t recall the name. To most people this would constitute a soon forgotten frustration. But Marini was not most people. He was a Harvard Business School trained serial entrepreneur with significant recruiting industry experience—he had founded both SuperFan and Tickle.com, selling the latter to Monster Worldwide for nearly $100M. So a month later he launched BranchOut, a professional networking Facebook app. Marini went at this hard and by September had pulled together a $6M Series A round led by Accel Partners, Floodgate and Norwest Venture Partners with some notable tech firm execs joining the round as well. Recruiters want to make the best use of their time, so they go to the source with the largest number of listed professionals, while at the same time professionals want to list their names on the site with the most recruiters visiting. Such one-hand-shakes-the-other self-reinforcing upward spirals are known as Network Economies22: the value of the service to each customer is enhanced as new customers join the “network.” In such a situation, having the most customers is everything, and Marini knew exactly how this game was played: rapidly scale or die. Catch-up is usually impossible if there are Network Economies and LinkedIn already had 70M members. But Marini was betting that the game was not yet over. His idea was to build on Facebook’s base, which was almost 10x that of LinkedIn, enabling this with tools so that a user could seamlessly download all their information from LinkedIn. Marini positioned a Facebook tie-in as a key to better value: “Facebook has a strength of connection that LinkedIn doesn’t have. LinkedIn is"

"Industries exhibiting Network Economies often exhibit these attributes: Winner take all. Businesses with strong Network Economies are frequently characterized by a tipping point: once a single firm achieves a certain degree of leadership, then the other firms just throw in the towel. Game over—the P&L of a challenge would just be too ugly. For example, even a company as competent and with as deep pockets as Google could not unseat Facebook with Google+. Boundedness. As powerful as this Barrier is, it is bounded by the character of the network, something well-demonstrated by the continued success of both Facebook and LinkedIn. Facebook has powerful Network Economies itself but these have to do with personal not professional interactions. The boundaries of the network effects determine the boundaries of the business. Decisive early product. Due to tipping point dynamics, early relative scaling is critical in developing Power. Who scales the fastest is often determined by who gets the product most right early on. Facebook’s trumping of MySpace is a good example."

"∴ Profits (π) = (P – c) Q – C                             Where P ≡ price faced by all sellers There are two businesses: S, the strong company, and W, the weak company As an indication of leader leverage, assess: Surplus Leader Margin: What governs S’s margins if P is set Э Wπ = 0? C H A P T E R   2 NETWORK ECONOMIES GROUP VALUE BranchOut Takes on LinkedIn In June of 2010 Rick Marini had a problem. He needed to track down a contact at a particular company—he was certain he knew someone there but just couldn’t recall the name. To most people this would constitute a soon forgotten frustration. But Marini was not most people. He was a Harvard Business School trained serial entrepreneur with significant recruiting industry experience—he had founded both SuperFan and Tickle.com, selling the latter to Monster Worldwide for nearly"

"The first team that I built has become known in Silicon Valley as the “PayPal Mafia” because so many of my former colleagues have gone on to help each other start and invest in successful tech companies. We sold PayPal to eBay for $1.5 billion in 2002. Since then, Elon Musk has founded SpaceX and co-founded Tesla Motors; Reid Hoffman co-founded LinkedIn; Steve Chen, Chad Hurley, and Jawed Karim together founded YouTube; Jeremy Stoppelman and Russel Simmons founded Yelp; David Sacks co-founded Yammer; and I co-founded Palantir. Today all seven of those companies are worth more than $1 billion each. PayPal’s office amenities never got much press, but the team has done extraordinarily well, both together and individually: the culture was strong enough to transcend the original company."

"LinkedIn has done exactly this for recruiters. When LinkedIn was founded in 2003, they didn’t poll recruiters to find discrete pain points in need of relief. And they didn’t try to write software that would replace recruiters outright. Recruiting is part detective work and part sales: you have to scrutinize applicants’ history, assess their motives and compatibility, and persuade the most promising ones to join you. Effectively replacing all those functions with a computer would be impossible. Instead, LinkedIn set out to transform how recruiters did their jobs. Today, more than 97% of recruiters use LinkedIn and its powerful search and filtering functionality to source job candidates, and the network also creates value for the hundreds of millions of professionals who use it to manage their personal brands. If LinkedIn had tried to simply replace recruiters with technology, they wouldn’t have a business today."

"When LinkedIn first emerged, experts were discussing “how will it make money?” and we were also concerned about “what will happen to it?” It was beyond imagination that it would become an indispensable service for job hunting, and hearing about its subsequent great success made us sigh, thinking, “We don’t have foresight.”"