LinkedIn connects with $12.8 million

Popular networking site for business professionals raises a new round of financing from two top venture capital firms.

NEW YORK (CNNMoney.com) -- LinkedIn, a company that runs a popular online service that allows people to share business contact information, announced Monday that it has raised $12.8 million from two prominent venture capital firms.

Bessemer Venture Partners, one of the oldest venture capital firms in the U.S., and European Founders Fund (EFF), a leading investor in Internet companies, were the two firms that participated in the financing round.

The two join well-regarded venture capital firms Sequoia Capital and Greylock Partners as investors in LinkedIn, which has grown rapidly during the past year.

Chief Executive Officer Reid Hoffman said that the company has more than 9 million members and 350 corporate customers, including Microsoft (Charts) and Target (Charts).

A MySpace for grown-ups

And unlike many other dot-com startups, LinkedIn does not rely solely on advertising for sales. Hoffman said that only about 25 percent of the company's revenue comes from advertising. Subscriptions account for half of all sales while the remaining quarter comes from job listings, he said.

LinkedIn has now raised a total of $28 million through three rounds of financing. Hoffman said that LinkedIn will use the proceeds from the latest round to further expand internationally as well as on some limited marketing efforts.

The company has often been described as a MySpace-like service for business people looking to network. In fact, both VC firms cited the growing importance of LinkedIn as a resource in their business, as a reason for investing in the company.

"As heavy users of LinkedIn for deal flow, due diligence and hiring, we have seen first-hand how profoundly LinkedIn promises to transform several service markets," said David Cowan, managing partner of Bessemer Venture Partners in a statement.

Bessemer has invested in a variety of Internet companies during the past few years, including Skype, the Internet phone service that was bought by eBay (Charts) in 2005, and online video advertising firm Revver.

"We wanted to invest in LinkedIn because we see the enormous international potential as more professionals recognize the power of online networks," added Oliver Samwer, the founder off EFF, which has invested in Alando, a German online marketplace now owned by eBay, and Jamba, a wireless content company that was bought by VeriSign (Charts) in 2004. VeriSign sold a controlling stake in Jamba last year to media giant News Corp (Charts).

Five degrees of LinkedIn separation

The fact that LinkedIn now counts several well-known VC firms among its investors is likely to lead to more speculation that the company could eventually be acquired or go public. Hoffman, who said that LinkedIn is profitable and expects to generate $100 million in sales by 2008, said he's not interested in selling the company.

Hoffman did not rule out an eventual initial public offering, although he quickly added that it was "highly unlikely" LinkedIn would file for an IPO this year.

He said that the company was targeting an IPO between the third quarter of 2008 and third quarter of 2009. He said that he wants to have his company on solid footing, similar to how Google (Charts) waited for several years before finally going public.

"My personal view is that we would like to delay an IPO. We thought the Google strategy was smart; build a foundation for your business before you go public," Hoffman said.