Black recessionary clouds are massing over Silicon Valley, but Reid Hoffman
can’t help looking on the bright side. “Entrepreneurs are inherently
optimistic,” he says. “They see opportunity in times of trouble.”
The founder of business networking website Linkedin - a Facebook for 31m
professionals around the world – drinks only black coffee when times are
grim or he has a project to complete in double-quick time. Today he takes it
with the smallest splash of milk, so things could clearly be worse in
cyberspace.
Hoffman is a big man, both online and off. His website, which has done away
with the practice of pressing a business card into someone’s hand, is doing
brisk business at a time when finding - and keeping - work has become a
challenge. Linkedin is valued at $1 billion (£650m), and Hoffman is the
largest single shareholder.
Regarded as a dotcom visionary, he has anticipated many of the internet trends
of the past decade, putting money into Facebook and Digg, a news aggregator.
He was a key architect in the success of PayPal, the online payments system
that was sold to auctioneer eBay in 2002 for $1.5 billion.
“He is commercial but he also strikes me as having a social conscience. People
in his position don’t need that,” said Brent Hober-man, founder of
Lastminute.com.
Hoffman shows no signs of slowing down. He thinks the time is ripe for bold
entrepreneurs. “During a downturn is really a good time to found a company,”
he says. “You have a longer time to get something established before the
competition emerges.”
Last Sunday, the former Marshall scholar returned to the Oxford Union to argue
against the motion “This house believes that the problems of tomorrow are
bigger than the entrepreneurs of today”. His view won the day. Given the
right platform, perhaps he could steady the frayed nerves of global
financial markets.
However, such prescience failed to anticipate quite how many of Linkedin’s
members would be urgently seeking work through his website.
As unemployment has risen, the company has tweaked some of its services to
help jobless executives find stop-gap contracts or consulting work. The
website reported a surge in sign-ups when Lehman Brothers collapsed in
September, and October was its best month ever, when 1.8m new members
joined. It has 2m in Britain.
Hoffman, his bulky frame clad in loud colours, thinks next year will be even
better. He predicts Linkedin will double its 31m membership, implying that,
on average, 2.6m people will be joining each month. A third of members check
in every month.
“Professionally, everyone is a small business. People know they can Google you
so you have to be increasingly entrepreneuri-al with your own brand,” he
says.
Even though English is the international business language, Linkedin has just
launched a local language version in France. “We are seriously localising,”
he says, with the aim of recruiting one in four of the world’s population,
roughly anyone aged 22 to 65 with an eye on their career.
Linkedin, founded with some of the $10m Hoffman netted from PayPal, was
originally conceived as an online method of keeping up to speed with the
activities of colleagues and peers.
It expanded into an advice service. Now recruitment firms buy subscriptions so
they can go hunting for job candidates. Some people have won new business
contracts after making contact online. At least one firm’s founder wooed a
buyer. New services added by Google and Amazon mean you can order the same
book as the boss is reading or circulate presentations.
Linkedin is even making a profit, from revenues this year of close to $100m.
Advertising online is slowing, so the firm is fortunate that it relies on it
for only 25% of income. The rest comes from corporate subscriptions and
individuals paying to search data and send introductory e-mails.
Hoffman’s drive to grow profitably is in stark contrast to Facebook, which was
valued at $15 billion last year when Microsoft took a stake. Founder Mark
Zuckerberg said recently he would have a business plan within three years.
Despite his wait-and-see stance, most technology companies are facing up to
the harsh reality of the downturn. A recent presentation from the leading
venture capitalist Sequoia Capital - including disturbing images such as a
pig being led to slaughter - startled a complacent Silicon Valley community
into action.
Warnings of smaller funding rounds, the need for cost-cutting and quicker cash
generation have sparked a swathe of job losses and closures. Even the big
guns, eBay and Google, have been reducing jobs and contractors. “The next
couple of years are going to be harder,” says Hoffman. “How far down does
this rabbit hole go?”
Linkedin is pulling back from opening an engineering facility it had planned
for Denver. Instead of doubling his workforce next year, Hoffman is looking
to recruit about 15% more staff.
His success has attracted investors, most recently Goldman Sachs, German
software provider SAP and publisher McGraw-Hill which pumped in $22.7m last
month, taking Linkedin’s total cash raised to $76m.
The company could be floated when the markets have thawed out. “The target is
building a good business. An IPO [initial public offering] is ancillary,”
says Hoffman. He tracked down a chief executive for Linkedin, Dan Nye, by
hunting through the website.
Hoffman had originally intended to take a year’s sabbatical after selling
PayPal. Within three months he was back, looking to take advantage of the
dotcom bust.
“I wanted to create something that would only be possible on the internet,
that would get to huge scale, that would change people’s lives and become an
effective business. I thought: the time is now.”
Ideas he rejected included a worldwide online computer game, essentially a
scaled-up version of World of Warcraft, which has 11m monthly subscribers.
“That is still a good idea, but I didn’t think it was game changing,” he
adds.
He is not shy of failure. “One of the pronounced cultural differences between
the British and Americans is that Americans are not afraid of being
embarrassed. Maybe we relish embarrassment – just look at how we like Jerry
Springer.
“If all your ideas are successful, great, but part of the culture of Silicon
Valley is to fail fast. Then move on. I don’t feel overshadowed by my
earlier successes.”
Hoffman acknowledges that he had a comfortable start in life. His father was a
successful San Francisco lawyer who left open the offer of a room back home
if his son’s plans fell flat. The young Hoffman never needed to take it up.
He quickly became independent, attending boarding school 2,500 miles away in
Vermont, where he learnt blacksmith skills and how to farm maple syrup.
After university in California, Hoffman worked at Apple and Fujitsu before
founding his first company, Socialnet.com, an early social networking
website, in 1997.
His success gave him the funds to spread money around other projects. He has
made one investment in Europe, Last.fm, an online music service sold to CBS
for $280m in May 2007. On a trip to London, Hoffman met the founders of a
club in Soho and put them together with Spencer Hyman, a venture capitalist
who became the company’s chief operating officer.
Admirers say the European technology scene could do with more of his kind.
“The best entrepreneurs are typically very humble and understated people who
let what they do do the talking,” says Saul Klein, a partner at the
high-tech venture capitalist Index Ventures. The firm invested alongside
Hoffman in Last.fm and in a personal capacity Klein joined him in backing
Dopplr, a social network that lets people share their travel plans.
Klein adds: “Reid is very unassuming but he is sought-after, and has developed
a good awareness of what is going to be a sensible business model over the
long term.”
For the future, Hoffman predicts more development in “Enterprise 2.0”, web
applications for businesses, not consumers. He has to be careful what to
back so as not to conflict with Linkedin.
He has been attending an entrepreneurs’ forum in Oxford at this time of year
for the past four years – which means he is used to celebrating Thanksgiving
away from home and his wife, Michelle. The pair met at college, initially in
a linguistics Andrew Davidson is away class. A further stroke of luck meant
they became adjacent residents in a student dormitory soon after.
“I’ll try to buy something for her on Saturday,” says Hoffman, already
fretting it will end up being a typical airport gift of a box of chocolates.
In the meantime, friends promised they could find a turkey, and he packed a
special blend of coffee in his suitcase to guarantee a taste of home is on
the table. Ever the optimist, Hoffman will doubtless splash in the milk
himself.
The life of Reid Hoffman
VITAL STATISTICS
Born:Born: August 5, 1967
Marital status:married to Michelle Yee. No children
Education:Stanford University, BS in symbolic systems; Oxford University,
MStud in philosophy
First job:editing games books for Chaosium, a publisher of role-playing games
Pay:not disclosed Home:Palo Alto, California
Car:Acura TLS Favourite music:Deep Forest
Favourite book:Amusing Ourselves to Death, by Neil Postman
Favourite film:The Hudsucker Proxy, a 1994 comedy fantasy film
Favourite gadgets:Garmin Nuvi and Blackberry Curve
Last holiday:three days in Paris with his wife in June after attending a
conference
WORKING DAY
THE Linkedin chairman wakes up at 6.30am at his house in Palo Alto and is
checking e-mails by 6.45. The office is a 12-minute drive away but Reid
Hoffman usually stops on the way at a restaurant called Hobee’s for a
working breakfast. Hoffman’s favourite is the Santa Cruz Scramble - egg
whites, salsa and artichoke hearts.
His day at the office, in Mountain View, close to Google’s headquarters,
consists of meeting after meeting. “We have some of them down to 10 or 15
minutes maximum,” says Hoffman. At his desk, he surveys three computers
simultaneously. Each has dozens of windows open at once.
He usually leaves the office at 9pm and drives himself home.
DOWNTIME
REID HOFFMAN’s day job may be social networking, but the chairman of Linkedin
has little time to be sociable. He tries to fit in half an hour of “mental
flossing” each night, when he reads a book or watches a video.
Beyond that, work often interrupts his home life, with meetings taking place
at his house over the weekend. His wife, Michelle, is understanding. They
met at college.
“Saturday night is our date night and we try to do something on Sunday
afternoons if we can make it work,” says Hoffman. He enjoys playing Settlers
of Catan, a German board game, and watching Blu-ray DVDs.
