Reid Hoffman on LinkedIn’s Early Funding Strategy: Solving the Right Problem

When LinkedIn raised its Series A funding, co-founder Reid Hoffman and his team secured $4.7 million. But it wasn’t just about the money—it was about reaching specific milestones to set themselves up for future success. Hoffman knew that each round of financing needed to be strategically tied to the next one, ensuring that LinkedIn could hit key targets to attract more investors later on.

Reid Hoffman, Co-founder, LinkedIn

Photo: Getty Images

Differentiating from Friendster

At the time, social networks like Friendster dominated the conversation, and LinkedIn was often compared to it—but for professionals. Hoffman’s priority in this early stage was clear: LinkedIn had to distinguish itself from Friendster and carve out its own niche as a professional network. Without that clear differentiation, LinkedIn wouldn’t have been able to grow or raise more capital.

Focusing on the Right Milestone

Interestingly, Hoffman made the bold decision to "punt on revenue," meaning LinkedIn wasn't focused on making money during their Series A. While investors typically want to see revenue streams, Hoffman and his team understood that it wasn’t the immediate priority. Instead, they concentrated on defining clear use cases and proving the concept of a professional network.

They knew that solving the problem of creating a distinct category for LinkedIn as a professional platform was the most critical milestone. If they didn’t solve this, no other aspect—whether it was revenue or user engagement—would have mattered.

The Strategy Behind Series B

This laser focus on what really mattered gave LinkedIn the confidence to move forward and raise a successful Series B later on. By nailing down their unique value and demonstrating that they could lead in the professional networking space, they positioned themselves as the market leader.

Hoffman’s lesson here is all about prioritization: You don’t have to solve every problem at once. Focus on what truly matters in the moment, solve the biggest challenge, and let that be the foundation for future growth.

Listen to Reid Hoffman:

Source: Y Combinator "Reid Hoffman at Startup School SV 2014"