Site for professionals is latest web venture valued at $1bn-plus

LinkedIn, the networking website for professionals, has become the latest trendy internet venture to achieve a $1bn-plus (£510m) valuation, following its latest round of fundraising from venture capital firms.

Bain Capital Ventures is leading a consortium of investors putting up $53m for a 5 per cent stake in the three-year-old company, which boasts 23 million users and is growing at 1.2 million users a month.

While LinkedIn may have been eclipsed in size by MySpace and Facebook, which have over 100 million active users apiece, it was the first to turn a profit.

This is because its users are older professionals, who use the site to swap CVs, make useful business contacts and find jobs – making them a richer demographic for advertisers and allowing the company to charge fees for services.

Daniel Nye, LinkedIn's chief executive, said the average user is a 41-year-old with an income of $109,000 a year. "Millions of professionals increase their effectiveness by using LinkedIn to build relationships and exchange knowledge, opportunities and advice," he said. "The number is growing at a torrid pace."

The price tag sparked debate across Silicon Valley over whether a company that is currently targeting revenues of just $75m-$100m this year can be worth more than $1bn. The valuation put on LinkedIn follows the $15bn price tag put on Facebook when Microsoft took a small stake in that company last year as part of a wider advertising sales pact.

Mark Kvamme, a manager at Sequoia Partners, an early investor in LinkedIn which increased its stake in the latest fundraising, said: "It is a multi-billion dollar market opportunity, helping people find and manage careers and helping corporations manage knowledge."

Martin Warner, an independent UK-based technology consultant and entrepreneur, said buys such as Google's $1.6bn purchase of YouTube prove that large companies will pay lofty valuations to acquire fast-growing communities. "If you build a credible, large online community, then advertisers and others will push their products and services through those channels, so it is a very valuable space," he said.

Silicon Valley insiders have speculated that LinkedIn will eventually be sold to a larger corporate buyer such as Microsoft, but Mr Nye said the focus was to build new features into the site and to launch foreign-language versions. He also said there were no plans to float the company.

As well as Bain and Sequoia, the other investors in the latest funding round were Greylock Partners and Bessemer Ventures.

In its short life, LinkedIn has raised a total of $80m, including the latest money. It was founded in December 2002 by Reid Hoffman, formerly a vice-president of the online money business PayPal. The website went live six months later. It has its headquarters in Mountain View, California, the same small Silicon Valley town as Google.