How LinkedIn survived its early years in startup wilderness

You may scoff at the constant stream of nagging emails LinkedIn sends, but there’s no question the site is a success – Microsoft’s $26.2 billion acquisition will have any investor in the company smiling.

Possibly not Konstantin Guericke, who left the social network ten years ago, although the venture-capital investor told attendees at Slush in Helsinki he was happy to go, as he revealed the inside story of the social network Microsoft shelled out for.

In the early days, one consideration was to not appear too much like social network Friendster. That site may be long forgotten, but at the time LinkedIn was so worried about being seen as a copycat of the social network that it eschewed profile photos in order to differentiate itself and look more professional, Guericke said.

The move was roundly mocked – photos were one reason Friendster became so popular, after all – and although LinkedIn outlasted its rival, at the time it didn’t look as though the professional network would compete. “Friendster was huge – when we launched and grew for six months… and got funding, we had 40,000 users,” said Guericke. “Friendster had four million… Friendster loomed very large.”

But being the first to market doesn’t mean you’ll necessarily win, he added. “It’s not about who’s first; you can always take a good idea from someone else,” he said, adding that LinkedIn focused on piling up user numbers in order to take advantage of the network effect.

That was problematic as LinkedIn is a bit less exciting than other social networks to use for the first time. Guericke pins that on the “delayed gratification” versus social sites, where your friends tag you and post photos, giving you an instant buzz. With LinkedIn, the “benefit is two years later, when a recruiter calls you”.

Another LinkedIn move that was criticised was charging a subscription fee. Guericke said it simply made more sense than hoping to capitalise on professionals getting sucked into the social network, as users don’t have the time to click around. Plus, he said creating something that someone is paying for “feels very good”, whereas “giving someone a space so Gap can sell T-shirts” is less encouraging. “You’re not paying me, but willing to pay Gap for a T-shirt, it doesn’t make me feel as good.”

Guericke said he’s often asked what made LinkedIn a success. “I can’t point to one thing we did that made us successful and others fail, but I can tell you for each 30 or 40 competitors, I can tell you what each of them did wrong,” he said. “We didn’t mess up in a major way.”

He admitted that sounds contrary to what startups are supposed to do – take risks and be willing to make mistakes – but pointed to rival Zero Degrees, saying it had a “better product” but was “a little too aggressive” in its marketing, costing it users.

The most successful social networks have come out of the US – could one have ever succeeded out of Europe? Guericke thinks so, and advised startups not to worry too much about where they’re based, but to target the best market for their business. “You can start the company from here,” he said. “It doesn’t mean you have to have everything [right here], you pick and choose,” he added, advising startups to look for funders anywhere they can find them.

“Don’t think ‘I’m from Europe, I need to get everything here’… Just because you start in Europe, your initial market doesn’t have to be in Europe.” He pointed to another social network startup, Zing, which had success in Germany but never broke through into English markets.

“You have to do whatever it takes to be successful, and don’t worry about if the time zone is six or nine hours different,” he added.