LinkedIn decided to sell to Microsoft because it couldn’t keep pace with the world’s biggest tech companies when it came to research and development into new technologies, explained cofounder and executive chairman Reid Hoffman on CNBC today.
As a public company, you’re beholden to you shareholders every quarter, Hoffman said, speaking from the Allen & Co conference in Sun Valley, Idaho.
But at the same time, tech companies need to keep researching the next big thing and the “five-year future” if they want to stay competitive with titans like Google, Facebook, and even Microsoft in the long-term.
“That puts a lot of pressure to get into their league in a reliable way,” Hoffman says.
That push-pull between short-term gains and long-term investment is a tricky thing to manage. Indeed, before the deal with Microsoft came through, LinkedIn had been having a tumultuous year that saw it lose 40% of its value in a single day.
All the while, startups and the big tech companies alike are always pushing the bar higher for technological innovation. LinkedIn had the potential to rise to the challenge, Hoffman says, but finding a buyer was a more “reliable” solution.
“I think we could get there,” Hoffman says of the company’s ability to compete, technology-wise, but also says Microsoft’s $26.2 billion buyout was “a more certain result for our shareholders.”
And Microsoft was a natural fit for a new home for LinkedIn: Their missions are “naturally aligned,” Hoffman says, and they will be allowed to operate as a private company — meaning the short-term pressure on the social network goes away. The implication is that LinkedIn can refocus on technology.
“[Microsoft CEO Satya Nadella’s] already made suggestions about how we operate together and how we operate independently,” Hoffman says.