When Microsoft bought LinkedIn for $27 billion in 2016, the deal brought with it a small equity investment that's turned into a surprising windfall.
Two years before the acquisition, LinkedIn invested about $500,000 as part of a $6.9 million venture round in a fledgling spin-out called Confluent, which was setting out to commercialize the Apache Kafka open-source software. It was LinkedIn's first such investment, and valued Confluent at about $24 million.
On Wednesday, Confluent said its valuation has swelled to $2.5 billion, based on a fresh $125 million investment led by Sequoia. That means the company is worth over 100 times more today than it was when LinkedIn wrote its check in 2014. LinkedIn's stake is now valued at about $25 million (a 50-fold increase), because its investment was diluted in future fundraising rounds, said a person with knowledge of the deal who asked not to be named because the size of LinkedIn's ownership was never disclosed.
Confluent co-founder and CEO Jay Kreps, who started working at LinkedIn in 2007, declined to comment on the size of its stake. As a principal staff engineer at LinkedIn, Kreps led internal development of Apache Kafka, a data management tool that helps companies process and make sense of tons of information flooding into their systems in real time.
The arrangement between LinkedIn and Confluent is similar to Yahoo's investment in data software company Hortonworks, which spun out of Yahoo in 2011. Hortonworks later went public and then merged with rival Cloudera in a deal that closed at the beginning of January. The combined company has a stock market value of $3.4 billion.