When you see deals like this it is often not reported what liquidation preferences or other the investor is getting.
E.g. If Hedge Fund X puts in a $20M investment for 1% it might seem expensive, but not if they have a 3x liquidation preference that guarantees them a profit on any trade sale above $20m in value, and most likely on an IPO.
Similarly it helps LinkedIn set a price point with any future IPO plans.
These are not new shares being issued, so, correct me if I'm wrong, but any liquidation preferences that are attached to this purchase would be at the original valuation, not the new one.
He means that if linkedin would be sold for 60 million, they would get the first 60 million. Then afterwards the normal shareholders are served until the initial ratio is reached.
E.g. If Hedge Fund X puts in a $20M investment for 1% it might seem expensive, but not if they have a 3x liquidation preference that guarantees them a profit on any trade sale above $20m in value, and most likely on an IPO.
Similarly it helps LinkedIn set a price point with any future IPO plans.