As has been rumoured since the beginning of the year, enterprise social networking company Yammer has closed a big funding round: $85 million. A person familiar with the deal said it values Yammer around $500 million.That’s quite a bit more than the $40 or $50 million that had been rumoured, and is yet more evidence that enterprise collaboration is smoking hot right now.
The round puts Yammer in the same high-rolling league as enterprise startups Box and Workday, both of which raised rounds of more than $80 million last year. Jive Software also raised more than $160 million in its IPO last December and has a current market cap of $1.2 billion.
Yammer CEO David Sacks told us, “This round gives us the capability to do anything a public company can do, but without the headaches of being a public company.” Total, the company has now raised more than $140 million through five rounds.
So what will Yammer do with the money?
- Launch its first marketing campaign. Yammer has grown almost entirely through word of mouth. Employees usually begin using the free version on their own, and Yammer’s sales force later works to convert those companies to the paid version. Sacks said that Yammer needs no help on customer acquisition — the viral model is working. But it is going to start advertising to IT professionals and “key decision makers” in the enterprise, so they’ll be familiar with Yammer’s name and capability when it’s time to pay up. The campaign will kick off with a full page ad in the Wall Street Journal tomorrow.
- Staff up with more sales and engineering folks. The company has already grown from 250 employees at the beginning of the year to 300 now, and is planning on doubling or more this year.
- Get more space. With its rapid expansion, Sacks told us, they’re probably going to have to move this year. But the company hasn’t really started looking for new spaces yet.
Yammer last reported more than 4 million seats in use at corporations, with more than 800,000 paying seats. Sacks told us that it has a conversion rate of 20% from free to paid in the last year.
The round was led by new investor DFJ Growth (an arm of Draper Fisher Jurvetson) and previous investor Social+Capital, but includes a roster of other big names including Khosla Ventures, PayPal cofounders Max Levchin (individually) and Peter Thiel (through his Founders Fund), and former NFL Hall of Fame defensive back Ronnie Lott, who used to play for the San Francisco 49ers.
All told, previous investors put $30 million into this round, Sacks told us, showing they have lots of confidence in Yammer’s current growth trends and business model.
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