Deals

Enterprise social network Yammer raises a whopping $25M to triple its team

Yammer, which develops and distributes an enterprise-focused social network similar to Facebook, announced today it has raised an additional $25 million in funding to help expand globally and triple its engineering team.

Yammer recently revamped its business micro-blogging software to behave more like a Facebook for enterprise users and has seen a lot of success as a result. It’s now one of the flagship collaboration programs that help large businesses and companies that have employees strewn across the country communicate more effectively. The company has around 1.5 million corporate users, and around 80 percent of the largest companies in the world on the Fortune 500 list have deployed the service. More than 100,000 companies total use the service in 136 countries.

The enterprise network provider has seen such explosive growth that it’s even making traditional collaboration software powerhouses sweat a bit. Salesforce originally provided its customers with a micro-blogging service called Chatter and charged everyone else $15 a month to use it. But the company did an about-face and is now offering the service for free to compete with Yammer. Kevin Spain, a partner with Emergence Capital and an investor in both Yammer and Salesforce, earlier called on Salesforce to unleash its micro-blogging service for free in order to successfully compete.

“The fact that Salesforce has to copy Yammer even though it has 2,000 sales reps is like Goliath dropping his sword and armor and chasing after David with a sling-shot,” said David Sacks, CEO of Yammer. “This funding will make sure they don’t catch up to us.”

With Yammer, it’s free to join, and the company makes money off subscription models for premium services and off IT servicing, Spain said. A number of Yammer’s features are held behind one of two pay walls — a “silver” model that costs businesses $3 per user per month, and a “gold” model that costs them $5 per user per month. But because the service is free to use initially, it’s able to spread virally as employees begin using it on their own within companies. That means Yammer has virtually no marketing budget — it grows organically, much like Facebook and other social networks have.

The San Francisco, Calif.-based company has raised $40 million to date. The most recent round was led by U.S. Venture Partners. Yammer’s existing investors, Emergence Capital, Charles River Ventures and Founders Fund, also participated. U.S. Venture Partners Principal Mamood Hamid will join Yammer’s board of directors as part of the deal.

Yammer launched in 2008 and very quickly hit the 1 million user mark in July. The company is led by David Sacks, PayPal’s former chief operating officer. David Stewart, former senior director of product at social networking game company Playdom, and Mark Woolway, a former managing director at Clarium Capital, are also joining Yammer as executives as of today.