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Box.net, a provider of enterprise online storage, announced today that it has raised a whopping $48 million in its fourth — and potentially final — round of funding led by Meritech Capital.
Talk about a huge vote of confidence for an enterprise-class version of online backup and file-sync service Dropbox. Box.net is one of a number of very bright stars in what could be called the “enterprise 2.0” space that has attracted funding from venture capital titans like Andreessen-Horowitz — who joined Box.net’s most recent round of funding. It’s a group of companies that are basically pulling lessons from the consumer space — from companies like Twitter and Facebook — and applying them to the enterprise and IT space.
Yammer, an enterprise-style social network inspired by Facebook, for example, raised $25 million from Emergence Capital and U.S. Venture Partners — another of Box.net’s existing investors. Help desk ticket provider Zendesk raised another $19 million in a third and possibly final round in December led by Matrix Partners and including Charles River Ventures — another investor in Yammer. Matrix partners also led collaboration startup Huddle’s $10.2 million funding round in May last year.
Each startup has seen a ton of success. All of them are staunch supporters of the freemium business model, which entices users with a basic version of the service and then charges for premium features. Box.net and Zendesk have their applications on Yammer. Their executives have even hosted dinners from time to time. Oh, and Yammer and Zendesk are also right next to each other on the third floor at 410 Townsend.
This is a class of startups that has basically grown up together and pioneered the enterprise 2.0 space together as they grew. And now they’re getting ready to break out.
“The expectation is that this would take us to profitability or an event like an IPO,” said Box.net’s chief executive Aaron Levie. “We certainly will be investing this in growth, and that’ll produce some pretty good outcomes.”
Box.net recently overhauled its software to make it a more user-friendly experience. The basic offering is an online service where users can store documents and files and share them with co-workers. They can view previews online, make comments and adjust the files as they see fit. Box.net also plants folders onto hard drives that automatically synchronize with its online service.
The service has captured more than two-thirds of the largest companies in the world on the Fortune 500 list. It launched a version for of its application for Apple devices that has been downloaded 400,000 times in its first year. It also launched an application for Google’s mobile operating system Android in the fourth quarter last year that has already seen 60,000 downloads. Box.net is even working to get its software pre-loaded on Samsung devices running Android.
Box.net was able to attract funding from Emergence Capital despite its history of being an early-stage investment firm. The firm decided to invest in Box.net because the business model and team were just too enticing to pass up, said Emergence venture partner Matt Holleran. Emergence has also had some success with late-stage enterprise investments — it invested in Salesforce and SuccessFactors, which have both since gone public.
“This is about as big of a market as it gets, and couple the service with people like Aaron, and that gets us really excited,” Holleran said. “He’s unencumbered by history and he’s passionate about both end users and IT executives — and that vision and drive and experience helps you most.”
Box.net will use the funding to double its engineering and sales teams. The company also plans to move into another office in Palo Alto sometime over the next year or two, Levie said. And like the rest of the enterprise 2.0 class, the company was fortunate enough to be picky about who it took investments from.
This is a company that is nowhere near finished growing — Levie just won’t have it that way. He has too much ambition to simply take it to profitability. He’s charmed the enterprise world, and it looks like he’s charmed some pretty powerful members of the venture capital community. It’ll be interesting to watch how far he can get.
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