Successful businesses create an environment where people share best practices to enable others to learn and grow. Enterprise social networking can't make that happen by itself -- but it does provide the most conducive technological means imaginable.
According to David Sacks, CEO of enterprise social networking service Yammer, "eventually, not having a social network in your business will be like not having a phone system or not having email." Founded in 2008 by Sacks and sometimes considered a direct competitor to Jive Software, Yammer recently received a fifth round of venture funding to the tune of $85 million.
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One of the founders of PayPal, where he served as COO, Sacks has several successful entrepreneurial ventures under his belt, including a genealogy site and, randomly enough, the 2005 movie "Thank You for Smoking." I spoke with Sacks shortly after news of the new Yammer investment was announced. The following is an edited version of our conversation, which ranged from embedding social networking in enterprise apps to the consumerization of IT.
Eric Knorr: Why would VCs plunk down such a large round for an enterprise social networking company?
David Sacks: I think the reason why we got $85 million of investment in this round is that we were the first mover to define this new category of enterprise software, which is actually a very big category. It's our belief that every company will have its own internal social network. It doesn't matter what size the company is -- we've seen adoption from the Fortune 500 all the way to little startups. It doesn't matter what industry vertical the company is in; we've seen adoption across just about every industry vertical. And it's global, so we have adoption across pretty much every country.
It's a very large market, and I think that's what has investors excited. And we're growing very fast.
Knorr: You were one of the early movers. What hurdles did you have to overcome?
Sacks: We were the first ones to call ourselves an enterprise social network. There was actually a conscious effort on the part of virtually all the companies that are now competing with us to reject the idea of enterprise social networking out of a concern that it would be perceived as a nonbusiness tool. Our view of it is, yes, social networks before Yammer were predominantly used in the consumer space, but that shouldn't obscure that fact that it's a communication tool, and there's nothing inherently consumer about that style of communication -- it just hadn't been applied to the enterprise yet.
We didn't mind being called "the Facebook for the enterprise." We actually have a lot of common DNA with Facebook. Our first investor Peter Thiel was Facebook's first investor. Sean Parker, the founding president, is on our board of directors. So they've been involved in Yammer since the beginning. When Facebook was still primarily on college campuses, we were asking ourselves where social networking would go next. We felt that everyone would have a social networking account in their personal lives and we thought Facebook would probably win that battle, so we started thinking about applying it to enterprises.