Work Collaboration Developer Slack Lands $120 Million in Venture Funding

Startup work collaboration developer Slack has landed $120 million in new venture and banking funding, bringing the nascent company’s valuation to some $1.12 billion, its chief executive Stewart Butterfield told the Wall Street Journal.

So far Slack, whose sole product is a messaging app replacing email for small workgroups, has raised about $180 million in total. The company plans to use the new funds to hire marketing personnel and on campaigns to uncover new customers, officials said.

Workplace collaboration tools are rapidly gaining in popularity, and combined with momentum from enterprise mobility, could bring additional opportunities for channel partners.

TechCrunch first reported Slack’s latest funding round on Oct. 23, although Butterfield at the time denied raising the cash, saying in a Twitter post the company expected to seek additional funding “sometime in the next six years.”

Considering Slack’s work collaboration software only exited beta this past February, it’s meteoric ascent has been nothing short of extraordinary. The funding, led by Kleiner Perkins Caufield & Byers, Google (GOOG) Ventures and prior investors Andreessen Horowitz, Accel Partners and The Social+Capital Partnership, delivered the developer into the rarified air of startups quickly gaining $1 billion-plus valuations.

That group, as the Journal reported, includes YouTube, which Google bought for $1.65 billion when it was about two years old, Groupon, valued at $1.35 billion less than 18 months into operation, and Yammer, which Microsoft (MSFT) purchased for $1.2 billion in 2012 when it was four years old.

The new funding round has bought Slack two new advisory board members—John Doerr, Kleiner Perkins general partner, and M.G. Siegler, Google Ventures general partner.

According to Slack’s website, the subscription service modeled company offers its messaging app in three different configurations based on increasing functionality, ranging from a “lite” version at no cost to a “Standard” edition priced at $6.67 per user per month and a “Plus” edition at $12.50 per user per month. An “Enterprise” version, priced at $49-$99 per user per month, is slated to debut in 2015.

According to TechCrunch, Slack has about 250,000 daily active users, some 70,000 of which pay for the service. Only six months ago, Slack counted about 60,000 daily active users with 15,000 paid seats.

Butterfield, whose background includes having a hand in creating Flickr, founded Slack as a different company in 2009 but changed its direction to developing a workgroup collaboration tool in 2013. He told the Journal that high investor demand prodded him to seek the additional funds even though the company doesn’t need the money.

“People say the best time to raise money is when the market is good and you don’t need it,” he told the Journal. “It’s 2014, and the market is pretty good.”

Slack is developing a version of its software for iOS and Android platforms currently is in beta testing.