Call center software provider Five9 Inc. raised $12 million in a third round of venture capital from previous investors to boost in marketing and take the company to profitability by the end of the year.
The seven-year-old Pleasanton, Calif., startup turned to Hummer Winblad Venture Partners and Partech International, both of San Francisco, and Mosaic Venture Partners of Toronto, to bring its total venture investment to $29 million. President and CEO Mike Burkland said the round was positioned to give the company working capital to build out features of its product while expanding sales, and he said he expects positive cash flow this year.
Burkland, hired to lead the startup in January, said his experience at hosted software companies, along with his belief that this kind of technology fits naturally into the software-as-a-service model, attracted him to the CEO slot.
"I believe hosted call center software is the next big wave," he said. "We are at an inflection point with analysts projecting 44% growth, and I think the industry will grow to more than $1 billion a year by 2011."
Burkland cited market research firm Datamonitor Ltd. of the U.K. in projecting growth, based on the number of seat licenses. He said that in addition to market characteristics, he was attracted to the company based on Five9's early foothold in hosted services and its position in the market.
Five9 provides software that enables companies to automate call center functions on a subscription basis, and offers features, services, and training it claims can help customers launch full service call centers in 72 hours. The company has a large development team in Russia and its own customer support staff in the Philippines, but does not provide outsourced call center personnel.
Partech general partner Tim Wilson, whose firm led Five9's $12 million Series B round in May 2005, said the company established a strong position in outbound calling systems early on, and that capital from its second round supported building an offshore development team and bolstered the company's technology for inbound calling centers. He said the company now has products that integrate inbound and outbound features, and that chief technology officer Jim Dvorkin, formerly the head of call center initiatives for customer relationship management software provider Salesforce.com Inc., is developing additional features.
Wilson said investors made initial inquiries into raising money from outsiders, but chose to keep the round among themselves. Burkland would not disclose a valuation for the round or say whether it came at an increase to the previous round.
Five9 did used no outside financial adviser in closing the deal, and received legal work from Tim Curry of O'Melveny & Myers LLP in Menlo Park, Calif. Howard Lasky of Coblentz, Patch, Duffy & Bass LLP in San Francisco represented the investors. -- Clifford Carlsen
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