IMlogic Makes Instant Sense With $14M

Will instant messaging be as big as email? Over the past year evidence has shown that consumers are saying yes. But what about businesses? While corporate America has been slower to take to the technology than individuals, Venrock Associates is betting that corporations will spark the next growth wave for this form of fast communication.

IMlogic Inc., a maker of instant messaging software solutions, has closed on a $14 million Series B round of venture financing. Venrock Associates led the deal, which included participation from Goldman Sachs & Co., General Catalyst Group and Kodiak Venture Partners. Mike Tyrrell, general partner at Venrock Associates, will join the IMlogic board of directors.

“Venrock and Goldman Sachs have a deep track record of software investing and of making consistent investments in good times and bad,” says IMlogic CEO Francis deSouza, who added that the deal was slightly over subscribed.

For Boston-based IMlogic, the funding dwarfs the $3.75 million Series A round that the company secured in April 2002. The company will use this round of funding to expand its management team and grow its sales, marketing and customer service units. Recent senior management appointees include Jim Kelliher as CFO, Elena Grinev as vice president of client services and Jim Drill as vice president of sales and business development.

In recent months, IMlogic has signed Merrill Lynch and Bear Stearns to its client roster, and it has signed a partnership agreement with Microsoft to provide its archiving technology for the next generation of MSN Connect for Enterprises instant messaging systems. “We want to expand on our momentum,” says deSouza, who formerly ran Microsoft’s Real Time Collaboration Group. With sales of instant messaging packages having roughly doubled in the past year, de Souza looks at the email market as a barometer for where it can go. “The recent growth has been in the consumer market, and we see most of the future growth coming from the business market, from companies,” he says. So far, the company has sold about 100,000 desktop applications to corporate users.

Board member Louis Volpe, a partner at Kodiak Venture Partners, also sees the enterprise market as a big growth area for instant messaging. “The potential is huge, and we think we have a team in place that knows the IM space as well as anyone,” he says. Volpe expects IMlogic to be profitable by late 2003 or early 2004, but any talk of an exit strategy is premature. “We’re focused on building a good team and letting them grow the business,” he says.

With sales and revenue growth expected in the near term, and profits hopefully not far behind, de Souza does not see IMlogic taking to the venture markets again for the foreseeable future. “Depending on how it goes, we’ll probably take another look in another two or three years,” he says.