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The Associated Press September 27, 2011, 4:38PM ET

Ex- Facebook exec leads $17M investment in Yammer

Yammer, a startup that helps companies build their own social networks, has gained the financial backing of a former Facebook executive.

Chamath Palihapitiya, who left Facebook three months ago, led a $17 million investment in Yammer through his Social+Capital Partnership fund. Three of Yammer's earlier investors -- Charles River Ventures, Emergence Capital and U.S. Venture Partners -- also participated in the funding announced Tuesday.

With the latest infusion, Yammer has now raised a total of $57 million since it was co-founded three years ago by David Sacks, who helped take online payment service PayPal public in 2002. A few months later, eBay Inc. bought PayPal for $1.5 billion.

Sacks is trying to strike it rich again with Yammer, one of several companies that are developing tools designed to allow a company's employees, customers and partners share information the way friends and families do on Facebook's online hangout. Yammer's competition includes Jive Software Inc., which is trying to raise at least $100 million in an initial public offering of stock, and Inc., which already runs a highly successful business software service.

"Social networking is destined to have as significant an impact on the enterprise as it has already had in our personal lives," predicted Palihapitiya, who served as a vice president in various roles at Facebook.

Yammer, which is based in San Francisco, says it has more than 3 million users from a list of companies that include Ford Motor Co., Orbitz Worldwide Inc. and 7-Eleven.

Sacks said Yammer didn't need to raise more money but decided to take the cash because it was a way to give Palihapitiya an "observer's seat" on the company's board of directors.

With the addition of Palihapitiya, Yammer is well connected to Facebook. Sean Parker, who advised Facebook founder Mark Zuckerberg in the company's early days, is one of Yammer's directors and former PayPal CEO Peter Thiel was Yammer's first major investor, just as he was at Facebook.

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