Atlassian snaps up HipChat to boost enterprise services

Collaboration software company wants its customers to easily chat over work projects

Enterprise collaboration software Atlassian announced Tuesday that it has acquired internal chatting service HipChat. 

With more than 1,200 companies as customers, including Groupon and WIRED, HipChat becomes a part of Atlassian's portfolio of software for its more than 18,000 companies.

The exact details of the acquisiton were not publically disclosed.

Thus far, HipChat has been focused on group chatting internally for work groups, companies and entire enterprises for real-time updates and action. HipChat also provides file sharing and group collaboration capabilities -- think Yammer -- and is accessible through a Web browser, and native applications for certain mobile devices. 

But with Yammer's progress, it's tough to compete head on. Just a few days ago, Yammer grabbed a whopping $85 million in a Series E round of funding, led by DFJ Growth, bringing the company's total funding to $142 million. Yammer stated that the latest financing will be used to grow its sales and engineering teams globally. Yammer's products enable business-oriented communications within organizations so that various departments can share crucial data on a secure internal circuit.  

HipChat has had far fewer funds to work with. Just months after its inception, it took in $100,000, thanks to the TechFellow Awards program. The program entrusts $25,000 to entrepreneurs and innovators in the high-tech industry to either invest in a new startup or a startup of their own. HipChat was the beneficiary of $25,000 from both Sandy Jen and Elaine Wherry, both co-founders of instant messaging company, Meebo, and TechFellow Awards recipients.

As part of the TechFellow program, Founders Fund also reserves the right to co-invest another $250,000 with their TechFellow recipients. Founders Fund went ahead and co-invested $50,000, bringing the total amount invested in HipChat to $100,000. The structure is a convertible debt, meaning the angel investors and the Founders Fund can invest in HipChat’s Series A round at a discount.

At that point, HipChat was targeting the small- to medium-sized businesses.  HipChat’s service at $1 per user, per month, was also a relatively reasonable fee for startups that collaborate often on IM. VatorNews covered HipChat at the time in our Vator Box segment with Jed Katz of Javelin Ventures as our guest host. Vator Box is where we analyze start-ups. The conclusion: HipChat should focus on getting usage and forget about monetization. This would help tee it up as a possible acquisition. Seems we were on target with this feedback. 

Now HipChat's service can be monetized and distributed through Atlassian.

Atlassian fell in love with the product as it was implementing the service internally when it finally decided that this function would be an ideal additional to the clients it serves.  

HipChat is also capable of integrating into various products and Internet services that enterprises might be interested in. Atlassian will assure that the newly added service has connectivity available with its company's a free source code hosting service (Bitbucket), GitHub, MailChimp, Heroku and several others. 

There are also new integrations are available Wednesday for Atlassian Confluence, an issue tracking software; Confluence, a content collaboration product; and two popular developer tools, FishEye and Crucible.

The three founders of HipChat - Pete Curley, Garret Heaton and Chris Rivers - will also join Atlassian.

Atlassian is used by 18,000 large and small organizations -- including Citigroup, eBay, Netflix and Nike -- for internal product and issue tracking and communication. Altassian most closely competes with, the now public, Jive Software. Jive went public in mid-December on the Nasdaq under the ticker symbol JIVE, raising $160.8 million in fresh capital.

To date, Atlassian has received $60 million from Accel Partners and claims annual revenue north of $100 million.

HipChat will keep its services unchanged for those that are already users of the product -- from pricing to service standards.