Two VCs, KKR Execs Put $29M on Desktop

Desktop.com cleared off the tables to rake in its $29 million first round of venture financing.

Founded by the team that launched Four11’s Rocketmail, Desktop.com plans a mid-September launch for its product, details of which are being kept under wraps.

“We are not at full disclosure on the product, but we decided that a bigger application was an environment where Web site services and applications could be unified,” said Katie Burke, chief executive of Desktop.

The sizable financing came from three investor groups – Accel Partners, Sequoia Capital and executives at Kohlberg Kravis Roberts & Co. After developing the idea for the company, the three founders – Burke and Larry and Karen Drebes – debated raising private capital before or after the product launch.

Burke said the company did not want to draw too much attention to the product before it was developed.

“Also, we had left a good amount of money on the table when we left Yahoo!, so we wanted the valuation to reach a certain level before we started diluting,” Burke said.

She added that the decision to raise money prior to the launch ultimately clung to the capability to market the product straight from the launch rather than have to take time post-launch to fund raise.

Following the financing, Mitch Kapor of Accel became the director of Desktop.com’s board of directors, and will be joined on the board by Sameer Gandhi of Sequoia and a KKR representative.

Burke offered no specifics on the company’s future financing needs, but said management needs to flesh out its marketing campaign and execute development plans for awhile to determine if more will be needed. However, she did confess that “$29 million is a large round, and we should be able to accomplish a lot with that.”

“We think we can be helpful [to Desktop.com] up front and in the [next] level with our network of contacts at Fortune 1000 companies,” said Marc Lipschultz, a KKR executive.

The commitment from the KKR executives represents the twelfth investment the principals at the firm have made in the past two years, Lipschultz said. Examples of companies in the group’s portfolio, which does not come from the 1996 Fund, include Starmedia, Mypoints.com, PlanetRX and LivePerson. Best known for its LBO activity, KKR expects to become more active in venture stage companies.

“These companies are growing up quickly, and as they come through the start-up phase they will need relationships with companies in our network,” said Clifton S. Robbins, a general partner at KKR.

The two said the firm’s investments would run the gamut, covering smaller start-up investments to commitments similar to Desktop.com. In addition, Robbins said the firm would look at start-up companies and established companies that are beginning Internet efforts.