Benchmark, Benioff invest $6.5 million in Zuora

Benchmark Capital has invested $6.5 million in online subscription software company Zuora, which launched its Web site Thursday, according to the company.

The series A round of funding also included investors Salesforce.com founder Marc Benioff and Min Zhu, founder and co-CEO of Web conferencing company WebEx.

Redwood City, Calif.-based Zuora, founded in March 2007, has built a platform that automates purchasing and billing for online subscriptions. With its automated platform, which has yet to fully launch, the company hopes to make it easier and less expensive for any online service provider or publisher to regularly bill customers. Customers could include software providers like Salesforce or consumer companies like Zipcar, a car-rental service, according to founder and Chief Executive Tien Tzuo, one of Salesforce's first employees.

"We want to be the PayPal for the subscription business," Tzuo said.

For now, Zuora is available only by private invitation. But the company's first customer is Coremetrics, a Web analytics firm.

Zuora's product competes with services from credit card providers, some of which allow customers to bill buyers on a repeat basis. It also competes with Portal Software, a large subscription-billing provider that typically services larger clients. Most often, however, companies like Salesforce or Zipcar build their own online billing systems. Tzuo said that Salesforce put half of its developer staff on the job and it took them nine months to create a customized billing system.

"Our system is on-demand, so you can use as much or as little of it as you want," Tzuo said.

The company was also founded by Zuora President K.V. Rao, an early architect of WebEx. He's joined by Chief Technology Officer Cheng Zou, also an early staff member of WebEx.

"The team's deep understanding of complex billing needs has allowed them to develop a simple, modular, and highly scalable offering to enable on-demand billing," Benchmark General Partner Peter Fenton said in a statement. Fenton will join the board.

Zuora plans to use the money to launch its platform, build more functionality, and expand sales and marketing.