Inside Salesforce Ventures - the investment arm behind a $1 billion software ecosystem fueling growth
- If it seems like there are a lot of companies built on or around Salesforce, it's with good reason.
- The $106 billion cloud software company has made 275 investments around the world in companies that support its wider ecosystem.
- But Salesforce Ventures isn't like traditional venture capital firms, which want to make their investors money.
- The team has one priority: to make strategic investments that grow the number of ways customers can use Salesforce.
Salesforce Ventures is one of the most active firms in corporate venture capital, third behind GV (Google) and Intel Capital in 2017, according to CB Insights.
The firm makes an average of one deal a week between new and return investments, and while its investments are by all accounts a success financially, making bank isn't actually one of its goals.
"Our financial returns have been excellent but that's not the priority for the program," John Somorjai, executive vice president of corporate development, told Business Insider.
"The goal for the program is being this strategic investor that's helping to deliver these great solutions for our customers. The good news though is because we can help these companies along the way, they tend to do quite well," he said.
Unlike its peers in venture capital, Salesforce Ventures doesn't take board seats and rarely leads a financing round. This keeps the team in good graces with big name investors, particularly Bessemer Venture Partners and Accel, so they frequently gets deals on the recommendation of other firms.
Last quarter, the company saw gains of $211 million on its strategic investments, which is equal to 7% of its over all revenues for the quarter, according to a company filing.
In total, Salesforce Ventures has made 275 investments. Twelve of its portfolio companies have gone public and more than 50 of them have been acquired.
In fact, 11 have been acquired by Salesforce itself - the most recent being CloudCraze, a business-to-business commerce platform built on top of Salesforce, which got acquired in March.
Salesforce Ventures grows the greater ecosystem
Salesforce co-CEO Marc Benioff came up with the idea in 2009, when the Great Recession made it difficult for small cloud startups to get off the ground.
"He kept hearing those stories of our partners having trouble raising money," said Somorjai, who joined the company in 2005 to start its corporate development team. "It was so critically important for us to build this ecosystem around Salesforce, so he told me to start this program up and I was thrilled to do it."
Since then, Salesforce Ventures has grown to 12 dedicated people across offices in San Francisco, Chicago, London and Tokyo. It has six active funds, including a $100 million fund dedicated to Canadian startups, and a $100 million fund for Europe, the Middle East, and Africa.
[Read about Salesforce's biggest public investments]
While global in nature, Salesforce Ventures is strict about where its money goes. Somorjai said his team sticks to variations on a theme: those that integrate with Salesforce; those that build on top of Salesforce; and those that implement Salesforce solutions.
"It's really important that as we grow, we have these capabilities that are built all around Salesforce on a global basis," Somorjai said.
Many of its best deals come on the recommendation of customers, and from sales and product executives who witness the interesting ways that people use the Salesforce platform.
One of Salesforce Venture's most recent investments is in a consulting firm called Virsys12, which was founded by CEO Tammy Hawes in 2011 to help healthcare providers use Salesforce. The startup sell its own apps and helps companies use Salesforce more efficiently.
Ahead of its investment, Salesforce gave Virsys12 an award for its work with 180 Health Partners, an organization the helps pregnant women with opiod dependency, using - you guessed it - the Salesforce platform.
Investments are a family affair
Salesforce Ventures' investment thesis isn't the only thing that makes it unique.
It's common at venture capital firms for the entire team to watch a pitch and decide together which startups get offers. At Salesforce Ventures, the whole company pitches in.
"We will have people involved from product, from sales, from finance as well as my team," Somorjai said, "We all will evaluate the investment together."
While the dedicated Salesforce Ventures team is responsible for evaluating the terms of a deal, investments also require an executive sponsor from inside who will say that they like a startup and think the investment is important, Somorjai said.
This is vital, he said, because Salesforce's selling point as an investor is that it has all of the wisdom and resources of a $106 billion software success story.
"We help companies by giving them access to our customer base, access to our leadership and also a lot of critical advice," Somorjai said.
The average check is $2 million, Somorjai said, though it's been known to do much larger deals, such as its $100 million investment in Dropbox on the eve of its IPO.
And while turning a profit is secondary to Salesforce Ventures's goal of building out its community, Somorjai thinks he'll be seeing both happen for some time.
"I don't think we'll stop seeing good returns," he said. "Because we're quite disciplined in the types of companies we invest in, and we're picking the companies where we can help and where we can add value."