Salesforce has a new $125 million fund to bet on one of the hottest investment areas right now
- Salesforce is the $121 billion enterprise gorilla that pioneered delivering software over the internet.
- Its corporate venture arm, Salesforce Ventures, has just raised its second fund in Europe to invest in enterprise software companies in Europe and Israel.
- Software-as-a-service, the model essentially invented by Salesforce, is beloved by startup investors in Europe and one of the hottest investment areas right now.
- Partner Alex Kayyal said European tech is evolving away from consumer-oriented businesses and marketplaces, and towards the enterprise and deep technology.
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Salesforce, the enterprise software giant, has launched a $125 million fund for European enterprise startups, its second fund for the region.
The new fund comes as investor interest in European enterprise technology heats up, and as the wider enterprise software market is estimated at $397 billion globally, according to Gartner.
Salesforce Ventures is the corporate investment arm for Salesforce, investing in startups which have a connection - sometimes only loosely - to its own core business. Its US arm won big by quietly investing in Zoom just before the video conferencing firm went public and almost immediately doubled its money. In Europe, it's already backed promising businesses such as ID verification firm Onfido, which subsequently raised funding from a SoftBank spinoff fund.
The fund comes from Salesforce's own cash reserves, and investors are flexible about how big a cheque they write. Typically, the European arm invests at Series A but will invest at various stages of a company's development.
Alex Kayyal, partner and head of Europe at Salesforce Ventures told Business Insider that Salesforce Ventures is the second most active corporate investor globally, behind Google Ventures.
"We have deep pockets of capital," he added.
Kayyal has lived in London for a decade, and run Salesforce's European investments for four years. The European tech ecosystem has, he said, changed markedly in that time.
"Back then, a lot of the innovation was in marketplaces and consumer businesses," he said. "If you look at the initial success in Europe, there were incredible businesses, billion-dollar companies like Skype or Zoopla were the initial starting points. What we see now, there's a huge shift."
Kayyal pointed to Romanian automation business UiPath, which is now the most valuable AI startup in the world after raising huge funding, and the float of Dutch payments business Adyen as examples of a new generation of successful tech firms. In Salesforce's own portfolio, cloud software firm Anaplan went public last October, while cloud call centre New Voice Media was bought by Vonage last September.
"You're seeing multi-billion dollar exits. All of a sudden, $5 billion, $10 billion exits are not impossible in Europe. These companies are in the enterprise space and what that creates is a tonne of liquidity that investors can redeploy, entrepreneurs in these spaces can hire great people that have had experience in those startups, and the angel networks are in place," Kayyal said. "That's one big observation."
Kayyal said he's also excited by firms solving "deep technical problems" through artificial intelligence or other deep technologies, not least because Europe has some of the best talent globally. "Onfido and Unbabel have some of the biggest AI teams in Europe," he said.
Salesforce Ventures' pitch to entrepreneurs is the wider business' credibility in cloud computing, and access to its massive customer base. For example one portfolio company, translation firm Unbabel, can translate customer support queries and responses on the fly through Salesforce's customer support platform.
For entrepreneurs, Kayyal said he and his team look for "resilience."
"Being an entrepreneur is hard, and building a company is one of the most challenging and intense experiences anyone can go through," he said. Kayyal himself was an entrepreneur. "You're leaving a stable job oftentimes, and struggling to get customers at the beginning. It's having the resilience to keep running through walls, and finding a way through."
The second trait the team looks for is an entrepreneur's understanding of where they can fit into the Salesforce ecosystem.
"We're looking for big market opportunities, disruptive technology, and great customer traction," he said.