How Salesforce Ventures has helped fortify the Salesforce empire

The Salesforce ecosystem is dynamic — and that’s
not by accident.
Salesforce

•  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.

John Somorjai, executive vice president of corporate
development, started Salesforce Ventures in
2009.
Salesforce

If it seems like there are a lot of applications and tools that
integrate with or live on Salesforce, it’s no accident. The
company’s secret weapon is Salesforce Ventures, a corporate
investment arm with
$1.02 billion in equity in other companies — but only ones
that work with the Salesforce platform.

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

Canadian Prime Minister Justin Trudeau visited with CEO
Marc Benioff in San Francisco. Salesforce has a $100 million fund
dedicated to Canadian startups.
Salesforce

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.”