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“We plan to continue to make similar investments throughout the remainder of fiscal 2016,” it writes in its earnings report.
We should be able to get to find out more about it on Thursday, when Salesforce reports its second quarter earnings. Analyst estimates are pretty much in line with Salesforce’s forecasts at $1.6 billion in revenue for an EPS of $0.18.
Nick Mehta, CEO of Gainsight, a software that helps companies renew customer contracts, recently attended a two-day event hosted by Salesforce Ventures in Sausalito. It acquired sales intelligence software RelateIQ for $390 million last year, after spending $2.5 billion on marketing software ExactTarget two years ago.
Ballooning “strategic” investments
Salesforce ended up leading the $60 million Series D round announced in March, which made InsideSales one of the “unicorn” startups worth over $1 billion.
Even compared to some of the other corporate VC powerhouses, Salesforce’s investment seems pretty high. But in 2015 alone, Salesforce has led four rounds already.. Salesforce was on one of the investors in Box.
But the fact that Salesforce is increasingly looking for ways to find the next future growth engine through these investments sends a positive sign to the market, Stifel’s Rodericks says, especially as Salesforce becomes a more mature company.
“[Salesforce] does a really good job of connecting everyone. Salesforce was on one of the investors in Box.” data-link=”https://twitter.com/levie”Twitter/@levieBox CEO Aaron Levie (L) with Benioff. There, he was able to meet over 100 SaaS company CEOs, all under Salesforce Ventures portfolio, and make connections that he was able to build upon for the long term.
During the three months ended April 30, 2015, Salesforce spent approximately $145 million in privately held companies (including both equity and debt investments).
The actual cash spent on “Strategic Investments,” made up of investments in both public and private companies, also jumped to $144.5 million last quarter, nearly 9X growth from the year-ago period when it spent only $16 million on it.
It didn’t take too long for InsideSales.com CEO Dave Elkington to learn that Salesforce might be interested in investing in his company earlier this year.
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Salesforce’s investment in InsideSales is only one example of how the $50 billion cloud software behemoth has become one of the most active — and aggressive — corporate VCs in Silicon Valley lately. “So we’re really careful on making sure we’re investing in companies that really help that cause, and not just the next great startup.”
The $145 million cash they invested last quarter is only a fraction of the $731 million it generated in operating cash flow, too.
And the investments seem to be working so far. Three months prior to that, on January 31, 2015, its investments in private companies had a fair value of roughly $280 million.
A unique approach
The biggest difference between Salesforce Ventures and the rest of the corporate VCs is that it almost exclusively invests in cloud software companies — the same industry segment that Salesforce itself is in.
Business InsiderSalesforce also invested Dropbox. Intel Capital, historically one of the most active corporate VC firms, spent $134 million during the first six months of 2015, while Qualcomm states in its latest filings that it is committed to spending only $105 million to fund “certain strategic investments” in fiscal 2015.
That means investing mostly in subscription-as-a-service (SaaS) providers that help grow the Salesforce platform’s overall reach. “They are definitely one of the most active and collaborative corporate VCs in the valley.”
“This certainly gives them more visibility in the companies that they might look at as partners or potential acquisitions down the road,” he said.
“As we further discussed, they said, ‘Let us just lead this round’ — which is not a typical thing [for them] to do,” he said.
Some of the biggest names its invested in include Box (which went public this year and now worth around $2 billion), Docusign (whose last reported valuation was $3 billion), and Dropbox (reportedly last valued at $10 billion). Keeping Wall Street happy
GlassdoorExactTarget went public in 2012, but Salesforce acquired it for $2.5 billion in 2013.
“Corporate VC arms’ sweet spot is usually $1 million to $5 million,” Menlo Ventures’ Murphy said. It states that its investments range from $200,000 to $50 million, with eight investments individually exceeding $10 million.
In the year ended January 31, Salesforce spent about $93.7 million on strategic investments — only about 65% of what it spent in the last quarter alone.
Salesforce’s financial report clearly indicates this trend.
And that could potentially lead to more acquisitions, he noted, as Salesforce Ventures has been more active on the buy side too lately. Its increased spending and unique approach of focusing almost entirely on cloud software companies has significantly boosted its presence in the VC community.
“Salesforce put $145 million to work, and the whole [fair] value of it jumped by a little under $175 million. “I actually met one CEO there, talked about our company for half an hour, and then a few weeks later, they ended up buying our product,” he said.
But their next move did.
And Salesforce doesn’t seem to be slowing down anytime soon. Salesforce now has the most number of $1 billion “unicorns” in its portfolio among all corporate VCs.
According to Crunchbase, it was only the fourth time Salesforce had led a venture funding round in its seven-year history. So the fair value of their existing value is going up, and they’re aggressively putting more money to work,” investment firm Stifel’s managing director Tom Roderick told us.
“The whole goal of the program is to increase the cloud ecosystem and to view it