John Somorjai was the corporate counsel at Oracle 18 years ago when an opening popped up in the corporate development group. He's never looked back.
Starting as a manager, he found he had a knack for spotting good companies and cutting deals. Within 18 months, he was named the group's senior director.
For the past decade, he's been at Salesforce.com, where he's now executive vice president for corporate development and Salesforce Ventures, the company's investment arm. Salesforce Ventures has invested in more than 100 enterprise cloud companies since its inception in 2009, including Box, DocuSign, Dropbox, Evernote, Gainsight, Apttus, HubSpot and recently, SteelBrick.
"We have a great advantage of being on the corporate side. You really understand the trends of the independent software vendors (ISVs) and system integrator (SI) partners who are building an ecosystem," Somorjai told CMSWire yesterday.
We asked him to share some of the strategy about the company's investments and to peek into the future of the marketing technology vendors out there today.
CMSWire: How big is the Salesforce fund? And how is it funded?
Somorjai: We aren't limited by any specific investment dollar amount or fund because it's just cash comes off the balance sheet. Last September we introduced the Salesforce1 fund, which was a $100 million dedicated fund focused on investing in the most innovative companies in the mobile and wearable space that are building on Salesforce 1. That's also done off our balance sheets as a subset of the total of Salesforce Ventures.
If you want to get a little more details about exact amounts, you can look at the 10k that we just filed. [Editor's Note: The company's 2015 10k hadn't been posted on the company's Investor Relations page by publication time, but the 2014 10k is there for review.]
CMSWire: Most VC firms look for a return of 10X or more in an investment. What are your long term goals for an investment at Salesforce?
Somorjai: We are first and foremost strategic investors. Our focus is on building an ecosystem of partners around the world that can provide integrated solutions for our customers and give our customers a broader set of SaaS applications to buy that enable a better use of our platform.
Our goal is building the ecosystem. That's why you see it's investing in partners, some of which even compete with each other. We want to give our customers choice, and we want to make sure the best companies in our ecosystem are adequately capitalized.
The second focus is in encouraging integrated corporate philanthropy. Getting our portfolio companies to adopt something similar to our 1-1-1 model, where we leverage 1 percent of our product, 1 percent of our equity and time for social good.
So far, we've had many portfolio companies that have adopted the 1-1-1 model itself as well as their own integrated corporate philanthropy models.
I think we have as good returns as the best VC firms. Part of that is that we're investing in companies that Salesforce can actually help by providing advice and corporate introductions to customers. We have an ability to really help our partners to succeed more than any VC firm would.
CMSWire: Do you always invest in partners or are you open to looking at any company out there?
Somorjai: It has to be a partner or someone who is building their entire business on our platform. We have examples of a couple of consumer companies that we've invested in that are not necessarily an enterprise ISV.
But they are building their entire business on Force.com or Horoku, and they're running everything on Salesforce, our community cloud, and using our sales cloud, service cloud, marketing cloud.
Those are types of investments we will absolutely look at if it makes sense. I think the bulk, the vast majority of investments, are going to be close partners of ours, both ISVs and system integrator partners.
CMSWire: I wrote about your investments in Apttus and SteelBrick last month. They're not quite close enough to call competitors, but they're pretty close in the configuration, price and quoting (CPQ) area. Are there are certain sectors that you go after, looking for, say, three or four companies at a time?
Somorjai: We invested in Apttus previously and then we made a much larger investment now because it's been so successful. SteelBrick is in the same space, but serves a different segment of the market. It's a very important space for us.
Configuration, price and quoting is really the cross between Salesforce and e-commerce and ERP systems. So having strong vendors in CPQ that are building on the Force.com platform is really important to us.
And both Apttus and SteelBrick are built 100 percent on our platform, so it made sense to invest in both of them. I would say it was a coincidence that both of them happen to be raising money at the same time.
CMSWire: You also work in acquisitions. Is a prior venture investment in a company a common factor in the companies that Salesforce acquires?
Somorjai: No. We've acquired four companies we've invested in, and in the course of the past nine years, Salesforce has made over 30 acquisitions. So it's a subset of what we look at.
But I think the best thing about the venture program is that it's a great way for these small companies to get access to our executives and get to work with us. We get to know the management team, we have years of experience with them and, if that someplace down the road, leads to an acquisition, it's that much easier.
It's a really important part of the M&A success we've had here to buy companies that have a similar culture to us, and where the management team is going to stick around and have successful careers at Salesforce.
CMSWire: The MarTech landscape has been growing at an almost frightening pace. It seems to me we're almost sure to see a consolidation at some point. Do you agree? And if so, how would a contraction affect Salesforce Ventures or Salesforce itself?
Somorjai: We've been very fortunate to have bought three great companies that have created our marketing cloud -- Exact Target being the largest. If you look at the breadth of the offering we have today in marketing, there are still more pieces we could certainly add to that. I think there are other companies also focused on the marketing space and creating a broad portfolio for themselves. So it wouldn't surprise me to see more consolidation.
I do think there are too many marketing technology and ad technology companies out there. Not all of them will succeed and, at some point there will be more consolidation. But there are a few of them that are actually standout performers and have been very successful. One of our investments, HubSpot,went public a few months ago. So I think there's an opportunity to see a few of the better companies survive independently. But I do agree with you that most of them will be consolidated.
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