John Somorjai was the corporate counsel at Oracle 18 years ago whenan opening popped up in the corporate development group. He'snever looked back.
Starting as a manager, he found he had a knack for spotting good companiesand 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 vicepresident for corporate development and SalesforceVentures, the company's investment arm. Salesforce Ventures hasinvested in more than 100 enterprise cloud companies since its inception in2009, including Box, DocuSign,Dropbox, Evernote,Gainsight, Apttus, HubSpot andrecently, 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 arebuilding an ecosystem," Somorjai told CMSWire yesterday.
We asked him to share some of the strategy about the company's investmentsand to peek into the future of the marketing technology vendors out theretoday.
Investor Insight
CMSWire: How big is the Salesforce fund? And how is it funded?
Somorjai: We aren't limited by any specific investmentdollar amount or fund because it's just cash comes off the balance sheet. Last Septemberwe introduced the Salesforce1 fund, which was a $100 million dedicated fundfocused on investing in the most innovative companies in the mobile and wearablespace that are building on Salesforce 1. That's also done off our balancesheets as a subset of the total of Salesforce Ventures.
If you want to get alittle more details about exact amounts, you can look at the 10k that we justfiled. [Editor's Note: The company's 2015 10k hadn't been posted on thecompany's InvestorRelations 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 aninvestment at Salesforce?
Somorjai: We are first and foremost strategic investors. Our focus is on building anecosystem of partners around the world that can provide integrated solutions forour customers and give our customers a broader set of SaaS applications to buythat enable a better use of our platform.
Our goal is building theecosystem. That's why you see it's investing in partners, some of whicheven compete with each other. We want to give our customers choice, and we wantto make sure the best companies in our ecosystem are adequately capitalized.
The second focus is in encouraging integrated corporate philanthropy. Gettingour portfolio companies to adopt something similar to our 1-1-1 model, where weleverage 1 percent of our product, 1 percent of our equity and time for socialgood.
So far, we've had many portfolio companies that have adopted the 1-1-1model itself as well as their own integrated corporate philanthropy models.
I think we have as good returns as the bestVC firms. Part of that is that we're investing in companies that Salesforce canactually help by providing advice and corporate introductions to customers. Wehave an ability to really help our partners to succeed more than any VC firmwould.
CMSWire: Do you always invest in partners or are you open to lookingat any company out there?
Somorjai: It has to be a partner or someone who is building their entire business onour platform. We have examples of a couple of consumer companies thatwe've invested in that are not necessarily an enterprise ISV.
But they arebuilding their entire business on Force.com or Horoku, and they're runningeverything on Salesforce, our community cloud, and using our sales cloud,service cloud, marketing cloud.
Those are types of investments we willabsolutely look at if it makes sense. I think the bulk, the vast majority ofinvestments, are going to be close partners of ours, both ISVs and systemintegrator partners.
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CMSWire: I wrote about your investments in Apttus andSteelBricklast month.They're not quite close enough to call competitors, but they're prettyclose in the configuration, price and quoting (CPQ) area. Are there are certainsectors that you go after, looking for, say, three or four companies at atime?
Somorjai: We invested in Apttus previously and then we made a muchlarger investment now because it's been so successful. SteelBrick is inthe same space, but serves a different segment of the market. It's a veryimportant space for us.
Configuration, price and quoting is really the crossbetween Salesforce and e-commerce and ERP systems. So having strong vendors inCPQ that are building on the Force.com platform is really important to us.
Andboth Apttus and SteelBrick are built 100 percent on our platform, so it madesense to invest in both of them. I would say it was a coincidence that both ofthem happen to be raising money at the same time.
CMSWire: You also work in acquisitions. Is a prior venture investment in a company a commonfactor in the companies that Salesforce acquires?
Somorjai: No. We've acquired four companies we've invested in, and in the course of thepast nine years, Salesforce has made over 30 acquisitions. So it's a subset ofwhat we look at.
But I think the best thing about the venture program is thatit's a great way for these small companies to get access to our executives andget to work with us. We get to know the management team, we have years ofexperience with them and, if that someplace down the road, leads to anacquisition, it's that much easier.
It's a really important part of the M&A success we've had here to buycompanies that have a similar culture to us, and where the management team isgoing to stick around and have successful careers at Salesforce.
CMSWire: The MarTech landscape has been growing at an almost frightening pace. Itseems to me we're almost sure to see a consolidation at some point. Do youagree? And if so, how would a contraction affect Salesforce Ventures orSalesforce itself?
Somorjai: We've been very fortunate to have bought three great companies that havecreated our marketing cloud -- Exact Target being the largest. If you look atthe breadth of the offering we have today in marketing, there are still morepieces we could certainly add to that. I think there are other companies alsofocused on the marketing space and creating a broad portfolio for themselves. Soit wouldn't surprise me to see more consolidation.
I do think there are too many marketing technology and ad technologycompanies out there. Not all of them will succeed and, at some point there willbe more consolidation. But there are a few of them that are actually standoutperformers and have been very successful. One of our investments, HubSpot,wentpublic a few months ago. So I think there's an opportunity to see a few ofthe better companies survive independently. But I do agree with you that most ofthem will be consolidated.
Title image by Mongione/Shutterstock
