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18 December 2015

2015 round up: Salesforce Ventures

Salesforce's corporate venturing unit invested larger amounts in 2015, building up a stable of enterprise IT unicorns as its strategic VC model began to be widely replicated.

Author: Robert Lavine, reporter

Salesforce Ventures, the corporate venturing arm of enterprise cloud software provider Salesforce.com, had a busy 2015, ramping up its investments as it watched its portfolio gather value and other businesses in the enterprise space look to copy its strategic investment model.

Unlike some of its more prominent corporate venturing counterparts, Salesforce Ventures has a relatively fixed idea of the startups it targets, investing only in enterprise cloud companies, in a bid to form what it calls “the world's largest ecosystem of enterprise cloud companies,” which naturally fit around the Salesforce platform itself.

Salesforce Ventures launched its first dedicated fund, the $100m Salesforce1 Fund, in September 2014 in order to back companies developing mobile apps and connected products that link to the firm’s Salesforce1 mobile platform, now called App Cloud.

Perhaps significantly, two of the first four investments from the fund were in e-signature technology provider DocuSign, which was helped in closing a $115m series E round, and sales acceleration platform InsideSales, which went on to raise $60m in a Salesforce Ventures-led round in March 2015.

The launch of the fund seemed to herald an acceleration in Salesforce Ventures’ investments that was more apparent as this year progressed.

According to the company’s third quarter report, the estimated fair value of its investments in privately held companies ballooned from $280m at the end of January to $654m by the end of October, and the expenses allocated to strategic investments totalled $325m for the first nine months of 2015.

Although it originally operated mainly as an early-stage fund, Salesforce’s late-stage investments have crept up in the past three years and it appears more willing to lead bigger rounds.

In addition to InsideSales, Salesforce Ventures also led a $128m series G round for integration platform Mulesoft in May, as well as a big $42.8m series A round for app delivery platform Vlocity and a $41m round for sales technology company Apttus. Apttus went on to raise $108m later in the year in a series C round that reportedly marked the unit’s largest ever investment.

Some of the larger rounds Salesforce Ventures took part in included the $130m series E round closed by cloud communication company Twilio in July, a $110m round for Salesforce back-office app developer FnancialForce.com and a $58m series C round for experience optimization platform Optimizely.

Exits were relatively thin on the ground considering the level of Salesforce’s investments over the course of the year, but cloud collaboration platform Box raised $175m from a long-awaited IPO in January, and Salesforce customisation service TerraSky went public in Japan in May.

The unit may however be in line for a flurry of exits in 2016. The unicorns (companies valued at $1bn or more) in its portfolio include not only Apttus, DocuSign, Mulesoft, InsideSales and Twilio, but also Evernote and Anaplan. There has been a compression in pre-IPO funding in recent months, and it is likely at least some of those companies will look to go public next year.

As far as Salesforce Ventures’ investments go, a clue to its intentions may lie in the commitment it made in October to invest $100m in European startups. The unit has already funded the likes of CartoDB and Qubit,and with the seeming reluctance of some other corporate investors to venture beyond the US and Asia, it may represent a comparatively clear field.

More certain is that Salesforce Ventures’ expansion in its investments comes at a time when other enterprise software companies are entering the fray in a big way.

The $80m fund announced by Slack this week follows similar initiatives launched in 2015 by Box, Twilio, Workday and Expensify, all of which are aiming to follow Salesforce’s lead by funding the development of ecosystems around their products. It seems that if you're an enterprise software company, corporate venturing has now become an important and accepted part of your growth.

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