Getting backed by Salesforce Ventures in Europe
This month marks an important milestone for us here at Salesforce Ventures, one that I’m particularly excited about. We just made our 25th investment in Europe, having backed London-based Onfido. Our first investment in Europe dates back to 2011, when we invested in Saaspoint (subsequently sold to Appirio), and a lot has happened since then.
In many ways 2015 marked the start of a new chapter for us here in Europe. Last year we announced a commitment to invest $100M in European enterprise startups. The European opportunity was too exciting to ignore, so we built a team and got to work. In the last twelve months alone we’ve backed 13 companies, making us one of the most active investors in Europe.
I still remember when I first moved to London in 2006, the word “entrepreneur” was a bit of a dirty word (and sometimes interchangeable with “unemployed”). Over the last ten years, the ecosystem has flourished, and we’re excited to be part of that growth. Total VC invested in Europe has increased 5x in that period from €2.9 billion to €12.9 billion(1), so we’ve come a long way.
As we look ahead to our next milestones, I wanted to pause for a second and answer some of the most common questions we get here at Salesforce Ventures.
The basics of when, where and what?
We usually invest at the Series A stage and above. Every investor defines it slightly differently, but for us that typically means the company has at least $100k in Monthly Recurring Revenue (MRR), ideally growing at 10+% monthly.
In our experience, that’s when entrepreneurs have found product-market fit and are ready to implement a repeatable and scalable sales model. We don’t tend to invest before Series A because access to the Salesforce ecosystem is less helpful when you’re just getting started as an entrepreneur and don’t have customers in place.
We’re based in London and invest across Europe and Israel. So far we’ve invested across 9 different countries in Europe. Most of our investments have been in the UK, France, Germany and Israel, though we’re open to investing across Europe.
From a sector perspective, our goal is to back the next generation of tech startups that are reimagining the enterprise. Our approach to strategic investing involves backing companies that are aligned with our own major product categories, as this is where we can be most helpful. Our portfolio includes companies that are built on one of our platforms, are on AppExchange or otherwise integrate into our products.
As a company we have 7 major product categories (or “clouds” as we call them):
· Sales — CRM and sales force automation (and what you may know us by)
· Service — helpdesk and customer support
· Marketing — marketing automation and personalized journeys
· Community — collaboration and engagement
· Wave Analytics — business analytics and visualizations
· Apps — building apps using either Force.com or Heroku
· and IoT — which interweaves across all these product categories
Increasingly, we’re also offering more industry-specific solutions across our product categories. At Dreamforce last year for example, we announced Health Cloud and Financial Services Cloud. We also recently acquired Demandware, which will extend our platform into commerce.
Why Salesforce does it
Salesforce was founded in 1999. Today, we’re the fastest growing enterprise software company in the world with over $8B in annual revenue and a market cap of ~$55B(2). Our rapid pace of growth at our scale is truly remarkable and still blows me away (historical CAGR the last three years of 28%). We’ve gone from small startup to being a Fortune 500 company and we’ve managed to maintain our entrepreneurial spirit. I’d argue a big part of that is because we’re still founder-led.
Strategically, one of the many reasons we’ve been successful is because we created the largest ecosystem of enterprise partners in the world. A good example is our AppExchange, which features over 3,000 apps and recently celebrated its 10th birthday. If you haven’t had a look, I’d recommend you check out just how many different types of companies you’ll find on the AppExchange. Companies on AppExchange and those in our portfolio have broadened the Salesforce platform for our customers.
This is a great example of how an ecosystem can benefit customers and companies alike. Indeed, we believe that a rising tide lifts all boats, and this has fueled our investments in the cloud ecosystem since 2009. Fast-forward to today and we now have over 150 active enterprise cloud companies in our portfolio globally.
The question that everyone wants to ask
We often get asked whether the investment program is there solely as a pipeline for M&A. While strategic investments give us insight into the market and help us build closer relationships with companies, the principal goal is to grow our ecosystem of partners, accelerate cloud adoption and extend our platform to new areas.
We want our portfolio companies to build great businesses and have great outcomes.
The numbers speak for themselves — out of all the companies we’ve invested in, we have acquired less than 5% of them. Many of our portfolio companies have been acquired by companies such as Amazon, Yahoo!, Oracle, Dropbox, Facebook, Cisco and Accenture. We’ve also had 6 companies who had IPOs. Recent exits include Twilio ($1.2B IPO) and CloudLock ($293M sale to Cisco).
Where we add value
The best entrepreneurs always have choices when it comes to raising capital. As a result, our model depends on adding value to our portfolio companies beyond capital alone. Historically we have always co-invested with top tier VCs across both Europe and the U.S., allowing us to focus on the areas we believe we can be most helpful.
Adding value means three things to us:
· Access — to our ecosystem, our product teams, our partners and our execs. We’ve been able to accelerate companies by providing this access.
· Advice — we’re 100% focused on enterprise and SaaS, and are able to provide help ranging from product/market positioning to fundraising and business model validation.
· Credibility — in the early years of a company’s history, the strength of the Salesforce brand can be leveraged for winning customers, hiring great talent and adding the best VCs.
The road forward
Looking ahead, we’re incredibly excited and optimistic about enterprise startups in Europe. In many ways, there has never been a better time to start a B2B company in Europe, with unprecedented access to talent, growing sources of capital, and ever-faster go-to-market opportunities.
We will continue to invest in the most disruptive enterprise companies we meet. Some of the spaces we’re most excited about are enterprise mobility, the API economy, SME-focused solutions, predictive analytics, Business-to-Developer (B2D) applications and the use of AI/ML to disrupt markets.
Above all, however, we’re looking for outstanding founders and teams disrupting large markets. If you fit the bill we’d love to meet you and learn more.
(1) Source: PitchBook
(2) Estimated revenue based on Wall Street consensus figures for FY2017. Market cap based as at July 15, 2016.