Salesforce is best known for its cloud software, but it’s also been quietly turning itself into one of the most active VC investors in the Valley lately.
Its billionaire CEO Marc Benioff loves working with entrepreneurs and often serves as a mentor for a lot of them, too.
But Benioff isn’t too thrilled with all the high valuations going on in the private markets, and says he’s now done investing in “unicorn” startups, or companies that raise at a valuation of $1 billion or more.
“The unicorn thing, I’ve been saying for a while now, is not great,” Benioff told Stephanie Ruhle on Bloomberg GO earlier this week. “The reason why it’s not great is not necessarily that these companies are not worth this much money or whatever — we don’t actually know because they have manipulated the private markets to achieve these valuations.”
Benioff says he’s been getting calls almost every day about startups raising at these outsized valuations, but there remains a lot of question marks around the actual worth of their businesses.
“I’m not investing any more in companies with a billion dollars or more valuations because I just don’t believe in that unicorn theory anymore. I think it’s a bad thing,” he added.
Instead, Benioff thinks if the unicorn startups truly believe in their valuations, they should go public and get the public market’s validation. He used Fitbit, a company he invested in early, as an example for getting the market’s stamp of approval by going public.
Benioff is an investor in a number of pre-IPO companies valued at over $1 billion, either personally or through Salesforce’s VC arm, Salesforce Ventures, including Dropbox, Evernote, and Docusign.
“There is no reason why these companies who claim to be worth billions of dollars and making billions of dollars to stay private,” he continued. “They need to get out on the market, run their companies with the right level of governance, and let the market rationalize these valuations.”
Benioff also pointed out that Salesforce barely had a “unicorn” valuation when it went public in 2004, even though it had over $100 million in revenue. Salesforce now has a market cap of over $50 billion and its stock is trading at a record high.
Many startups claim being private longer makes it easier to run the company and focus on long-term goals. But Benioff isn’t buying that theory either. In fact, he says being a private company’s CEO is harder because of the unstableness.
“Being a public company is good. It forces us to make sure we keep the cadence…we have to keep our eye on the ball,” Benioff said. “The unicorn mania that’s going on, that’s dangerous for our Silicon Valley economy.”