This might just be one of the best-kept secrets in Silicon Valley’s venture capital scene: Salesforce, the $US50 billion cloud software maker, is beating all VC firms in funding some of the largest private software companies in the world.
According to the investment bank JMP Securities, Salesforce had the largest number of companies under its portfolio from JMP’s annual “Hot 100” list, which tracks the best private companies in the software industry.
The report, published last month, said Salesforce has investments in 20 of the 100 biggest business software companies, topping some of the most prominent VC firms in the Valley, including Andreessen Horowitz, Battery Ventures, and Sequoia Capital.
Companies under its portfolio include: Dropbox, Twilio, Docusign, Domo, and Insidesales, cloud software companies that were all valued at more than $US1 billion.
“The rise of Salesforce.com as a force in the venture industry is quite remarkable,” the report said. “This strategy helps Salesforce.com keep its finger on the pulse of innovation.”
Here’s the chart:
Salesforce’s investment in private companies has been ballooning in recent years. According to its latest earnings report in July, Salesforce invested $US449.7 million in privately-held companies, nearly 3 times what it spent six months ago in January 2015.
And the money is turning out to be well-spent too. The fair value of Salesforce’s investments in privately-held companies went from $US280 million in January 2015 to $US631 million in July 2015, it states in its 10-Q report.
Salesforce’s success in the software investment space may be due to its unique strategy to solely focus on cloud enterprise software makers — the same industry segment that Salesforce itself is in.
But Salesforce is also becoming more aggressive with the size of its investment, according to Menlo Ventures’ Matt Murphy, who has over 20 years of experience in the VC world.
“What’s more unusual is Salesforce leading rounds and its willingness to invest $US10 to $US50 million,” Murphy told us in a previous interview, noting most corporate VCs tend to invest less than $US5 million in a single round. “They are definitely one of the most active and collaborative corporate VCs in the valley.”
The clear goal of all this is to grow and nurture the overall enterprise cloud software space, an industry that Salesforce has pioneered since the late 90s. But as Tom Roderick, managing director of investment firm Stifel, told us previously, it also puts Salesforce in a better position for potential acquisitions.
“This certainly gives them more visibility in the companies that they might look at as partners or potential acquisitions down the road,” he said.
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