Why Salesforce needs a new $50 million fund when it already has its own VC arm

Salesforce CEO Marc BenioffSalesforceSalesforce CEO Marc Benioff

Salesforce launched a new $50 million fund Tuesday specifically targeting startups that use its Lightning app-building platform.

The fund will be managed by Salesforce Ventures, the company’s VC arm, who typically invests out of Salesforce’s own balance sheet.

The move makes a lot of sense given how Salesforce Ventures has become one of the most aggressive VCs in all of Silicon Valley lately. It will also help groom a lot more startups building on Salesforce’s own platform, expanding the overall Salesforce ecosystem.

But the biggest impact will be in supercharging the growth of App Cloud, Salesforce’s app platform business. App Cloud is now the fastest growing segment in Salesforce’s $50 billion empire, and expanding its user base will directly impact the cloud company’s top line growth.

In its most recent quarterly earnings, Salesforce disclosed that App Cloud generated $325.9 million in revenue, up 45% year-over-year, by far the highest growth rate among its four largest product categories.

App Cloud is now Salesforce’s 3rd largest business, trailing only Sales Cloud and Service Cloud, but its growth has accelerated over the past 5 quarters, getting to the scale of a $1.3 billion run rate for this year.

Plus, App Cloud is believed to have more upside than any other segment at Salesforce. According to a note by Bank of America’s Kash Rangan on Wednesday, App Cloud is estimated to have 1.3 million users, or just 13% of the 10 million-plus total Salesforce subscribers, meaning there’s a lot of room to grow for the product.

“We believe we are in the early stages of the app economy,” Rangan wrote in the note.

And if the startups that build on top of Salesforce show real growth, some of them may end up getting acquired for hundreds of millions of dollars. Steelbrick, a sales software maker built on top of Salesforce’s platform, not only received funding from Salesforce, but was acquired for roughly $300 million last year.

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