While Salesforce.com has been an active investor in startup companies for years, it’s taking these efforts to the next level with its first dedicated venture capital fund.
The Salesforce1 Fund will initially invest US$100 million in emerging companies over the next few years, said John Somorjai, executive vice president of corporate development and strategy. The fund will focus on new mobile application startups that are building products on the vendor’s Salesforce1 platform, Somorjai said.
Salesforce.com already has many companies in its investment portfolio, with stakes in the likes of ServiceMax, Kenandy and Infor. With the new fund, however, “we’re formalizing the program,” Somorjai said. “Companies want more and more functionality. They want more apps. As a result of that we’ve created a dedicated fund to accelerate that effort.”
As part of Monday’s announcement, Salesforce.com named a number of new investments, including ones in InsideSales and e-signature provider DocuSign.
While the plan is to spend $100 million over several years, “we’ll see how long it lasts,” Somorjai said.
Vendors have often used dedicated venture funds in hopes of jump-starting partner interest in a new platform. Earlier this year, IBM launched a fund for startups that want to use its Watson supercomputer to build products.
In 2012, SAP created a fund with similar goals for its Hana in-memory computing platform. The company says more than 1,500 startups are now building on Hana.
It’s easy to see why big vendors start venture funds, beyond the obvious hope of investing in companies that eventually sell for big money. Startup developers bring an outside perspective to a vendor’s technology and with it the chance they’ll create something novel enough to warrant an acquisition.
For startups, these funds provide needed capital but also the added credibility of a relationship with a much larger, more established vendor. This is key for landing initial customers, which tend to work closely with startups to refine and test products before a launch.