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Salesforce Ventures tops $3 billion invested

Salesforce Ventures continues to invest heavily in partners to help build out its platform as the pandemic evolves customer needs. Q&A with managing partner Matt Garratt.

Salesforce Ventures, launched in 2009, invests in companies that partner with Salesforce to extend the features and functionality of the platform. Other goals of Salesforce's venture capital arm include increasing diversity in tech -- and tech investors -- and, of course, profit for fund growth.

Last year, Salesforce invested heavily in partners to quickly help address customers' needs changed by the pandemic, social distancing and remote work. Two successes are partnerships with cloud data warehouse vendor Snowflake, whose IPO smashed market expectations, and the Zoom video conferencing platform -- in which Salesforce invested $100 million at its 2019 IPO and sold in 2020 during a rapid expansion of its value but before its peak.

We spoke with Matt Garratt, senior vice president and managing partner at Salesforce Ventures, to find out what's next on the investment docket. The answers have been edited for clarity and brevity.

Matt Garratt, SVP and managing partner, Salesforce VenturesMatt Garratt

For those who are new to Salesforce Ventures, give us a quick recap of what you do, and your greatest hits.

Matt Garratt: So, the way to think of a strategic investment arm for Salesforce is that all the investments we make have some strategic ties back into the business. Lately, we were large investors in Snowflake. And we've done a lot of work and integrations with them, as one of the most common use cases is to take CRM data and other data, combine that, and then publish it to Tableau, which is our BI solution, and Einstein Analytics, a related BI solution.

Companies like Zoom we work closely with in terms of some of our service and sales, and cloud use cases. We invested in DocuSign. We've been investors in MuleSoft. We will start getting involved with businesses as early as the seed funding and Series A, and sometimes we won't invest until the later rounds.

We work with our GMs, who run product -- we think about how we create a product roadmap, whether there are integrations that are going to create a unified experience for our customers, so they get this better experience. [Before the Snowflake partnership], you could spin up Snowflake, connect it to Salesforce and publish to Tableau, but it was just much more difficult before we started working more closely together. In that case, there were benefits for Snowflake, benefits to Salesforce, but most importantly, benefits to all our customers.

Salesforce Ventures infographic
Since 2009, Salesforce Ventures has made strategic investments to bulk out its platform.

What technology categories are you looking to invest in right now?

Garratt: Last year, we closed an investment in Tanium. Endpoint security has been increasingly important, to secure all those devices out in the wild. We were an investor in Zoom to enable remote work. We're an investor in Talkdesk, which allows you to quickly spin up a call center on your laptop. And again, all those things that allow you to do that work remotely. We've also been investing more recently in things like Hopin, which allows you to hold virtual events. It's a little different than a Zoom conference -- it's more geared toward large events.

Also, generally we're pretty bullish on what we've seen as this large acceleration of digital transformation, which is really, really, I think, being driven by data. [We evaluate technologies to enable] this whole 360 view of your customer, allow workflows and provide intelligence that's not just siloed in one specific function of the business such as sales or marketing, or e-commerce customer. When you have that full view of the customer -- any complaints they had, what other things they bought from you in the past -- then you start to be able to provide better intelligence, better artificial intelligence on top of that, making better recommendations. Going further, you start to add more automation, collapsing workflows. And that's where a lot of our investments have been.

There's a lot of capital out there now. We want to be helpful. If we don't think we can be helpful and really create strategic alignment, there's no real point for us to invest.

You're looking at things primarily through a strategic lens. Where does profit come into the decision to back a company for Salesforce Ventures?

Garratt: There's a lot of capital out there now. We want to be helpful. If we don't think we can be helpful and really create strategic alignment, there's no real point for us to invest. Once we do make that investment, though, we go through the same sort of diligence that you would go through at any institutional venture capital firm. We do want to make sure that we are making money on these investments.

We've been fortunate. Last year alone we had three IPOs, including Snowflake and NCino.

How does Salesforce decide when to acquire a company it invested in? For example, you have been partners with Apttus forever but haven't acquired them, but Salesforce quickly acquired another longtime partner, Vlocity, and rolled out product last year.

Garratt: The way we think about it, whenever we make an investment, we think about it in terms of, 'Is this going to be a good partner? Is this going to be a strategic partner? Is this going to be a successful standalone business?' To the extent that we might acquire a business down the road, those things are very hard to know in the future. We kind of look at it the opposite way -- if we know that Salesforce is going to be building or buying for a certain space, Salesforce Ventures won't invest. So, we think about the two independently in terms of how we assess the merits of the business from an investment standpoint. We've made more than 400 investments, and we've acquired only 14.

When Salesforce acquires a company Salesforce Ventures invested in, what's your role? Are you in on the decision, serve as a consultant, or something else?

Garratt: We recuse ourselves from those conversations. The M&A and corporate development team run those processes.

People outside of Salesforce might conclude that Salesforce Ventures invested in Zoom at its 2019 IPO in order to prepare for a potential Slack acquisition, because Slack needs a video component to compete with Microsoft Teams, and the Zoom investment made for tighter integrations with the Salesforce platform. Was that how it happened on the inside?

Garratt: It was very different. Like Tanium, for instance, we made an investment because we were spending much more time partnering with them and thinking about using their solution as it relates to our platform. If we see a really compelling business, great leaders, the cultures align ... that's when we tip over and we invest.

Some of these companies Salesforce Ventures backs help your biggest competitors, too. How do you determine who to invest in, knowing that a partner might also make Microsoft's CRM platform work really well? Or, Salesforce invested in Optimizely, which was later bought by Episerver. You're kind of competing with Episerver now. How do you figure all that out?

Garratt: A lot of companies that we've invested in have been acquired by many of the leading tech companies, many of them competitors such as Oracle, IBM, Microsoft and other large tech companies. Amazon, Facebook, they've all bought companies that were in our portfolio. It's a tribute that, when we're investing, we're really coming in and saying, 'Hey, you know, there's no special strings, you're not tied to Salesforce. We're coming in, we're going to work with you and make you successful and together.'

At the earliest stages of companies, they really don't have the ability to spend too much time and energy on more than one or two strategic partners. And, you know, there may be cases where they spend three or four years developing a relationship with us. They do a great job of that, and then they go on, and they have the next ecosystem. When you're in the tech business, it's not always a zero-sum game. You think about, is there a partnership process there? Is there a way of working with this company, that's going to be beneficial to our customers? Who knows what's going to happen in two or three years, but as long as we're both getting value out of this right now -- that takes a lot of focus and concentration on the near-term.

Do you have to assume that most Salesforce customers are using some mix of applications and services from your competitors, anyway?

Garratt: That's right. In our view, if we have a compelling enough value proposition for the company that we're working with and if they're going to put a lot of energy, we're going to make this successful. If they're going to go and do something with someone else, that's fine. We really, really just want to focus on making sure that our relationship with them is successful. The more successful the relationship is, the more attention they're going to give you and work with you.

We hope the pandemic will wind down soon. How did the pandemic change technology? What's your mindset as you're looking for new partners to invest in?

Garratt: There's a huge human resource component to it. And there's a lot of things in terms of how to spin up remote teams. How do you manage remote teams? How do you hire and set up remote offices? We largely had workers -- in many industries, not just technology -- that were heavily concentrated in cities where people went to the office. That's gotten shaken up and thrown across the globe. That's creating a lot of new opportunities, new dynamics, and is something that we are continuing to monitor.

The rate of adoption of cloud technologies is just accelerating. We're really only at 30% cloud penetration, so overall, we're still very bullish. Now you have all these applications, you have cloud infrastructure, all the things that you need to do to make sure that your applications are secure. You can manage them, you can move data from here and move data from there. We're still very early in building this unified experience across the enterprise, but it's really been accelerated through pandemic.

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