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Enterprise cloud computing giant Salesforce, which had its best first quarter ever, reported US $5.96 billion in revenue, up 23% y-o-y. The company made headlines last year when it announced its mammoth US$ 27.7 billion acquisition of Slack, the popular workplace chat company. With the company projected to earn US$ 50 billion in revenue by FY26, it will be interesting to analyse the acquisitions it has made till now in an effort to understand its business strategy. 

Add to Cart is a unique series that analyses the acquisitions of some of the largest and most well-known companies in the world. In this edition of the series, we’ll be analysing the acquisitions of Salesforce.

Analysis

The analysis is based on data from Crunchbase. The startups have been classified according to various industries based on data from Pitchbook, and the sector classification is based on Global Industry Classification Standard (GICS). The sector classification is subjective and has been made considering the sector/industry that the startups closely resemble. A total of 62 startups have been considered for this analysis, and this is by no means an exhaustive list of all the startups that Salesforce has acquired over the years. Of the 62 startups, the acquisition price was available for 22, and the estimated revenue range was available for 31 startups.

Of the startups for which the estimated revenue range was available, 30 of them had revenues of less than US$ 10 billion, while only one had revenues of more than US$ 10 billion. Founded in 2000, ExactTarget was an on-demand email marketing software services startup. The startup provided an integration platform and enabling program for software developers who wanted to offer email and emerging digital messaging capabilities within their applications. In June 2013, Salesforce acquired ExactTarget for US$ 2.5 billion in a cash and stock deal. 

Salesforce’s acquisitions are spread across six countries– the US, Canada, the UK, Germany, France and Israel. The US leads in terms of the number of acquisitions and accounts for 82% of the total, with startups in this region having a median age of 5yrs at the time of acquisition. The US’s neighbour, Canada, comes in second with 6% of the acquisitions and a median age of 4yrs, followed by Israel with 5% of the acquisitions and a median age of 2yrs. Bonobo AI is a Tel Aviv, Israel based conversational intelligence platform. The platform centralized disparate customer interaction data from various channels and used AI to provide actionable insights, helping clients improve conversion, retention and improve customer relationships. Salesforce acquired the startup in May 2019 for an undisclosed amount. 

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The information technology sector is home to 68% of the startups, with a median age of 4yrs. All three of Salesforce’s largest acquisitions are from this sector. Slack is a software-as-a-service platform that brings together people, data and applications. Founded as a gaming company in 2009, Slack pivoted and grew into a full productivity suite with file hosting, IT administration, video meeting features, and other features which were typically offered by large enterprise corporations. Despite the pandemic leading to a surge in remote work and increasing the need for the workplace chat app, Slack still failed to turn a profit. The company had lost close to half of its market value since it went public in April 2019 and faced intense competition from the likes of Microsoft and Facebook, which might have primed it to become an acquisition target. Salesforce acquired the startup in December last year, offering Slack’s shareholders US$ 26.79 in cash and 0.0776 shares of Salesforce common stock per share of Slack which amounted to an enterprise value of approximately US$ 27.7 billion

Founded in 2003, Tableau was the result of a computer science project at Stanford that sought to improve the flow of analysis and increase the accessibility of data to people through visualization. Today Tableau has become one of the most powerful, secure, and flexible end-to-end visual analytics platforms. Salesforce acquired the startup in June 2019 for a whopping US$ 15.7 billion, which was at that time Salesforce’s biggest acquisition. MuleSoft is a cloud-based application integration platform that connects organizational applications, data and devices. Salesforce acquired MuleSoft in March 2018 for US$ 6.5 billion in a cash and stock deal.  

The communication services sector is home to 26% of the startups with a median age of 5yrs. Founded in 2007, Mobify was a customer engagement platform that offered a unified customer experience across mobile websites and applications. Prior to being acquired, the startup had raised US$ 27.7 million from investors such as Acton Capital, Vistara Capital Partners and BDC Venture Capital. Salesforce acquired the startup for US$ 60 million in September last year. Evergage was a real-time personalization platform that delivered the most relevant, individualized marketing experience. By combining in-depth behavioural analytics and customer data with advanced machine learning, Evergage provided companies with a detailed and real-time insight into how their customers used their products. Salesforce acquired the startup in February 2020 for an undisclosed sum. 

Summary

Overall, Salesforce has acquired 62 startups with a total disclosed acquisition price of US$62.2 billion, which is around 2x more than the combined acquisitions of Apple, Facebook and Twitter. Around 97% of the acquisition price has flowed towards these top industries- communication software (44.7%), application software (29.3%), systems and information management (12.6%) and business/productivity software (10.1%).  The overall median age of the startups was 5yrs, and the median acquisition price was US$ 519.5 million. The period between 2011-2020 has accounted for 84% of Salesforce’s acquisitions, with the remaining acquisitions taking place between 2000-2010. The big picture here is that Salesforce more often than not acquires startups to boost its cloud computing solutions, making it all the more comprehensive and a one-stop solution to meet all the enterprise needs of an organization. 

For more extensive analysis and Market Intelligence reports feel free to approach us or visit our website: Venture Capital Market Intelligence Reports | VCBay.

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