Salesforce Ventures, the investment arm of the cloud services giant, has pumped half a billion dollars into over 150 cloud and enterprise startups since 2009. But with most of those investments focused on the U.S., Salesforce Ventures is now getting more serious in the Old World. Today, the group is announcing that has earmarked $100 million to invest specifically in European startups.
Of the 150+ companies in Salesforce Ventures’ portfolio today, only 17 come from Europe. Considering that proportion, today’s news is a big step ahead for the business.
“It’s now the right time for us in Europe,” John Somorjai, Salesforce’s EVP of Corporate Development and Salesforce Ventures, said in an interview. “Europe is adopting the cloud very rapidly, and the opportunities are immense for us with an enormous pipeline for us to invest in.”
He cites figures from IDC to back up his belief: the analysts believe that European business investment in cloud-based software and services will grow twelve times faster than other IT segments, with €33.3 billion put into cloud services by 2019.
Somorjai said that five investments have already been made out of SV’s $100 million budget that will be announced in the next couple of months. The sizes of the rounds will vary, he added.
“Qubit and New Voice Media [two European startups already in Salesforce’s portfolio] are more advanced and late stage so we will be funding them with larger growth capital in their next rounds,” he said. “But we will also be doing a lot of Series A and B rounds, too.” A typical size for a European funding will be between $1 million and $5 million, he said. It is not clear if Salesforce Venture’s recent investment in mapping startup CartoDB may have also come out of this $100 million fund. Nor is it clear if Talkdesk, a $6 million investment announced last week, was also out of the European fund. Talkdesk was originally founded in Portugal but has since moved its headquarters to San Francisco.
The European investment business will link back to Salesforce Ventures’ operations in the U.S. run by Somorjai, not unlike other special-interest funds from Salesforce Ventures, such as the $100 million mobile-focused fund it announced last year. Alex Kayyal will be heading up Salesforce Ventures’ efforts in Europe, based out of London.
These are relatively modest beginnings. Salesforce’s venture growth there follows in the vein of other big tech giants like Google also ramping up their venture activity in Europe. Google Ventures splashed on to the scene in 2014 with a group of five general partners dedicated to investments in Europe.
One motivation for venture firms coming to Europe, be they corporate or independent, is that the startup scene in this part of the world is relatively smaller and less overheated than that of Silicon Valley. This means potentially less competition from other venture firms for getting involved in the most promising companies, and lower valuations and funding rounds than those that are typical on the West Coast.
But things could ramp up quickly, too. Similar to other corporate venture funds, SV does not raise money from limited partners. Instead, it gets capital directly off Salesforce’s balance sheet — a way of both growing the wider ecosystem of cloud services for enterprises and potentially making connections with companies for wider corporate dealflow.
This also means that while the plan is to invest the $100 million over the “next few years,” if something interesting came along, Salesforce Ventures has the ability to change up that amount. (In fact, although Somorjai said in an interview that Salesforce Ventures had invested around $500 million in startups to date, the company has only ever really publicly disclosed investments of around $200 million).
Being so closely linked to the bigger business — the head of Salesforce Ventures is also the person who leads and greenlights all of Salesforce’s acquisitions — doesn’t necessarily mean that Somorjai and his team eye up every investment as a potential acquisition. Somorjai pointed out that of the 35 exits of Salesforce Ventures’ portfolio companies, the company has acquired only seven to date. “M&A is not the driver, it’s about building the ecosystem,” he said.