Salesforce.com CEO Marc Benioff has long been buddy-buddy with the venture capitalist community. Hes quoted frequently as saying that the venture capitalists are investing more in software as a service than in software. Now Benioff, along with Bay Partners, is quantifying his assertions.
Bay Partners and Salesforce.com announced Oct. 1 the launch of a program to fund companies that, quite literally, build their business on Salesforce.coms Force.com development platform. Bassemer Venture Partners will also be a part of the program, dubbed Force Ventures.
Force Ventures will target emerging companies that have some customers under their belt and are looking for seed money to build primarily sales and marketing efforts—Salesforce.coms application forte.
"Were coming in with companies that get to a certain point, have a few customers, and want to accelerate [and] build out a marketing team and sales," said Neil Sadaranganey, a partner with Bay Partners, of Menlo Park, Calif. "But when you need salespeople, you need capital. Thats where we come in. We want to select the ones that are promising."
Force.com is Salesforce.coms platform-as-a-service play that amounts to an on-demand infrastructure that helps developers build multitenant on-demand applications. The platform includes a number of components, including a database, workflow engine, multitenant programming language, Web services API and user interface framework.
Bay Partners, along with Bessemer, plans to invest at least $500,000 in each company, with total investments of about $25 million over the next three years.
"This is a reasonable amount, given the size of the investments. Its not the several-million-dollar investments—not in one deal—but you can extrapolate that were going to have a healthy set of companies that are going to be part of this," said Salil Deshpande, a Bay Partners partner. "Ten to 15 companies [funded], thats quite a few."
The idea to fund a Salesforce-specific group of companies comes from an informal relationship Salesforce, of San Francisco, has had with Bay Partners for the past several years. Bay Partners has already invested in four Salesforce.com AppExchange partners—Eloqua, Xactly, eProject and Cornerstone OnDemand, the first two of which are part of Salesforce.coms incubator.
The Force.com venture program is being led by Sadaranganey and Deshpande from Bay Partners and Byron Deeter from Bessemer Venture Partners. Salesforce will help pinpoint partners who may be a good fit for the program.
Sadaranganey said Bay Partners has long believed that SAAS (software as a service) is fundamentally changing the entire enterprise software landscape and creating new opportunities for venture capitalists.
"Platform-as-a-service accelerates this evolution," he said. "Wherever there are killer platforms, there exist huge opportunities for killer apps built on those platforms. Salesforce.coms AppExchange has had an incredible impact on the business success of several of our portfolio companies, such as Eloqua and Xactly, and we expect the same for applications and companies built on the Force.com platform."
Bay Partners also funds the AppFactory around the Facebook Platform, a set of APIs and services that help developers build add-on features and content into the social networking site Facebook.
"What we are doing with Salesforce is similar, but there is an important difference," said Deshpande. "It is similar in that we are getting behind platforms that we think will be viable in the future—Facebook is great for consumer and social apps. We see Force.com as the best platform for business applications."
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