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Bay Partners, Bessemer Venture Partners, Business, Customer Relationship Management, Funding, Investments, Public Companies, Software, Technology

Force.com takes $25 million from Bay Partners & Bessemer Venture Partners

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Bay Partners and Bessemer Venture Partners have teamed up with Salesforce to invest $25 million in businesses building on the recently announced Force.com application platform over the next three years. Investments will be around $500,000 each where some convertible notes are also included. Investments may go as high as $2 million depending on the company’s stage and needs.

Force.com is owned by Salesforce.com, Force.com is presented and offered as platform as a service (PaaS).  Force.com is the world’s first Platform as a Service (PaaS), enabling developers to create and deliver any kind of business application, entirely on-demand and without software. It’s a breakthrough new concept that is making companies radically more successful by letting them translate their ideas into deployed applications in record time.

With Force.com Salesforce is planning to enter the custom software market. It is a new platform that will allow developers to create database driven applications and deploy them as services. So if Salesforce doesn’t offer what you are looking for, and no one has built it for you on Salesforce’s AppExchange, you can simply build it yourself using the Apex framework.

Basically there is a number of rival start-ups that are focused on offering users easy way to create and deploy database driven applications – DabbleDB, Zoho Creator, Rollbase (from former Taleo executives), LongJump, Coghead  and WyaWorks, among others. Unlike some experts predicting that this is sort of game ending for some of the start-ups above, we think this is just a step towards improving the custom software market’s environment and competitiveness among the players from which the end users would only benefit from. Also, some of the smaller companies within the sector are cost-effective and are positioned towards different market niches by targeting different customers when compared to the Salesforce.com. To me it looks more like a beginning of the game.

Many experts in enterprise SaaS right now know that ultra-configurable platforms such as Force.com are the envy of the industry for many reasons. Suffice it so say they enable extremely rapid expansion of the core and beyond into adjacent market segments as well as completely new markets – even long-tail micro-markets driven and executed entirely by end-users.

Bottom line is that users are being given more and more power to develop their own on-demand apps. This is a mega-trend in enterprise software and all significant players will need a strategy to deal with it. Users are becoming much more empowered to design, build, deploy and even distribute their own custom business apps without even knowing how to program.

Highly configurable do-it-yourself SaaS for business users is the future of software and Force.com is a fantastic example of where things are headed. Just about every enterprise software company, especially those targeting SMBs, will want to be running on their own version of this kind of platform over the next several years in order to compete.

Again, this is by no means a game-ending proposition for any of the companies working in this space. Oppositely, some great strategic acquisitions will emerge here as enterprise software companies figure out how to deal with this phenomenon. Multi-tenant, meta-data-driven, configurable SaaS is difficult stuff to build right. The startups that can and are doing a good job now will command a premium in the near future.

On the other hand Salesforce.com has always been seen and known as an aggressive company.

Salesforce.com is the worldwide leader in on-demand customer relationship management (CRM) services. More companies trust their vital customer and sales data to salesforce.com than any other on-demand CRM company in the world.
 
Why? Perhaps it’s because we deliver integrated, completely customizable enterprise applications for companies of all sizes. Or maybe it’s because Salesforce is so easy to learn and use, and thanks to the power of the on-demand Force.com platform, it can be up and running in weeks or days—not the months or years required by traditional client/server CRM software. Or it could be the unprecedented speed with which our customers see real, tangible ROI. Or maybe it’s because of our 100-percent dedication to the success of our customers.

In fact, more than 35,500 companies worldwide depend on Salesforce to manage their sales, marketing, customer service, and other critical business functions. We are proud to be contributing to the success of companies of all sizes, in all industries, around the globe including:

  • Corporate Express
  • Daiwa Securities
  • Expedia Corporate Travel
  • Dow Jones Newswires
  • SunTrust Banks
  • Kaiser Permanente

Salesforce.com was founded in 1999 by former Oracle executive Marc Benioff, who pioneered the concept of delivering enterprise applications via a simple Web site. Salesforce.com is constantly building on that legacy by improving and expanding our award-winning suite of on-demand applications, our Force.com platform for extending Salesforce, and our one-of-a-kind AppExchange directory of on-demand applications.

Salesforce.com has received considerable recognition in the industry, including:

  • Technology of the Year (InfoWorld, 2004, 2005, 2006)
  • Editors’ Choice Award (PC Magazine, 2002, 2003, 2004)
  • Visionary Award (SDForum, 2004)
  • Best of the Web (Forbes, 2003)
  • CRM Excellence Award (Customer Inter@ction Solutions, 2003, 2004, 2005, 2006)
  • Top 100 Innovators Award (BusinessWeek, 2006)
  • Innovation Award (AMR Research, 2005)
  • CODIE Award for Best CRM (2002, 2003, 2004, 2005, 2006)

The growing list of global business partners dedicated to providing complementary products and services to salesforce.com customers includes IBM, Microsoft, BEA Systems, Sun, TIBCO, PricewaterhouseCoopers, Miller Heiman, and dozens more.

It is believed that the partnership will provide Bay and Bessemer early leads to new companies and Saleforce’s assistance during due dillegence.

Bay Partners have already invested in many Appexchange integrated companies (Xactly, Eloqua, Cornerstone, eProject) and are looking to get in earlier this time around. Notably, Bay Partners has also invested in Facebook’s platform by putting aside funds for 50 investments. So far they’ve closed three, as far as we know.

The investment program has been underway over the past couple of months. Bay has been looking at 12 deals and already committed to one. The deals are judged on a case by case basis.

The Force.com venture program is being led by Neil Sadaranganey and Salil Deshpande from Bay Partners and Byron Deeter from Bessemer Venture Partners.

Saleforce.com is one of the first web based companies to go against the practice to sell software as a product. Instead, they do believe that the software is best to be offered as a service – Software as a Service or so called SaaS. Marc Benioff is salesforce.com’s Chairman & CEO. 

The company is publicly traded on NYSE.

 SALESFORCE.COM INC (NYSE:CRM)  
 
After Hours: 56.73 0.00 (0.00%) on 11/30/07
 
Last Trade: 56.73
Trade Time: 4:02PM ET
Change:  1.47 (2.66%)
Prev Close: 55.26
Open: 55.62
Bid: N/A
Ask: N/A
1y Target Est: 59.36
 
Day’s Range: 55.29 – 57.73
52wk Range: 35.55 – 58.00
Volume: 3,314,902
Avg Vol (3m): 1,694,100
Market Cap: 6.70B
P/E (ttm): 630.33
EPS (ttm): 0.09
Div & Yield: N/A (N/A)

The company’s current market capitalization is more than $6 Billion. Larry Ellison is one of the early investors in Salesforce. 
 
Ok, when people speak for SaaS (Software as a Service), we should take into consideration the following aspects, as some SaaS entrepreneurs are pointing out.

1. Enterprise Software companies which have not yet switched to SaaS are feeling the pressure and in many cases this is already affecting their bottom lines.

2. In order to adopt a SaaS strategy a quick way to do this is to partner with SaaS and build on the Force.com platform, but this is not an end-game strategy, it is a stop-gap measure. Ultimately Salesforce will want to own all major categories, Benioff (Salesforce.com’s Chairman & CEO) wants to build the next SAP/Oracle/PeopleSoft on – demand and why wouldn’t he? However, this causes a fundamental conflict with a partner who would ever consider Force.com their primary platform.

3. It is hard to believe that other enterprise software companies out there are going to bow down to Force.com, give up, and hand over the keys to Benioff. Every enterprise software company will need a strategy to compete with this kind of platform and allow their own applications to be customized, expanded, and even new apps created in an ecosystem, in order to remain competitive. And there is much more of a business case for a successful stand-alone enterprise software company to build or buy to get there versus give up and run on Force.com. There could also be a number of consolidations within the sector of some of the smaller players.

Force.com is a fantastic platform, but it represents a very new very big change that is happening in enterprise software today. It represents an incremental shift in power to end-users in terms of their ability to customize and build applications specific to their business needs. It is the intersection of the do-it-yourself web with enterprise software (e.g. YouTube ==> YouSoft). To say that Salesforce.com has and will continue to have a monopoly on this sector is short-sighted.

Some of the Salesforce.com’s latest press releases, news and announcements:

Salesforce.com CEO Marc Benioff Named 2007 Agenda Setter and Top Ten Business Leader for Championing Software-as-a-Service (http://investor.salesforce.com/phoenix.zhtml?c=141811&p=irol-newsArticle&t=Regular&id=1081407&)

Salesforce.com CEO Marc Benioff Named 2007 Agenda Setter and Top Ten (http://investor.salesforce.com/phoenix.zhtml?c=141811&p=irol-newsArticle&t=Regular&id=1081140&)

Salesforce.com CEO Marc Benioff Named 2007 Agenda Setter and Top Ten Business Leader for Championing Software-as-a-Service (http://investor.salesforce.com/phoenix.zhtml?c=141811&p=irol-newsArticle&t=Regular&id=1080863&)

Salesforce.com Executive Vice President of Products and Marketing to Present at the Credit Suisse Technology Conference
(http://investor.salesforce.com/phoenix.zhtml?c=141811&p=irol-newsArticle&t=Regular&id=1081140&)

Toyota Motor Europe Standardizes on Salesforce across Europe (http://investor.salesforce.com/phoenix.zhtml?c=141811&p=irol-newsArticle&t=Regular&id=1080863&)

Via

[ http://www.techcrunch.com/2007/09/30/bay-and-bessemer-add-25-million-in-monetary-muscle-behind-forcecom/ ]
[ http://www.salesforce.com/company/investor/ ]
[ http://www.techcrunch.com/2007/09/13/salesforce-enters-custom-application-market-with-forcecom/ ]
[ http://www.salesforce.com/company ]
[ http://www.salesforce.com/platform/ ]