The billionaire CEO of Salesforce.com Marc Benioff is spending $390 million on a three-year-old startup because two of his friends told him to.
During the quarterly conference call with Wall Street analysts on Thursday, Benioff explained how the company's latest acquisition of RelateIQ came about.
"I have a dinner every month that I attend with 10 to 15 CEOs of mostly very strong and emerging companies. ... And two of them looked me in the eye – and this never happened before – and they said, 'You really need to buy RelateIQ.' I said, 'Why?' They said, 'We use Salesforce but we use RelateIQ also. It's an incredible complement to your future.' I knew about RelateIQ. I used it. I started to spend a lot more time with it and I saw exactly what they were talking about."
Salesforce announced the acquisition of Palo Alto-based RelateIQ last month through a SEC filing. The deal is expected to close in October.
RelateIQ had just raised $40 million in March at a $245 million valuation, TechCrunch's Leena Rao reported at the time. It had raised $69 million total from a combination of traditional VCs (like Redpoint Ventures, KPCB) and Valley bigwigs like Asana and Facebook cofounder Dustin Moskovitz and the VC fund founded by Yahoo founder Jerry Yang, AME Cloud Ventures.
So Benioff is paying a $145 million premium for a company founded in 2011 with fewer than 100 employees (according to its LinkedIn profile).
Salesforce.com's bread-and-butter product is a cloud app called "customer relationship management" (CRM). It's like an address book on steroids that helps you keep track of all the things you are doing with each contact like calls, emails, proposals, and so on. RelateIQ makes an alternative CRM product that sifts through your email and calendar to automate a lot of that, telling you who you should be calling, who you are neglecting, who to ignore. RelateIQ was positioning itself is the anti-CRM.
And it was gaining traction. The company had recently hired Twitter’s former VP of Search. In 2013, it hired famous data scientist DJ Patil, who built the data science team at LinkedIn before joining Greylock Partners and then jumping to RelateIQ. He'll now be joining Salesforce and is rumored to be heading up a new research-and-development team called Salesforce X, VentureBeat's Jordan Novet reports.
After the deal was announced, speculation ensued about Benioff's motivations. Was he snuffing out an up-and-coming competitor? Or was he interested in the tech to fill in a hole in his own product line?
Answer: Both.
"One of the key reasons we bought RelateIQ. It really makes SalesCloud so much better. ... We had no choice but to acquire the company and make that happen," Benioff said adding that he has a "huge vision" for the product and expects to announce new products around it within six months.
This is one of Salesforce.com's largest acquisition. The biggest was ExactTarget, bought for $2.5 billion last year. It also bought BuddyMedia for $689 million in 2012.
