The Real Story Behind Mergers, Acquisitions and Corporate Venture Capital

The Real Story Behind Mergers, Acquisitions and Corporate Venture Capital

John Somorjai, EVP at Salesforce Ventures, sits down with Jason Lemkin to talk corporate development and venture capital: who gets funded, the financial climate, and more.

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In a nutshell:

  • Founders should always have an exit strategy, and start building relationships with potential acquirers early on.
  • If you have solid business fundamentals, you should continue to ramp up your sales team even in an uncertain funding climate.
  • Be transparent. There’s no point in doing otherwise.

In 2009, Salesforce began to make strategic investments as Salesforce Ventures with a goal to building an ecosystem of the best companies in cloud computing that its customers would have an interest in. At that time, companies were having a hard time raising money and the involvement of Salesforce early on made a difference in their growth. Salesforce invested in companies with room to grow, including HubSpot, DocuSign and Box. Salesforce Ventures focuses not just on financial returns, but on strategic investments. Of SV’s 150 investments, about half are Series A, 30% are Series B and the rest are late stage.

As markets show signs of unrest, Somorjai recommends that companies minimize burn rates. If you have low net churn, he says, and reasonable CAC, you should continue to ramp up sales. Consider the funding climate an opportunity for businesses with sound fundamentals.

SV doesn’t have one metric they look at when investing, but they do consider CAC, ARR and attrition - the last is an important, but often overlooked, measure of a company’s success.

Mergers and acquisitions

Generally, companies are bought, not sold. If you have a pre-existing relationship with a potential acquirer, the process may go easier - but you’ll have to be very clear about your value proposition. Founders that want to be bought should build executive relationships with target buyers.

“There are no shotgun weddings.”
Take meetings with corporate development teams you think might be good buyers - and be transparent. Always disclose your revenue - your acquirers will find out anyway.

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