00:00:53 · Alex Immerman, Erik Torenberg, John Somorjai
[00:00:53] S1: If you were gonna start a company today and it was gonna attack Salesforce head on, what are the openings that you see fit? [00:01:02] S2: When software can be built faster than ever, what makes a company worth buying? A16z partner Alex Immerman sits down with Salesforce chief corporate development and investments officer, Somorjai, who has helped oversee nearly $100,000,000,000 in acquisitions. John explains how Salesforce decides whether to build, buy, partner, or invest, and why distribution can transform the trajectory of a start up. They also discuss what founders should know before entering an acquisition, the red flags that can kill a deal, and why John thinks parts of today's venture market have become overvalued. [00:01:38] S1: John, it's great to be with you today. [00:01:40] S0: Thank you for having me. It's wonderful to be here. [00:01:42] S1: You've been at Salesforce now for over twenty years. Marc Benioff is a Mount Rushmore style figure for cloud software, led the transition from on premise to cloud. He is an incredible marketer. Dreamforce this year, he framemogged Jensen and Dario, and Sam. I'm curious, you've had a long career with him. What's it like to work with him?
00:01:42 · Alex Immerman, John Somorjai
[00:01:42] S1: You've been at Salesforce now for over twenty years. Marc Benioff is a Mount Rushmore style figure for cloud software, led the transition from on premise to cloud. He is an incredible marketer. Dreamforce this year, he framemogged Jensen and Dario, and Sam. I'm curious, you've had a long career with him. What's it like to work with him? [00:02:09] S0: Well, would also add visionary to that point as well. Marc is quite a visionary, and he really, I think, can see where the industry is heading. And so that's how he helps the company transform itself. And when he thinks about growing the business, he thinks about organic innovation, but also inorganic innovation. And that's really been the key to how we've grown the company and marrying the two together. And so acquisitions play a huge role in that. And when Marc sees that the world is moving in a certain direction, he will point me and my team to go figure out, go find the best asset to buy in that category and come up with those ideas all the time. I would say the other thing that's very unique about Marc is just his level of curiosity and how he thinks about things with a beginner's mind all the time. And so he asked that of us as well. And I think it's really helped us find some remarkable companies to bring into Salesforce and also some really exceptional entrepreneurs. [00:03:13] S1: With that in mind, I really like that idea of a beginner's mind, the curiosity. How do the two of you approach acquisition and investment ideas together?
00:03:13 · Alex Immerman, John Somorjai
[00:03:13] S1: With that in mind, I really like that idea of a beginner's mind, the curiosity. How do the two of you approach acquisition and investment ideas together? [00:03:24] S0: Well, I think that one of the things that's always been the hallmark of Salesforce is we listen to our customers quite a bit. And so we get a ton of feedback around what do customers want to buy from us? Where do they feel like our products are missing? Where are the gaps? And we take that and work with our product teams to really identify what are the best opportunities. And that's certainly for the acquisition side. On the investment side, my ventures team meets with thousands of companies every year. And I think we get a very good sense of traction? Where is the interest? What areas of technology are really growing the fastest? And we can bring all of that feedback and learnings back into the company, and I think make better decisions as a result. [00:04:10] S1: And you alluded to Marc as this big visionary, and of course he is. How do you and your team think about balancing Marc's big vision mindset with strategic and financial discipline? Maybe there's been times where you've
00:04:10 · Alex Immerman, John Somorjai
[00:04:10] S1: And you alluded to Marc as this big visionary, and of course he is. How do you and your team think about balancing Marc's big vision mindset with strategic and financial discipline? Maybe there's been times where you've [00:04:26] S0: had to tell Marc no on his big grand idea. I'm curious how that all comes together. So, what we have is an internal framework that we follow, which we are pretty disciplined about following. We look at sort of three elements. The first would be where is the strategic fit and how much customer success can it drive? I think the second would be, can we accelerate the business? Will it fit into our technology stack? Is there a good cultural alignment with the team? Do we see the talent there as people that will work well within Salesforce? And then the third part, which is probably the trickiest in this day and age is how can we deliver value to our shareholders and to our customers? And what is the timeline for value accretion? Is the valuation reasonable? And that last point is probably the hardest right now because everything is expensive. [00:05:22] S1: We're in a unique moment in time, and we should use some time later to chat on that. Maybe to take a step back, Salesforce today, really large company, you're much more than CRM today. Mhmm. How do you describe Salesforce as a platform today?
00:05:22 · Alex Immerman, John Somorjai
[00:05:22] S1: We're in a unique moment in time, and we should use some time later to chat on that. Maybe to take a step back, Salesforce today, really large company, you're much more than CRM today. Mhmm. How do you describe Salesforce as a platform today? [00:05:38] S0: Well, think it's always been a place where customers can go to buy technology to help them interact with their customers in new ways. And that's sort of been foundational from the beginning. But how we think about it is that we have a platform that is at its core, it's delivering trusted foundation for all of your enterprise applications. And then you can interact with it from different surfaces. And that's why we made Salesforce headless. And so you can interact with it through Slack. You can interact with it through Cloud Force and through other places. And I think it's just as broad as a company wants to make it, a place where you can really deliver a lot of enterprise value. [00:06:20] S1: Absolutely. I mean, I think it has been really cool to see you guys leading the charge on the headless transition. I'm curious as we all enter this brave new world with AI, and there's new interfaces. You referenced Cloud. There's obviously ChatGPT. There's a broad swath of them today. You're able to access Salesforce via them. Maybe a good portion of your customers are aspirational about requiring fewer seats in the future, because they're able to accomplish more work today with AI than they previously needed to. I'm curious, under this transition, like, how do you think about Salesforce capturing value
00:07:00 · John Somorjai, Alex Immerman
[00:07:00] S0: in this new world? Well, first of all, I mean, I think we have different ways to price our products. But most importantly, consumption is a big part of how we price. And so many of our products, they are consumption based. Like, MuleSoft was always consumption based, for example. And so I would say what we try to do is make sure that, first of all, we wanna be delivering value that our customers really appreciate and wanna continue to pay for. And whether they pay on a per seat basis or on a usage basis, it doesn't really matter. But I think that the key thing is making sure that they're happy and successful and will come back. And that's one of the critical pieces about where the technology industry has been moving is more towards outcome based pricing where you're paying for resolutions. This is what Fin does so well for example. Versus just paying for a seat. And I think that's definitely a trend that we are getting really behind and more and more of our products are gonna be delivered that way. [00:08:02] S1: Yeah. Fin was certainly an early pioneer in in the outcome based, more resolution based pricing.