John Somorjai
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a16z · Inside Salesforce’s $100 Billion M&A Playbook | John Somorjai
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What Happened When a Salesforce Security Test Reached the CEO's Laptop?
John Somorjai says one Salesforce penetration test reached all of a company's source code, got into the CEO's laptop, and pulled information about employees, and the problems were unrecoverable. The failure usually comes after the term sheet, not at the eleventh hour. Price and the major terms are already set, and then deep diligence starts.
Salesforce shares those findings and tries to help the company fix them. This case was among the worst he had seen. Other security findings can be fixed. The team sorts them into P0, P1, and P2 problems. Some must be fixed before signing. Others must be fixed before close. How bad the findings are sets that condition, and a company has to have its house
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Why Does John Somorjai Say Many Venture Valuations Will Not Last?
John Somorjai says many venture valuations will not last because they are way too high, the set of buyers is small, and the companies will not be able to grow into those prices. He calls a lot of the investing irresponsible and expects a reckoning. He does not know when, and he calls it inevitable. Very few companies go public, probably one percent or less, so an exit depends on who could buy the company. Above 10 billion dollars, that buyer set is so small, yet he sees many enormous multibillion-dollar valuations. He also says those prices will be bad for employees.
Founders usually want the highest valuation they can get, and he says that is not usually the best decision. Generational com
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Why Is Salesforce Ventures Investing in Robotics?
John Somorjai says Salesforce Ventures is investing in robotics because dexterity and mobility are improving, and he expects a huge future for that industry. Robotics is the part of the portfolio he is most excited about. The bets include Figure AI and humanoids, Physical Intelligence, Dyna Robotics, and Skilled, plus Zipline, which does drone delivery. In Japan, Salesforce invested in Mugen, a robotics company he describes as really big in logistics. He says these companies are not only about software, and that they are going to be important to the industry.
The path into that book is the billion-dollar AI fund Salesforce created at the beginning of 2023. Beyond Anthropic, it included Mist
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What Makes a Startup Worth Acquiring at Salesforce?
John Somorjai says a startup is worth acquiring when Salesforce's product teams cannot build the next three years of the roadmap with the people they have, and cannot easily hire the expertise. Hiring AI engineers is very hard, so the right acquisition can speed development when Salesforce can integrate it quickly.
A typical deal, from the first idea until the product is integrated, can take six to nine months. The comparison is whether the team could deliver the same thing on its own faster than that. When the right company shows up, he says the fit is obvious. The founders who demoed Listen Labs to Mark Benioff were brilliant, in his account. The technology was outstanding, and the interf
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How Do Acquisitions Put a Startup in Front of Salesforce's Sales Force?
Alex Immerman says an acquisition can put a startup in front of Salesforce's 15,000 sales reps, and that in the case of Listen Labs a handful of those reps can open the product to the whole sales team. John Somorjai says building that channel alone takes a very long time. A company has to hire the reps, ramp them, enable them, and get them productive, across small business, medium-sized business, and enterprises, and it has to do that globally. He calls that a heavy task.
Salesforce also keeps a partner path. Somorjai says the company works with probably more than 8,000 ISV partners, and Salesforce Ventures sometimes invests in those partners, so a customer can buy a partner product or a Sa
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Why Is Salesforce Moving From Seats to Outcome-based Pricing?
John Somorjai says the technology industry is moving toward outcome-based pricing, where a customer pays for resolutions instead of paying for a seat. Salesforce is getting behind that trend, and more of its products will be delivered that way. The point he puts first is that customers stay happy, successful, and willing to come back, whether they pay per seat or on usage.
Fin is the case he uses. Fin can charge for resolutions because the time to value is fast. On average it is up and running in 16 days, and the agents start handling calls that would otherwise have gone to a person. Salesforce tried Fin on its own help site and had it running in 14 days. On help.salesforce.com, Fin now han
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What Can Kill a Salesforce Deal?
John Somorjai says security is the one function that can hold up the red flag and kill a deal. Across 14 functions on every diligence process, a technology stack that is easily open to hacking is a real problem.
A company has to be ready and organized so the data keeps flowing. Trouble getting access to data is a warning. Many companies lack strong controls over their financials or data on customer contracts, and they do not understand customer attrition. A lot of founders focus on one metric alone, annual recurring revenue. Annual recurring revenue is a wonderful metric, but it masks attrition. Very high attrition usually means a lot of unhappy customers, and he allows there might be produ
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How Does Salesforce Decide Which Companies to Buy?
John Somorjai says Salesforce follows an internal framework and stays pretty disciplined about following it. The framework looks at three elements. First comes strategic fit and how much customer success a deal can drive. Second comes whether Salesforce can accelerate the business, whether the business will fit the technology stack, and whether the team shows cultural alignment and talent that will work well inside Salesforce. Third, the trickiest part right now, is how a deal can deliver value to shareholders and to customers, what the timeline is for value accretion, and whether the valuation is reasonable.
The last point is the hardest right now because everything is expensive. Salesforc