Recently, SaaS giant Salesforce announced the launch of a $250 million fund, which is by far the largest AIGC venture capital fund.
In this regard, CEO Clara Shih said that the fund will focus on "cultivating the next generation of artificial intelligence startups".
Some analysts also said that although the generative AI like ChatGPT itself amazed the public. However, their greatest role in the enterprise lies in their combination with the company’s business, which is obviously the goal of Salesforce.
However, judging from today’s stock price performance, the heavy AI did not make this old SaaS manufacturer dead.
250 million US dollars, which has exceeded the net profit of last year.
Different from VC’s pursuit of high returns, as a typical CVC, Salesforce chose to set up the fund at this time more likely because of industry competition and stock price considerations.
We saw that the foundation of the fund was announced at its annual conference TrailblazerDX. At that time, the company announced three major initiatives in generating artificial intelligence:
First, Salesforce is integrating generative artificial intelligence into customer relationship management products under Einstein GPT. These new features are designed to combine the data in Salesforce with a series of generative AI engines (including engines from OpenAI and Cohere), so that customers can seize the initiative in making marketing emails, writing supporting articles and even making computer code.
Second, Salesforce announced its cooperation with OpenAI, which makes ChatGPT available directly from Slack. This function is currently in the testing stage and will be launched on a large scale later this year.
Third, Salesforce Ventures is launching a $250 million investment fund to support generative AI startups.
There are several backgrounds that have to be mentioned behind these three measures.
First of all, on the eve of releasing its new AI product, Salesforce released a survey result, which showed that although some IT leaders expressed concern about AI, most people thought it could help them better support customers and improve data insight. Even 67% of the respondents said that they would give priority to this technology in the next 18 months, and one-third of the respondents thought it would be their top priority.
At the same time, Salesforce believes that it has identified several areas where artificial intelligence is reshaping the sales pattern: artificial intelligence insight of sales, natural language chat robots for service requests, targeted marketing content and personalized e-commerce experience.
Secondly, at the end of last year, after OpenAI’s ChatGPT broadened the imagination of the technology industry, many large companies rushed to announce the function of using artificial intelligence to generate content. Last month alone, Microsoft integrated OpenAI technology into Bing, Google announced the launch of ChatGPT competitor Bard, Meta released one of its large language models under the open source license, and Snapchat launched a social generation tool.
In addition, Microsoft recently launched Dynamic 365 Copilot, a functional assistant tool for customer relationship management (CRM) and enterprise resource planning (ERP) based on artificial intelligence, which directly extended its hand to the territory of traditional enterprise software platforms such as Zoho, Salesforce and IBM.
A consensus in the field of science and technology is that it is often fatal to miss the first advantage of technology, so we have seen Salesforce’s heavy investment in AI.
More importantly, the deployment of AI and the launch of Slack’s new ChatGPT application are at a critical moment when the board members of Salesforce are replaced, and investors have been pushing for new changes. Even at the beginning of this year, the company cut 10% of its employees.
As we all know, affected by the macro-environment, the market value of American SaaS companies suffered a decline in different degrees in 2022, and Salesforce was not spared. Salesforce is also under pressure from investors. Using the white-hot trend of generating artificial intelligence can help companies resist concerns about their growth prospects.
It is worth mentioning that at the beginning of this month, Salesforce released the latest financial report data. According to the financial report, the revenue of Salesforce in fiscal year 2023 was $31.4 billion, an increase of 18% year-on-year. However, the income growth rate has slowed down this fiscal year. Its revenue in the fourth quarter of fiscal year 2023 was $8.4 billion, a year-on-year increase of 14%, which was lower than the annual growth rate.
In terms of profit, salesforce’s operating profit in fiscal year 2023 was $1 billion, compared with $500 million in the previous fiscal year, which was significantly improved this fiscal year. This fiscal year, the company’s net profit was $200 million, compared with $1.4 billion in the same period of the previous fiscal year, and the net profit in the latest fiscal year decreased by 86%.
It can be seen that the scale of the AIGC fund has exceeded the net profit of Salesforce last year, which can be seen from the investment.
According to public data, Wall Street analysts agreed that earnings per share (EPS) in the fourth quarter was $1.36. However, the company reported earnings per share of $1.68, far exceeding expectations. In addition, the average income of analysts is estimated to be about $8 billion, while the company’s revenue in the fourth quarter was $8.4 billion.
But despite the amazing revenue growth of Salesforce in recent years, it is expected to achieve the goal of reaching $50 billion in sales in fiscal year 2026. But its share price trend has been developing in the opposite direction. Since December 2020, the company’s share price has plummeted by nearly 30%.
It is not difficult to see that Salesforce is eager for the growth prospects of its performance.
The first four companies to be selected.
Back to Salesforce, the new fund itself. Although the fund is the largest fund of Salesforce Ventures, it is not the first dedicated AI fund. As early as 2017, it raised $50 million for the artificial intelligence innovation fund to support its Einstein artificial intelligence toolset.
According to PitchBook, Salesforce Ventures has participated in 140 venture capital transactions of artificial intelligence and machine learning startups, accounting for about 19% of its total investment so far.
John Somorjai, executive vice president of Salesforce enterprise development and Salesforce Ventures, said: "for more than ten years, Salesforce Ventures has been investing in high-potential enterprise technology business, and these initial investments of the fund to generate artificial intelligence companies are fully in line with this strategy."
In fact, in the past decade, Salesforce Ventures has raised more than a dozen funds, ranging in size from $50 million to $125 million, and has also launched a series of vertically specific investment funds, including funds targeting specific regions such as Japan or Canada.
But before, Salesforce Ventures usually invested in enterprise cloud startups. After all, such investments may become more important for this software company because of the restrictions on large-scale acquisitions. For example, it has invested in star companies such as Zoom and DocuSign, and invested heavily in Snowflake IPO.
It is precisely because of its huge transaction scale and strategic value that Salesforce Ventures has always been regarded as the king of SaaS unicorns. At the same time, some people think that it may continue this myth in the AI field.
It is reported that the fund has invested in four start-up companies: You.com, a upstart search engine, just launched the generation of artificial intelligence a few months ago; Anthropic, an AI startup founded by former employees of OpenAI and highly sought after by VC, developed ChatGPT；; Cohere, a natural language processing (NLP) startup that recently cooperated with Google; And a secret startup called Hearth.AI
Specifically, Richard Socher, the founder of You.com, is the former chief scientist of Salesforce. The company was founded in 2020, and launched the AI chat function YouChat in search engines before Google and Microsoft at the end of last year. In terms of financing, at the end of 2021, You.com completed a $20 million seed round of financing led by Marc Benioff, CEO of Salesforce, and then completed a $25 million series of financing in the middle of last year.
Anthropic was founded in January, 2021. The latest report shows that shortly after accepting hundreds of millions of dollars from Google, it recently completed a new round of financing of 300 million dollars. After this financing, the value of Anthropic reached 4.1 billion dollars. Earlier, Anthropic raised $704 million through Series A and Series B financing in 2022.
Similarly, Cohere was founded in 2019, mainly providing access to large-scale language models and natural language processing (NLP) tools through APIs. Cohere has raised $170 million so far, including $125 million in Series B financing last year and $40 million in Series A financing in 2021. Earlier this year, it was reported in Reuters that Cohere was in talks to raise hundreds of millions of dollars in a round of financing, and the valuation of this startup may exceed 6 billion dollars after the completion of financing.
As for Hearth.AI, it should have been established in May, 2022. Except that it is the next generation management system (CRM) shown on its official website, we have not found any more public information. (Text/Zhang Xue, source/investment network)
