It is a win Salesforce Ventures wants to repeat as it just said it would buy $250m of stock in the initial public offering (IPO) of cloud database company Snowflake. Others have taken notice as well as a surge of IPOs are underpinned by corporate investors.
According to a regulatory filing noted by broadcaster CNBC, Salesforce sold all of its 2.8 million Zoom shares in the second quarter to end-June.
Zoom went public at $36 a share in April 2019 and a year later, during the April to June 2020 period, Zoom’s price was between $113.75 and $259.51 per share.
Salesforce has invested in other software companies as they were debuting on public markets, including cloud storage company Dropbox and online research provider SurveyMonkey, CNBC said, although the former’s return was only up to 12.6% higher over the past two years.
About 15% of VC-backed firms raise additional capital from venture investors in the five years after going public, according to academics Peter Iliev and Michelle Lowry’s data sample.
China-listed games and technology provider Tencent has been another company using corporate venturing strategies to buy into or continue holding portfolio companies at their IPO. Tencent invested 160m in KE Holdings, a China-based online estate agent also known as Beike, which went public in a $2.12bn IPO, according to GCV Analytics research last month.
In June, Tencent (through its Huang River Investment subsidiary) and spinoff Tencent Music Entertainment bought $200m of stock in Warner Music Group, joining 10% stakes in both Spotify and Universal Music Group.
Tencent’s buy and hold strategy is built off the playbook developed by its own corporate venture partner, Prosus (itself spun out of South Africa-based media group Naspers to showcase the value of its venture assets) over the past 20 years.
But going beyond financial returns to strategic partnership is hard.
John Somoraj, head of Salesforce Ventures, had told CNBC in 2019 its Zoom holding would be as “long-term investors” to develop a closer, strategic partnership only to sell out a year later. Salesforce in June agreed the next phase in its partnership with Snowflake.
US vehicle maker General Motors this week bought an 11% stake in Nikola, an electric and hydrogen-fuelled truck startup yet to launch a product but now at an $18bn enterprise value. Nikola had listed this year through a special purpose acquisition corporation at a $4bn valuation.
GM will offer up its battery and fuel cell technology as well as its manufacturing infrastructure to launch the Nikola Badger, a passenger truck, and gain $4bn of transaction benefits. Nikola hopes to realise $5bn in savings on input costs and R&D, the Financial Times noted. It is a playbook GM has worked with the purchase of autonomous driving startup Cruise for $1bn then later partial spinoff with funding from investors including SoftBank and Honda at up to a $19bn valuation.
As heard on the GCV webinar last night, with a record number of corporations beginning their corporate venturing activities learning the insights from the established peers, including these types of sophisticated deal sourcing and management techniques, will help all.
