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Former Salesforce chief scientist announces new search engine to take on Google
Richard Socher, former chief scientist at Salesforce, who helped build the Einstein artificial intelligence platform, is taking on a new challenge — and it’s a doozy. Socher wants to fix consumer search and today he announced you.com, a new search engine to take on the mighty Google.
“We are building you.com. You can already go to it today. And it’s a trusted search engine. We want to work on having more click trust and less clickbait on the internet,” he said. He added that in addition to trust, he wants it to be built on kindness and facts, three worthy but difficult goals to achieve.
He said that there were several major issues that led him and his co-founders to build a new search tool. For starters, he says that there is too much information and nobody can possibly process it all. What’s more, as you find this information, it’s impossible to know what you can trust as accurate, and he believes that issue is having a major impact on society at large. Finally, as we navigate the internet in 2020, the privacy question looms large as is how you balance the convenience-privacy trade-off.
He believes his background in AI can help in a consumer-focused search tool. For starters the search engine, while general in nature, will concentrate on complex consumer purchases where you have to open several tabs to compare information.
“The biggest impact thing we can do in our lives right now is to build a trusted search engine with AI and natural language processing superpowers to help everyone with the various complex decisions of their lives, starting with complex product purchases, but also being general from the get-go as well,” he said.
While Socher was light on details, preferring to wait until GA in a couple of months to share some more, he said he wants to differentiate from Google by not relying on advertising and what you know about the user. He said he learned from working with Marc Benioff at Salesforce that you can make money and still build trust with the people buying your product.
He certainly recognizes that it’s tough to take on an entrenched incumbent, but he and his team believe that by building something they believe is fundamentally different, they can undermine the incumbent with a classic “Innovator’s Dilemma” kind of play where they’re doing something that is hard for Google to reproduce without undermining their primary revenue model.
He also sees Google running into antitrust issues moving forward and that could help create an opening for a startup like this. “I think a lot of stuff that Google [has been doing] … with the looming antitrust will be somewhat harder for them to get away with on a continued basis,” he said.
He acknowledges that trust and accuracy elements could get tricky as social networks have found out. Socher hinted at some social sharing elements they plan to build into the search tool including allowing you to have your own custom you.com URL with your name to facilitate that sharing.
Socher said he has funding and a team together working actively on the product, but wouldn’t share how much or how many employees at this point. He did say that Benioff and venture capitalist Jim Breyer are primary backers and he would have more information to share in the coming months.
For now, if you’re interested, you can go to the website and sign up for early access.
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Daily Crunch: Slack and Salesforce execs explain their big acquisition
We learn more about Slack’s future, Revolut adds new payment features and DoorDash pushes its IPO range upward. This is your Daily Crunch for December 4, 2020.
The big story: Slack and Salesforce execs explain their big acquisition
After Salesforce announced this week that it’s acquiring Slack for $27.7 billion, Ron Miller spoke to Slack CEO Stewart Butterfield and Salesforce President and COO Bret Taylor to learn more about the deal.
Butterfield claimed that Slack will remain relatively independent within Salesforce, allowing the team to “do more of what we were already doing.” He also insisted that all the talk about competing with Microsoft Teams is “overblown.”
“The challenge for us was the narrative,” Butterfield said. “They’re just good [at] PR or something that I couldn’t figure out.”
Startups, funding and venture capital
Revolut lets businesses accept online payments — With this move, the company is competing directly with Stripe, Adyen, Braintree and Checkout.com.
Health tech venture firm OTV closes new $170M fund and expands into Asia — This year, the firm led rounds in telehealth platforms TytoCare and Lemonaid Health.
Zephr raises $8M to help news publishers grow subscription revenue — The startup’s customers already include publishers like McClatchy, News Corp Australia, Dennis Publishing and PEI Media.
Advice and analysis from Extra Crunch
DoorDash amps its IPO range ahead of blockbuster IPO — The food delivery unicorn now expects to debut at $90 to $95 per share, up from a previous range of $75 to $85.
Enter new markets and embrace a distributed workforce to grow during a pandemic — Is this the right time to expand overseas?
Three ways the pandemic is transforming tech spending — All companies are digital product companies now.
(Extra Crunch is our membership program, which aims to democratize information about startups. You can sign up here.)
Everything else
WH’s AI EO is BS — Devin Coldewey is not impressed by the White House’s new executive order on artificial intelligence.
China’s internet regulator takes aim at forced data collection — China is a step closer to cracking down on unscrupulous data collection by app developers.
Gift Guide: Games on every platform to get you through the long, COVID winter — It’s a great time to be a gamer.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.
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Why Slack and Salesforce execs think they’re better together
When Salesforce bought Slack earlier this week for $27.7 billion, it was in some ways the end of a startup fairytale. Slack was the living embodiment of the Silicon Valley startup success fantasy. It started as a pivot from a game company, of all things. It raised $1.4 billion, went from zero to a $7 billion valuation to IPO, checking off every box on the startup founder’s wish list.
Then quite suddenly this week, Slack was part of Salesforce, plucked off the market for an enormous sum of money.
While we might not ever know the back (Slack) room maneuvering that went on to make the deal a reality, it is interesting to note that Slack CEO Stewart Butterfield told me in an interview this week that he was not actually trying to sell the company when he approached Salesforce president and COO Bret Taylor earlier this year. Instead, he wanted to buy something from them.
“I actually talked to Bret in the early days of the pandemic to see if they wanted to sell us Quip because I thought it would be good for us, and I didn’t really know what their plans were [for it]. He said he’d get back to me, and then got back to me six months later or so,” Butterfield said.
At that point, the conversation flipped and the companies began a series of discussions that eventually led to Salesforce acquiring Slack.
Big money, big expectations
From the Salesforce perspective, Taylor says that the Slack deal was worth the money because it really allows his company to bring together all the pieces of their platform, one that has expanded over the years from pure CRM to include marketing, customer service, data visualization, workflow and more. Taylor also said that having Slack gives Salesforce a missing communication layer on top of its other products, something especially important when interactions with customers, partners or fellow employees have become mostly digital.
“When we say we really want Slack to be this next generation interface for Customer 360, what we mean is we’re pulling together all these systems. How do you rally your teams around these systems in this digital work-anywhere world that we’re in right now where these teams are distributed and collaboration is more important than ever,” Taylor said.
Butterfield sees a natural connection between what people do in the course of their work, what machines do behind the scenes in these systems of record and engagement and how Slack can help bridge the gap between humans and machines.
He says that by putting Slack in the middle of business processes, you can begin to eliminate friction that occurs in complex enterprise software like Salesforce. Instead of moving stuff through email, clicking a link, opening a browser, signing in and then finally accessing the tool you want, the approval could be built into a single Slack message.
“If you have hundreds of those kinds of actions a day, there’s a real opportunity to increase the velocity, and that has an impact, and not just in the minutes saved by the person doing the approval, but the speed of how the whole business operates,” Butterfield said.
Competing with Microsoft
While neither executive said the deal was about competing with Microsoft, it was likely an underlying reason that the companies decided to join forces. They may prove better together than they are separately, and both have complicated histories with Microsoft.
Slack has had an ongoing battle with Microsoft and its Teams product for years. It filed suit against the company last summer in the EU over what it called unfairly bundling of Teams for free with Office 365. In an interview last year with The Wall Street Journal, Butterfield said that he believes Microsoft sees his company as an existential threat. Hyperbole aside, there is tension and competition between the two enterprise software companies.
Salesforce and Microsoft also have a long history, from lawsuits in the early days to making friends and working together when it makes sense after Satya Nadella took over in 2014, while still competing hard in the market. It’s hard not to see the deal in that context.
In a recent interview with TechCrunch, Battery Ventures general partner Neeraj Agrawal said the deal was at least partially about catching Microsoft.
“To get to a market cap of $1 trillion, Salesforce now has to take MSFT head on. Until now, the company has mostly been able to stay in its own swim lane in terms of products,” Agrawal told TechCrunch.
As for Butterfield, while he saw the obvious competition, he denied the deal was about putting his company in a better position to compete with his rival.
“I don’t think that was really an important part of the rationale, at least for me,” he said, adding “the competition with Microsoft is overblown. The challenge for us was the narrative. They’re just good PR or something that I couldn’t figure out,” he said.
While Butterfield cited a list of large clients in enterprise tech, insurance and banking, the narrative has always been that Slack was favored by developer teams, which is where it initially gained traction. Whatever the reality, with Salesforce, Slack is definitely in a better position to compete with any and all comers in the enterprise communications space, and while it will be part of Salesforce, the two companies also have to figure out how to maintain some separation.
Keeping Slack independent
Taylor certainly recognizes that Slack’s current customers are watching closely to see how they handle the acquisition, and his company will have to walk a fine line between respecting the brand and product independence on one hand, while finding ways to create and build upon existing hooks into Salesforce to allow the CRM giant to take full advantage of its substantial investment.
It won’t be easy to do, but you can see a similar level of independence in some of Salesforce’s recent big-money purchases like MuleSoft, the company it bought in 2018 for $6.5 billion, and Tableau, the company it bought last year for more than $15 billion. As Butterfield points out, those two companies have clearly maintained their brand identity and independence, and he sees them as role models for Slack.
“So there’s a layer of independence that’s like that [for Mulesoft and Tableau] because it’s not going to help anyone call us Chat Cloud or something like that. They paid a lot of money for us, so they want us to do more of what we were already doing,” he said.
Taylor, whose opinion matters greatly here, certainly sees it in similar terms.
“We want to make sure we have a real integrated value proposition, a real integrated platform for developers, but also maintain Slack’s technology independence, technology agnostic platform and its brand,” he said.
Better together
As for the companies coming together, both men see a lot of potential here to merge Slack communications with Salesforce’s enterprise software prowess to make something better, and Taylor sees Slack helping link the two with workflows and automations.
“When you think about automation, it’s event driven, these long-running processes, automations. If you look at what people are doing with the Slack platform, it’s essentially incorporating workflows and bots and all these things. The combination of the Salesforce platform where I think we have the best automation intelligence capabilities with the Slack platform is incredible,” Taylor said.
The challenge these two men now face as they move forward with this acquisition, and all of the expectations inherent in a deal this large, is making it work. Salesforce has a lot of experience with large acquisitions, and they have handled some well, and some not so well. It’s going to be imperative for both companies that they get this right. It’s now up to Taylor and Butterfield to make sure that happens.
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Everyone has an opinion on the $27.7B Slack acquisition
When the Salesforce-Slack deal was officially announced on Tuesday afternoon, and the number appeared, it was kind of hard to believe. Salesforce had shelled out more than $27 billion to buy Slack and bring it into the Salesforce family of products. The company sees a key missing piece in Slack, and that could explain why it was willing to spend such an astonishing amount of money to get it.
With Slack, Salesforce now has what CEO Marc Benioff called the interface to everything, something he says that the company has thought about for years. In 2010, they tried building it themselves with Chatter, a social tool that never really caught on in a big way. With Slack they finally have it.
“We’ve always had the vision of the social enterprise at Salesforce for more than a decade. Oh, we’ve had Dreamforces entirely dedicated to the vision of what a collaborative interface, a high production interface with applications and an ecosystem would look like wrapped on top of our Customer 360,” Benioff said.
He added that ironically in a building right next door to Salesforce Park you’ll find Slack headquarters. They won’t have to go far to collaborate (or you know, they can just use Slack).
From Chatter to Slack
Neeraj Agrawal, general partner at Battery Ventures, says that Benioff has had an interest in enterprise social going back years, and this is his way of finally delivering. “Remember Chatter? Benioff was dead on with this trend. He lost Yammer to Microsoft (when Microsoft acquired it for $1.2 billion) about 7-8 years ago, and then launched Chatter. It was a huge bet, but didn’t work. Slack is really Chatter 2.0,” he said.
Chuck Ganapathi, CEO and co-founder at Tact.ai, was product lead on the Chatter product at Salesforce in the 2009 time frame. He wrote in a soon-to-be-published blog post he shared with TechCrunch that it failed for a lot of reasons, but mostly because at its core, Salesforce was still a bunch of database guys and enterprise social was a very different animal.
“Some of the issues were technical — Salesforce is a database-centric company, founded by Oracle alums on a relational DB foundation. DB applications and unstructured communication applications like Chatter or Slack represent completely different branches of computer science with little overlap,” he wrote. Because of that, he felt that they lacked the expertise to build the application correctly, and it never really caught on, with so many similar products in the market at the time.
But Benioff never lost interest in the concept of incorporating social into the Salesforce platform. It just took another 10 years or so and a bushel of money to make it happen.
A good match or not?
Leyla Seka, a partner at Operator Capital, who formerly ran the AppExchange at Salesforce, sees good things ahead with a combined Slack and Salesforce. “Salesforce and Slack together will offer a powerful duo of applications that will help companies work more effectively together. I think that COVID-19 has shown us how critical it is to get employees the data they need to do their job, but also the community they need to thrive at their job. The marriage of Salesforce and Slack promises to do just that,” Seka told me.
Brent Leary, principal analyst at CRM Essentials, was knocked out by the price tag, but says it shows that Salesforce is not afraid to go after what it wants, even if it has to pay a hefty price to get it. “This goes to show Salesforce has absolutely no fear in them when it comes to this deal. They are willing to throw down the big bucks on this acquisition because they see a huge payoff by adding this piece into their platform,” he said.
As for Slack, he sees it as a way for them to take the fast track to the enterprise big leagues. “And for Slack they go from competing with AMOSS (Adobe, Microsoft, Oracle, SAP, Salesforce) to joining one of them, and the company that really made the most sense for them to team up with,” he said.
Laurie McCabe, an analyst and founder at SMB Group, agrees with Leary’s take, saying Salesforce doesn’t hesitate when it thinks the value is there. “In this case, Slack gives them a strong collaboration offering that will help them compete more effectively against Microsoft’s growing cloud portfolio, which of course includes CRM and Teams,” she said.
Show me the money
Battery’s Agrawal believes this deal is all about generating revenue, and it was willing to pay a premium to move the needle in billion-dollar chunks. The end game he believes is about catching Microsoft, or at the very least getting to $1 trillion (with a T, folks) in market cap.
It’s worth noting that investors are not showing signs, initially at least, of liking this deal, with the stock down over 8% today and 16.5% since the rumor of Salesforce’s interest in Slack surfaced last week before the Thanksgiving holiday. That translates into more than $18 billion in lost market cap — probably not the reaction they were hoping for. But Salesforce is big enough that it can afford to play a long game, and reach its financial goals with the help of Slack.
“To get to a market cap of $1 trillion, Salesforce now has to take MSFT head on. Until now, the company has mostly been able to stay in its own swim lane in terms of products. […] To get to a trillion dollars in market cap, Salesforce needs to try to grow in two massive markets,” Agrawal said. Those would be either knowledge worker/desktop (see the 2016 Quip acquisition) or cloud (see the Hyperforce announcement). Agrawal says chances are the company’s best bet is the former, and it was willing to pay top dollar to get it.
“The deal will help Salesforce maintain a 20%+ growth rate over the next few years,” he said. Ultimately, he sees it moving the revenue needle, which should eventually drive market cap higher and help achieve those goals.
It’s worth noting that Salesforce president and CEO Bret Taylor said while they intend to integrate Slack deeply into the Salesforce product family, they recognize the power and utility of Slack as a standalone product and they don’t intend to do anything that would mess with that.
“Fundamentally, we want to make sure that Slack remains as a kind of technology-agnostic platform. We know that Slack is used by millions and millions of people every day to connect every tool under the sun. The most remarkable thing is just how many customers have also just integrated their own custom internal tools as well into this is really kind of the central nervous system for the teams that use it, and we would never want to change that,” he said.
It’s hard to judge a deal this large until we have some hindsight and see how well the two companies have meshed, how well they can incorporate Slack into the Salesforce ecosystem, while allowing that independence Taylor alluded to. If they can find a way to walk that line and Slack becomes that wrapper, that operating system, that glue that holds the Salesforce ecosystem together, it will be a good deal, but if Slack stops innovating and withers under the weight of its corporate overlords, then it might not be money well spent.
Time will tell which is the case.
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With Hyperforce, Salesforce lets you move your data to any public cloud
For much of its existence, Salesforce was a cloud service on its own with its own cloud resources available for its customers, but as the company and cloud computing in general has evolved, Salesforce has moved some of its workloads to other clouds like AWS, Azure and Google. Now, it wants to allow customers to do the same.
To help facilitate that, the company announced Hyperforce today at its Dreamforce customer conference, a new architecture designed from the ground up to help customers deliver workloads to the public cloud of choice.
The idea behind Hyperforce is to enable customers to take all of the data in what Salesforce calls Customer 360 — that’s the company’s detailed view of the customer across channels, Salesforce products and even other systems outside the Salesforce family — and be able to store that in whichever public cloud you want in whatever region you happen to operate. For now, they are in India and Germany, but there are plans to add support for 10 additional countries over the next year.
Company president and COO Bret Taylor introduced the new approach. “We call this new capability Hyperforce. Simply put, we’ve been working to enable us to deliver Salesforce on public cloud infrastructure all around the world,” Taylor said.
Holger Mueller, an analyst at Constellation Research, says the underlying architecture running the Salesforce system is long overdue for an overhaul. At over 20 years old, it’s been around a long time now, but Mueller says that it’s about more than modernizing. “The pandemic requires SaaS vendors to move their offerings from their own data centers to [public cloud] data centers, so they can offer both architectural and commercial elasticity to their customers,” he said.
Mueller added that by bringing Salesforce data into the public cloud, besides the obvious data sovereignty issues it solves, it brings all of the advantages of using public cloud resources.
“Salesforce can now offer both architectural and commercial elasticity to their customers. Commercial elasticity matters a lot to CIOs and CTOs these days because when your business slows down, you pay less, and when your business accelerates, then you can afford to pay more,” he said. He says that Salesforce is bringing an early generation SaaS product and pulling it into the modern age, something that is imperative at this point in the company’s evolution.
But while moving forward, Taylor was careful to point out that they rebuilt the system in such a way as to be fully backward compatible, so you don’t have to throw out all of the applications and investment you’ve made over the years, something that most companies couldn’t afford to do.”For you developers out there, This is the most remarkable thing. It is 100% backward compatible, your apps will work with no changes and you can benefit from all of this automatically,” he said.
The company will be rolling out Hyperforce over the next year and beyond as it opens in more regions.
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Salesforce announces new Service Cloud workforce planning tool
With a pandemic raging across many parts of the world, many companies have customer service agents spread out as well, creating a workforce management nightmare. It wasn’t easy to manage and route requests when CSAs were in one place, it’s even harder with many working from home.
To help answer that problem Salesforce is developing a new product called Service Cloud Workforce Engagement. Bill Patterson, EVP and general manager for CRM Applications at Salesforce, points out that with these workforces spread out, it’s a huge challenge for management to distribute work and keep up with customer volume, especially as customers have moved online during COVID.
“With Service Cloud Workforce Engagement, Salesforce will arm the contact center with a connected solution — all on one platform so our customers can remain resilient and agile no matter what tomorrow may bring,” Patterson said in a statement.
Like many Salesforce products, this one is made up of several key components to deliver a complete solution. For starters, there is Service Forecast for Customer 360, a tool that helps predict workforce requirements and uses AI to distribute customer service requests in a way that makes sense. This can help in planning at a time with a likely predictable uptick in service requests like Black Friday or Cyber Monday, or even those times when there is an unexpected spike.
Next up is Omnichannel Capacity Planning, which helps managers distribute CSAs across channels such as phone, messaging or email wherever they are needed most based on the demand across a given channel.
Finally, there is a teaching component that helps coach customer service agents to give the correct answer in the correct way for a given situation. “To increase agent engagement and performance, companies will be able to quickly onboard and continually train agents by delivering bite-size, guided learning paths directly in the agent’s workspace during their shift,” the company explained.
The company says that Service Cloud Workforce Engagement will be available in the first half of next year.
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Salesforce applies AI to workflow with Einstein Automate
While Salesforce made a big splash yesterday with the announcement that it’s buying Slack for $27.7 billion, it’s not the only thing going on for the CRM giant this week. In fact, Dreamforce, the company’s customer extravaganza, is also on the docket. While it is virtual this year, there are still product announcements aplenty, and today the company announced Einstein Automate, a new AI-fueled set of workflow solutions.
Sarah Franklin, EVP & GM of Platform, Trailhead and AppExchange at Salesforce, says that she is seeing companies facing a digital imperative to automate processes as things move ever more quickly online, being driven there even faster by the pandemic. “With Einstein Automate, everyone can change the speed of work and be more productive through intelligent workflow automation,” she said in a statement.
Brent Leary, principal analyst at CRM Essentials, says that combined, these tools are designed to help customers get to work more quickly. “It’s not only about identifying the insight, it’s about making it easier to leverage it at the right time. And this should make it easier for users to do it without spending more time and effort,” Leary told TechCrunch.
Einstein is the commercial name given to Salesforce’s artificial intelligence platform that touches every aspect of the company’s product line, bringing automation to many tasks and making it easier to find the most valuable information on customers, which is often buried in an avalanche of data.
Einstein Automate encompasses several products designed to improve workflows inside organizations. For starters, the company has created Flow Orchestrator, a tool that uses a low-code, drag and drop approach for building workflows, but it doesn’t stop there. It also relies on AI to provide help to suggest logical next steps to speed up workflow creation.
Salesforce is also bringing into the mix MuleSoft, the integration company it bought for $6.5 billion in 2018. Instead of processes like a mortgage approval workflow, the MuleSoft piece lets IT build complex integrations between applications across the enterprise and the Salesforce family of products more easily.
To make it easier to build these workflows, Salesforce is announcing the Einstein Automate collection page available in AppExchange, the company’s application marketplace. The collection includes more than 700 pre-built connectors so customers can grab and go as they build these workflows, and finally it’s updating the OmniStudio, their platform for generating customer experiences. As Salesforce describes it, “Included in OmniStudio is a suite of resources and no-code tools, including pre-built guided experiences, templates and more, allowing users to deploy digital-first experiences like licensing and permit applications quickly and with ease.”
Per usual with Salesforce Dreamforce announcements, the Flow Orchestrator being announced today won’t be available in beta until next summer. The MuleSoft component will be available in early 2021, but the OmniStudio updates and the Einstein connections collection are available today.
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Daily Crunch: Salesforce buys Slack for $27.7B
Salesforce announces its acquisition of Slack, Amazon brings the Mac mini to the cloud and Google Maps gets a newsfeed. This is your Daily Crunch for December 1, 2020.
The big story: Salesforce buys Slack for $27.7B
The acquisition, which was first reported last month, is now official.
“This is a match made in heaven,” said Salesforce co-founder and CEO Marc Benioff. “Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world.”
This cash-and-stock deal should make Salesforce a more serious competitor in the enterprise communication market. It also seems that Slack (which went public last year) was an obvious target for a takeover, due to an underwhelming stock price and a net loss of $147.6 million during the two quarters ending on July 31 of this year.
The tech giants
AWS brings the Mac mini to its cloud — This was just one of the announcements that Amazon Web Services made today at its re:Invent conference.
Google Maps takes on Facebook with launch of its own news feed — The feed is designed to make it easier to find the most recent news and recommendations from trusted local sources.
Facebook’s self-styled ‘oversight’ board selects first cases, most dealing with hate speech — The Facebook-funded body that the tech giant set up to distance itself from tricky content moderation decisions has announced the first set of cases it will consider.
Startups, funding and venture capital
SoftBank takes a $690M stake in cloud-based Swedish customer engagement company Sinch — Sinch provides cloud-based “omnichannel” voice, video and messaging services to help enterprises communicate with customers.
Voi, the European ‘micromobility’ rental company, raises $160M additional equity and debt funding — Voi says the new funding will be used to invest in technology development, fuel growth in current Voi markets and bring its latest e-scooter model to more cities.
Floww raises $6.7M for its data-driven marketplace matching founders with investors, based on merit — Having made more than 160 investments himself, founder Martijn De Wever says he recognized the need for a platform connecting investors and startups.
Advice and analysis from Extra Crunch
Bottom-up SaaS: A framework for mapping pricing to customer value — For the first time, individual employees are influencing the tooling decisions of their companies.
Who’s building the grocery store of the future? — Startups offering cashierless checkout, software analytics and robotics will clean up on aisle five.
(Extra Crunch is our membership program, which aims to democratize information about startups. You can sign up here.)
Everything else
China’s Chang’e-5 lunar lander successfully lands on the moon — China’s Chang’e-5 mission will be the third ever to bring back soil or rock samples from the moon.
US shopping app downloads on Black Friday reached a record 2.8M installs — Many U.S. consumers spent this year’s Black Friday sales event shopping from home on mobile devices.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.
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Salesforce beats growth expectations as investors digest the Slack acquisition
Today after the bell, Salesforce reported its third-quarter earnings for its fiscal 2021, a period that ended October 31, 2020. The CRM giant reported top-line revenue of $5.42 billion, up 20% from the year-ago period. Salesforce also had net income of $1.08 billion and earnings per share of $1.15.
Analysts had expected the company to earn $0.75 per share off revenues of $5.25 billion, according to Yahoo Finance.
Shares of Salesforce were off after-hours, falling around 3.6% at the time of writing. It was not clear if the company’s share price performance was due to its Q3 results, or its raised Q4 guidance, or its new fiscal 2022 expectations, or the newly announced Slack deal.
As TechCrunch reported moments ago, Salesforce will buy Slack for $27.7 billion in a cash and stock deal that was fully priced into shares of the smaller company, which dropped a little over a point on the news, having risen by nearly 50% since the deal’s existence first leaked.
Holders of Slack will be rewarded for their patience. Now it’s up to Salesforce leadership to prove that the huge buy will help boost the company’s growth.
Salesforce told investors today that it anticipates Q4 fiscal 2021 revenues of $5.665 billion to $5.675 billion, which works out to growth of around 17% from the year-ago period. The company also anticipates that it will grow around 17% in Q1 of its fiscal 2022.
But Salesforce expects to grow 21% in all of its fiscal 2022. How does it intend to accelerate? Its projections include Slack:
Full Year FY22 revenue guidance includes contributions from Slack Technologies, Inc. of approximately $600 million, net of purchase accounting, and assumes a closing date in late Q2 and Acumen Solutions, Inc. of approximately $150 million, net of purchase accounting, and assumes a closing date within Q2.
So, Salesforce investors, after two anticipated quarters of 17% growth coming up, your company will accelerate up to 21% growth for the next fiscal year. Is that worth $27.7 billion?
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Salesforce buys Slack in a $27.7B megadeal
Salesforce, the CRM powerhouse that recently surpassed $20 billion in annual revenue, announced today it is wading deeper into enterprise social by acquiring Slack in a $27.7 billion megadeal. Rumors of a pending deal surfaced last week, causing Slack’s stock price to spike.
Salesforce co-founder and CEO Marc Benioff didn’t mince words on his latest purchase. “This is a match made in heaven. Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world,” Benioff said in a statement.
Slack CEO Stewart Butterfield was no less effusive than his future boss. “As software plays a more and more critical role in the performance of every organization, we share a vision of reduced complexity, increased power and flexibility, and ultimately a greater degree of alignment and organizational agility. Personally, I believe this is the most strategic combination in the history of software, and I can’t wait to get going,” Butterfield said in a statement.
Every worker at every company needs to communicate, something that Slack can ably empower. What’s more, it also facilitates external communication with customers and partners, something that should be quite useful for a company like Salesforce and its family of offerings.
Ultimately, Slack was ripe for the taking. Entering 2020 it had lost around 40% of its value since it went public. Consider that after its most recent earnings report, the company lost 16% of its value, and before the Salesforce deal leaked, the company was worth only a few dollars per share more than its direct listing reference price. Toss in net losses of $147.6 million during the two quarters ending July 31, 2020, Slack’s uninspiring public valuation and its winding path to profitability and it was a sitting target for a takeover like this one. The only surprise here is the price.
Slack’s current valuation, according to both Yahoo and Google Finance, is just over $25 billion, which, given its very modest price change after-hours means that the market priced the company somewhat effectively. Slack is up around 48% from its valuation that preceded the deal becoming known.
The new deal also puts Salesforce more on par — and in competition — with its arch rival and sometime friend Microsoft, whose Teams product has been directly challenging Slack in the market. Microsoft, which passed on buying Slack in the past for a fraction of what Salesforce is paying today, has made Teams a key priority in recent quarters, loathe to cede any portion of the enterprise software market to another company.
What really has set Slack apart from the pack, at least initially, was its ability to integrate with other enterprise software. When you combined that with bots, those intelligent digital helpers, the company could potentially provide Salesforce customers with a central place to work without changing focus because everything they need to do can be done in Slack.
Today’s deal comes after Salesforce’s purchase of Quip in 2016 for $750 million. Quip brought to the SaaS giant a way of socially sharing documents, and when paired with the Slack acquisition gives Salesforce a much more robust social story to tell than its internal option Chatter, an early attempt at enterprise social that never really caught on.
It’s worth noting that Salesforce was interested in Twitter in 2016, the same year that Microsoft was reportedly interested in Slack, but eventually walked away from that deal when shareholders objected, not wanting to deal with the controversial side of the social platform.
Slack was founded in 2013, but its origins go back to an online multiplayer game company called Glitch that was founded in 2009. While the game was ultimately a failure, the startup developed an internal messaging system in the process of building that company that later evolved into Slack.
The company’s historic growth helped Slack raise more than $1 billion while private, earning an impressive $7 billion valuation before going public last year. But while the Glitch-to-unicorn story appears simple, Slack has always faced entrenched competition from the likes of not only Microsoft, but also Cisco, Facebook, Google and even Asana and Monday.com.
For Slack, the path to the public markets was fraught with hype and outsized expectation. The company was famous, or as famous as an enterprise software company can be. At the time it felt like its debut was the start of a long tenure as an indie company. Instead, that public life has been cut short by a huge check. Such is the dog-eat-dog world of tech.
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