Personal blog of Yzmir Ramirez

Last year I penned a post positing that Salesforce’s propensity to purchase mature enterprise companies not only provided new technology, but was also helping to produce a profusion of executive talent. As though to prove my point, the company announced today that it was promoting former Vlocity CEO David Schmaier to president and chief product officer.

Schmaier came to the organization last year when Salesforce acquired his company for $1.33 billion. It seemed like a good match, given that Vlocity sold Salesforce solutions designed for certain niches like financial services, health, energy and utilities and government and nonprofits.

As a result, Schmaier knew the product set and the company well. Last June, he was named CEO of the Salesforce Industries division, which was created after the Vlocity acquisition. The connection was clear to Schmaier as he told me at the time of his promotion last year:

“I’ve been involved in various mergers and acquisitions over my 30-year career, and this is the most unique one I’ve ever seen because the products are already 100% integrated because we built our six vertical applications on top of the Salesforce platform. So they’re already 100% Salesforce, which is really kind of amazing. So that’s going to make this that much simpler,” he said.

Brent Leary, founder and principal analyst at CRM Essentials, says that Schmaier’s history in building Vlocity makes this promotion pretty easy given the direction of the company, as well as the industry. “Over the last several years we’ve seen just how important developing industry-specific solutions have become to the major players in the space, and Schmaier’s promotion reaffirms this while illustrating how important creating verticals is to their platform [and] to the future of Salesforce,” he told me.

In a Q&A on the Salesforce website announcing the promotion, Schmaier talked about the challenges companies faced in the last year. “There’s no question 2020 was a challenging year. We are operating in this all-digital, work from anywhere world and things won’t go back to where they were, nor should they. One of the silver linings has been seeing what companies can do when there is no alternative and the imperative is to connect with their customers in entirely new ways,”

In his new position it will be Schmaier’s job to figure out how to help them do that.

It’s worth noting that there has been some turnover in the C Suite recently at Salesforce. Just today the company also announced that long-time CFO Mark Hawkins was retiring. He will be replaced by Amy Weaver, who was formerly the company’s chief legal officer. Meanwhile, last week the company hired former Hearsay Social co-founder and CEO Clara Shih to run Salesforce Service Cloud.

When Salesforce announced it was acquiring Vlocity for $1.33 billion in February, it was a deal that made sense for both companies. Today, the company announced that the deal has closed and Vlocity CEO David Schmaier has been named CEO of a new division called Salesforce Industries.

Vlocity has built several industry-specific CRM tools such as media and entertainment, healthcare and government on top of the Salesforce platform. While Salesforce has developed some of its own industry solutions, having a division devoted to verticalized tools creates additional market opportunities for the company.

Schmaier sees the new division as a commitment from the company on the value of an industry-focused approach.

“As Vlocity becomes part of what we’re calling Salesforce Industries, this will be a larger group within Salesforce to really focus on bringing these industry-specific solutions to the customer, helping them go digital and working in a whole new way,” Schmaier told TechCrunch.

Salesforce president and COO Bret Taylor will be Schmaier’s boss. Writing in a blog post announcing the new division, Taylor said that like so many aspects of technology solutions these days, the industry focus is about helping companies with digital transformation. As the world changes before our eyes during the pandemic, companies are being forced to move operations online, and Salesforce wants to provide more specific solutions for customers who need it.

“Companies in every industry have a digital transformation imperative like never before — and many are accelerating their plans for a digital-first, work-from-anywhere environment. With Salesforce Customer 360 and Vlocity, our customers have the most advanced industries platform as well as tools and expert guidance completely tailored to their specific needs,” Taylor wrote.

Schmaier says the fact that his company’s tooling was already built on top of Salesforce allows them to really hit the ground running without the integration challenges that combining organizations typically face after an acquisition like this one.

“I’ve been involved in various mergers and acquisitions over my 30-year career, and this is the most unique one I’ve ever seen because the products are already 100% integrated because we built our six vertical applications on top of the Salesforce platform. So they’re already 100% Salesforce, which is really kind of amazing. So that’s going to make this that much simpler,” he said.

It’s likely that Salesforce will continue to build on the new division and add additional applications over time given the platform is already in place. “We basically have a platform now inside Salesforce to build verticals. So the cost to build new verticals is a fraction of what it was for us to build the first one because of this industry cloud platform. So we are going to look at opportunities to build new ones but we’re not ready to announce that today. For starters, we are forming this one organization,” Schmaier said.

The company reported a record quarter last Thursday, but light guidance for next quarter spooked investors and the stock was down on Friday (it is up .77% today as of publication). The company does not rest on its laurels though, and having a division in place like Salesforce Industries provides a more focused way of dealing with verticals and another possible source of revenue.

It’s been a big news day for Salesforce . It announced that co-CEO Keith Block would be stepping down, and that it had acquired Vlocity for $1.33 billion in an all-cash deal.

It’s no coincidence that Salesforce targeted this startup. It’s a firm that builds six industry-specific CRMs on top of Salesforce — communications, media and entertainment, insurance and financial services, health, energy and utilities and government and nonprofits — and Salesforce Ventures was also an investor. This would appear to have been a deal waiting to happen.

Brent Leary, founder and principal analyst at CRM Essentials, says Salesforce saw this as an important target to keep building the business. “Salesforce has been beefing up their abilities to provide industry-specific solutions by cultivating strategic ISV partnerships with companies like Vlocity and Veeva (which is focused on life sciences). But this move signals the importance of making these industry capabilities even more a part of the platform offerings,” Leary told TechCrunch.

Ray Wang, founder and principal analyst at Constellation Research, also liked the deal for Salesforce. “It’s a great deal. Vlocity gives them the industries platform they need. More importantly, it keeps Google from buying them and [could generate] $10 billion in additional industries revenue growth over next four years,” he said.

Vlocity had raised about $163 million on a valuation of around $1 billion as of its most recent round, a $60 million Series C last March. If $1.33 billion seems a little light, given what Vlocity is providing the company, Wang says it’s because Vlocity needed Salesforce more than the other way around.

“Vlocity on its own doesn’t have as big a future without Salesforce. They have to be together. So Salesforce doesn’t need to buy them. They could keep building out, but it’s better for them to buy them now,” Wang said.

Still, the company was valued at $1 billion just under a year ago, and sold for $1.33 billion after raising $163 million. That means it received 8.2x total invested capital ($1.33 billion/ $163 million invested capital), which isn’t a bad return.

In a blog post on the Vlocity website, founder and CEO David Schmaier put a positive spin on the deal. “Upon the close of the transaction, Vlocity — this wonderful company that we, as a team, have created, built, and grown into a transformational solution for six of the most important industries in the enterprise — will become part of Salesforce,” he wrote.

Per usual, the deal will be predicated on regulatory approval and close some time during Salesforce’s second quarter in fiscal 2021.

As we wrote last week in How Salesforce paved the way for the SaaS platform approach, the ability to build extensions, applications and even whole companies on top of the Salesforce platform set the stage and the bar for every SaaS company since. Vlocity certainly recognized that. Targeting five verticals, it built industry-specific CRM solutions on the Salesforce platform, and today announced a $60 million Series C round on a fat unicorn $1 billion valuation.

The round was led by Sutter Hill Ventures and Salesforce Ventures. New investors Bessemer Venture Partners and existing strategic investors Accenture and New York Life also participated. The company has now raised $163 million.

Company co-founder and CEO David Schmaier, whose extensive career includes stints with Siebel Systems and Oracle, says he and his co-founders (three of whom helped launch Veeva) wanted to take the idea of Veeva, which is a life sciences-focused company built on top of Salesforce, and extend that idea across five verticals instead of just one. Those five verticals include communications and media, insurance and financial services, health, energy and utilities and government and nonprofits.

The idea he said was to build a company with a market that was 10x the size of life sciences. “What we’re doing now is building five Veevas at once. If you could buy a product already tailored to the needs of your industry, why wouldn’t you do that?,” Schmaier said.

The theory seems to be working. He says that the company, which was founded in 2014, has already reached $100 million in revenue and expects to double that by the end of this year. Then of course, there is the unicorn valuation. While perhaps not as rare as it once was, reaching the $1 billion level is still a significant milestone for a startup.

In the Salesforce platform story, co-founder and CTO Parker Harris addressed the need for solutions like the ones from Veeva and Vlocity. “…Harris said they couldn’t build one Salesforce for healthcare and another for insurance and a third one for finance. We knew that wouldn’t scale, and so the platform [eventually] just evolved out of this really close relationship with our customers and the needs they had.” In other words, Salesforce made the platform flexible enough for companies like these to fill in the blanks.

“Vlocity is a perfect example of the incredible innovation occurring in the Salesforce ecosystem and how we are working together to provide customers in all industries the technologies they need to attract and serve customers in smarter ways,” Jujhar Singh, EVP and GM for Salesforce Industries said in a statement.

It’s also telling that of the three strategic investors in this round — New York Life, Accenture and Salesforce Ventures — Salesforce is the biggest investor, according to Schmaier.

The company has 150 customers, including investor New York Life, Verizon (which owns this publication), Cigna and the City of New York. It already has 700 employees in 20 countries. With this additional investment, you can expect those numbers to increase.

“What this Series C round allows us to do is to really put the gas on investing in product development, because verticals are all about going deep,” Schmaier said.