Salesforce Ventures is the investment arm of Salesforce. Prior to this investment in Automattic, Salesforce Ventures had announced $875 million raised across 11 fund initiatives — but none that amounts to $300 million. Previosuly, each fund has been between $50 to $125 million spread across several investments.
I believe Salesforce Ventures called up funds specifically for this strategic investment in Automattic, which would likely put their total dollars invested (or committed to existing funds) well beyond $1 billion, and the $300 million into Automattic would be their largest investment to date, to my knowledge.
Salesforce Ventures states on their website that they are exclusively seeking investments in “enterprise cloud” companies. In Automattic Founder and CEO Matt Mullenweg’s announcement about the funding, he specifically noted how Salesforce CEO Marc Benioff, “helped open my eyes to the incredible traction WordPress and WP VIP has seen in the enterprise market, and how much potential there still is there.” I am curious to see how Automattic changes their approach to VIP in particular, in light of this.
$300 million is a lot of money. Salesforce is joining Insight Venture Partners, Tiger Global, and True Ventures as primary outside investors in Automattic.
Given that Salesforce was the lead and only investor here, they now own a significant stake in Automattic — and it will be interesting to see what kind of confluence that enables between the two companies. Automattic CEO Matt Mullenweg tells me, “Automattic has been a long-time customer of Salesforce’s products, and we think there are lots of opportunities for closer integration.”
Since Automattic recently acquired Tumblr and brought on a few hundred new employees from it, it’s natural to think the new fundraising is related. I asked Matt about that, and he said it was unrelated in terms of financial justification, but they did, “disclose the Tumblr transaction to Salesforce during [their] discussions.”
Automattic hasn’t raised money since 2014, and it seems like this round is similar to prior ones, wherein the money helps spur their growth plans along but that they are operationally profitable — or close to it. Matt told Techcrunch, “The roadmap is the same. I just think we might be able to do it in five years instead of ten.”
Matt called the investment proof of Salesforce’s own “tremendous vote of confidence for Automattic and for the open web.” Salesforce does have some history of supporting open source projects, although that shouldn’t be equated to an investment in Automattic as a company; it is a vote of confidence for companies that rely on open-source platforms as a part of their line of business.
Automattic is the single most significant contributor to WordPress and related open-source projects. It also relies on open-source software for its product development — particularly Jetpack and WooCommerce — and features like Gutenberg as the core experience for writing and site-building. How that blend of open source software and business development plays out, in the long run, is certainly of high interest to the open-source community.
I have long discussed on various platforms how I think there are a handful of companies that are big enough to acquire Automattic someday. I still think Automattic is more likely to go public at some point, but if they are acquired, Salesforce is definitely one of those few with the resources to make it happen, and perhaps the operational congruence as well.
Reaching a $3 billion valuation is an amazing feat that Automattic has achieved. Matt has said before that he believes each of their primary lines of business — WordPress.com, WooCommerce, and Jetpack — can be multi-billion dollar opportunities. I agree with him, particularly for WooCommerce. I think there’s a good chance WooCommerce will end up several times more valuable than all their other lines of business combined. I would love to see these new funds be funnelled into the incredible opportunity in the eCommerce landscape; one only needs to look at what Shopify has done to see what’s possible, and just how successful it can be.
I asked Matt why he was attracted to an investment from Salesforce’s VC arm, rather than an investment-only style firm. He said, “I love Salesforce’s philosophy, how they cultivate such a fantastic community, how they support progressive policies in San Francisco and the other cities they operate in, how they’ve been founder-led, their scale, their leadership, and their longevity in defining an entirely new class of software and being the most significant player in it.”
I love the point about Salesforce defining a class of software — and I have realized recently just how huge their developer community is — so I really appreciate this comment from Matt. Making commercial and SaaS software is a well-established business now. Automattic is in a unique position as the most powerful player in an open ecosystem proud of its independence. This provides many unique opportunities for Automattic the business and unique challenges for Automattic the WordPress community member.
Image credit: Matt Mullenweg, whose blog I brazenly stole it from.