INTRO: In the world of big tech, we often hear customer
numbers in the billions.
Last year, for example, Apple crossed 1 billion active iPhone users.
Similarly, Google also boasts 1 billion active users.
But, by far the biggest is Facebook who has nearly 3 billion active users.
Considering these mindboggling numbers and the fact that these companies are basically
ubiquitous, it’s not surprising that these companies are valued in the trillions.
But, what does surprise me though are background tech companies that the average person has
never heard of.
Such companies generally serve corporate customers and have little need to appeal to ordinary
people, yet they boast market caps in the hundreds of billions.
And one of the best examples of this is Salesforce.
In 2017, Salesforce announced that they have more than 150,000 customers.
Even if we assume this number has grown to 200,000 customers, given that Salesforce is
valued at $228 billion, each customer is worth well over a million dollars in terms of market
cap.
To put that in perspective, each Facebook customer is only worth $225 worth of market
cap, and even each Apple customer is only worth $2800 worth of market cap.
So, here’s what Salesforce does and how they became one of the most lucrative businesses
in the world.
MARC BENIOFF: Taking a look back, the story of Salesforce
dates back to a man named Marc Benioff who was born on September 25, 1964, in San Francisco,
California.
Marc’s father owned a local department store in San Francisco which provided the family
with a pretty comfortable life.
But, Marc’s father refused to spoil Marc.
He felt that Marc should work for everything he wanted.
So, when Marc wanted a computer as a teenager, his father told him to go get a job.
Marc ended up becoming a janitor at a jewelry store, but unfortunately, this didn’t last
too long as Marc would be fired for using the wrong soap on the floors.
Fortunately, though, he was able to save up enough money to buy a computer.
Most kids nowadays want a computer to play games, but Marc actually wanted a computer
to develop games.
Marc started off small developing an application called How to Juggle which he would sell for
$75.
But once he saw this first paycheck, he would go all-in on game development.
At 15, he founded a one-man company called Liberty Software which developed games for
the Atari 8-bit.
And over the next year, he published dozens of games including Flapper, King Arthur’s
Heir, The Nightmare, Escape from Vulcan’s Isle, and Crypt of the Undead.
He worked with a company called Epyx to bring his games to market, and by the time he was
16, he was earning $1,500 a month just from royalties.
Adjusting for inflation, that’s over $5000 per month today.
So, Marc was basically making $60,000 per year as a 16-year-old.
It’s no wonder why this guy became a billionaire.
Anyway, Marc ended up attending the University of Southern California where he majored in
business administration.
While completing his bachelor’s, Marc took on internships as a programmer at Apple’s
Macintosh division.
Marc enjoyed this experience and wanted to continue his journey as a programmer, but
one of his university professors advised that customer-oriented work would be much more
beneficial for Marc.
So, Marc got a sales job at Oracle after graduation.
While sales was not Marc’s area of expertise, he shined here as well.
Just one year after joining, Marc was named Oracle’s Rookie of the Year at age 23.
And just 3 years after that, Marc became the youngest person in the company’s history
to become vice president.
Considering the massive salaries of executives, Marc was able to become a millionaire by the
time he was 25.
Marc could’ve easily stayed at Oracle and possibly even worked his way up to CEO, but
after 13 years at Oracle, he decided that he wanted to do something bigger.
Marc felt that all software companies were approaching software incorrectly.
They treated software as a product.
Every few years companies like Adobe and Microsoft came out with a new version of Windows or
Photoshop.
But Marc felt that it would be way better if these companies treated software as a service
and constantly provided updates along the way.
Given that this is basically what all software companies do today, Marc was clearly onto
something.
And in February of 1999, he would start trying to make this vision a reality by launching
SalesForce.
SALESFORCE: Marc didn’t try to start SalesForce by himself
though.
He brought with him 3 Oracle veterans named Parker Harris, Dave Moellenhoff, and Frank
Dominguez.
Initially, Larry Ellison, Oracle’s founder, was extremely supportive of Marc starting
his own business.
In fact, he funded the startup with $2 million and even became a board member.
But, when he realized the SalesForce was also trying to compete against Oracle, Larry stopped
helping SalesForce, but he did keep his stake.
Now, that’s all cool and all, but what exactly did SalesForce even do?
Well, the bread and butter of SalesForce was and still is Customer Relationship Management
or CRM software.
CRM software allows companies to aggregate all of their sales, marketing, and customer
service data into one easy-to-use platform.
This makes it much easier for companies to analyze their demographics in extreme detail.
For example, what’s your conversion rate, how many unique customers do you have, how
many customers are repeat customers, how do sales vary with the age and location of your
customers, and so on and so forth.
Companies can then turn around and use this data to address shortfalls, single out certain
demographics, and craft targeted marketing campaigns that are super effective.
So basically, CRM software takes care of the logistics of managing customer data.
Now, providing CRM solutions wasn’t a new idea by any means.
There were plenty of large companies already providing CRM solutions like Oracle and Microsoft.
But, as we previously touched on, these guys were selling the software as a product.
Customers had to buy the software, install it onto their computers and servers, store
all the data themselves, and troubleshoot many issues themselves.
But, with SalesForce, SalesForce will store the data, SalesForce will run the servers,
and SalesForce will run the software.
Customers simply had to use a web portal to access everything they need from anywhere
in the world.
The convenience and accessibility the SalesForce provided were unbeatable, but there were a
few concerns.
First of all, companies had to trust SalesForce with customer data, and secondly, this was
not a one-time purchase, it was a subscription.
But, as more and more corporations switched over to SalesForce, companies had an easier
time trusting the SalesForce.
But, it wasn’t all smooth sailing.
Like all tech companies that were founded before 2000, SalesForce had to navigate the
dot-com crash.
And this was particularly rough given that SalesForce was an extremely young company
when the bubble burst.
To ease the financial stress on the company, Marc took SalesForce public in June of 2004
which allowed them to raise $110 million.
This helped them survive the dot-com crash, but Marc knew that he had to diversify their
income in order to better weather future recessions.
DELAYING PROFITABILITY: One of Marc’s first diversification efforts
came in 2005 when SalesForce introduced AppExchange.
As the name suggests, AppExchange was basically an app store but for businesses.
SalesForce customers could download these apps and SalesForce would split the revenue
with the app developers.
Now, this probably doesn’t sound that crazy today, but keep in mind that this was years
before the iPhone app store.
Another diversification effort from SalesForce came in 2009 with the launch of Service Cloud.
Similar to AppExchange, Service Cloud was another corporate application of an everyday
service.
If you have a technical question, one of the first things you’ll probably do is Google
it, but it’s not so easy if you’re a company and have a question about databases or servers.
So, with Service Cloud, Marc basically launched a Google/Quora type service for corporations.
Similarly, in 2011, Marc launched Chatter which was a social collaboration service for
companies.
All these diversification efforts did help Salesforce’s topline as revenue exploded
from hundreds of millions to billions per year.
But, Salesforce’s bottom line wasn’t looking that great because Salesforce was reinvesting
all of their profits into their employees and acquisitions.
The acquisition part is self-explanatory, but for people who aren’t familiar with
Salesforce, they probably aren’t aware of Salesforce’s insane salaries.
Software engineers, for example, earn anywhere between $182,000 to $754,000 per year.
Similarly, managers earn anywhere between $248,000 to $1 million.
At Salesforce, you can literally earn 7 figure salary without being a C suite executive.
Considering these salaries, I don’t think you’d be surprised to hear that Salesforce
is the 9th highest paying company in the world.
Aside from high salaries, Salesforce has one of the best workplaces in the world with Salesforce
boasting an A+ in terms of workplace culture.
Even Apple only scores a B+.
This has earned Salesforce the title of 2nd best place to work for in the world according
to Fortune.
Marc also ranks as the 15th most approved CEO in the US by employees, so clearly, Marc
knew what he was doing, and turning a profit simply wasn’t a priority for him.
He wanted to get Salesforce’s holdings, diversification, and employees to a certain
level of satisfaction before focusing on profits.
And in 2016, the time had finally come.
Ever since then, Salesforce has not only been pulling in billions every year but keeping
billions.
SALESFORCE TODAY: Today, Salesforce serves 90% of the Fortune
500 including everyone from Apple and Facebook to Walmart and Mastercard.
And given that each of these guys pays Salesforce millions of dollars per year if not tens of
millions for their services, it’s not surprising that Salesforce pulled in $25 billion in revenue
in the most recent 12 month period.
Aside from being a giant within the corporate world, Salesforce practices what Marc calls
the 1-1-1 philanthropy model.
Every year, Salesforce dedicates 1% of the company’s equity, 1% of their products,
and 1% of their employees’ time to philanthropic efforts.
So far, Salesforce has given their software to 46,000 nonprofits and NGOs for free or
at a discount, and their employees have volunteered a total of 4.9 million hours.
As for Marc, he only owns a modest 3-4% of the company, but given the size of Salesforce,
that itself translates to $9 billion.
Marc of course enjoys his wealth by splurging on toys like mansions and cars, but Marc also
donates significant amounts of his wealth.
He’s a very large proponent of taking action against climate change.
In fact, just a couple of months ago, he donated $300 million to fight climate change.
$200 million of this came from Marc himself and $100 million came from Salesforce.
And do you guys remember the teamtrees effort from Mr. Beast a couple of years ago?
Mr. Beast was able to raise a total of $23 million which translates to 23 million trees
being planted.
There were some high-profile figures who donated to this cause one of them being Marc who donated
$900,000.
Not only did Marc donate to teemtrees, but he went ahead and launched his own tree-planting
foundation called 1t.org.
As the name suggests, the goal of the foundation is to plant 1 trillion trees by 2050.
And given the connections that Marc has, he was able to get over 300 companies on board.
So, hopefully, this vision does become a reality, but we’ll just have to wait and see.
Do you guys think Marc can plant 1 trillion trees?
Comment that down below.
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