Here we continue to discuss potential locations for future Incubator sites. Salesforce is attempting to locate in areas which have high supply, meaning an abundance of talented software engineers with entrepreneurial spirit, along with areas with high demand for on-demand software. India would have to be considered one of the highest supply markets. Israel could also be an interesting location due to their high supply of entrepreneurs, although we do not address the issue specifically.
SM: Whatever domestic market India has or is beginning to have is very much in your sweet spot also from a demand perspective. RB: It is. The on-demand market is still fledgling in India compared to UK and North America, but we know there is excellent supply and a lot of entrepreneurship. We think we can do something there as well. My first priority is to prove that this model in San Mateo yields success stories.
SM: What is your timeline? How long do you think it is going to take to prove out the San Mateo model and start opening up India, China and Europe? RB: I don’t want to take any guesses on that just yet. We are a very ambitious company as you know, but I also want to make sure we are able to put down a formula which works. As you can imagine these are non-trivial investments which we make. I don’t know if you have seen our building in San Mateo, but it is a big building.
SM: This is a very interesting spin on corporate incubation. Over the years, there have been plenty of companies which have done corporate incubation, and there have been plenty of companies which have done corporate venture capital. Yahoo! in fact has the brick house project right now, and others have tried innovation in different forms. Your hypothesis is very compelling to me, and I think it has a very high chance of success. It is something I would like to track in the future. RB: I definitely think there is a lot of merit to this idea. We have 32 companies in the incubator, including some very large companies. You will find the fledgling companies have some great tales to tell. We just had our formal opening, and we had a lot of these companies speak to the audience.
Centive is an incentive compensation management company, which had complete on-premise software, none of which was on-demand. They took advantage of the incubator to learn how to move all of their software from on-premise to on-demand, and during the last five months they have moved their whole business model to on-demand and are building their business thanks to all the help they are getting in the incubator.
René shares some recent Incubator success stories. As the Incubator ages, the number of these stories is undoubtedly going to increase.
SM: I know you have only been going for five months so far, but do you have any success stories you can share with us? RB: In the past few months a number of the partners in this effort have been successful. I will tell you about two which I think are very interesting because it combines both Incubator as well as the AppExchange. The first is a company called ClickTools, they build surveys which are a very popular way to get customer feedback for sales support. This company was a pure UK based company, and they sold on-demand. They came into the Incubator in January, and they started to work on the AppExchange. Today, 80% of their business is sourced from the US. The Incubator has allowed them to have a presence in the US to drive up 80% of their revenue. The company has grown by leaps and bounds, and they have been very successful in this model. They are very open to discussing this, and I am sure they would love to give you their perspective. The other company is Apperio, which was born out of professionals who worked at Borland and SAP. They were a very early company, and in fact their whole presence is in the Incubator. They have done a number of things. They have built great applications which were sourced from the IdeaExchange, which is our public forum that exposes ideas, in record time they have developed and monetized the ideas through the AppExchange. Being close to Salesforce they have been able to land a very big deal with CFC Health for the automation of emergency response. They have effectively boosted themselves entirely out of the Incubator and the AppExchange with a lot of help from our sales folks. These two companies are definitely good examples of companies being successful with this model.
SM: What are the evaluation plans for the Incubator? Do you see yourselves becoming like a venture fund? RB: Funding and enabling are two different things. The venture netowk is there to provide the financing. We do a great job of teaching these companies how to do it. I think we can help them build the value proposition to get the right funding. We are still proving this model as we speak; as you said, it is four months and a bit old. We want to make sure we have a repeatable model. We will soon have 61 companies in the building, and believe me they are keeping us busy. My next step will be to look at other places around the world where the desire to become an entrepreneur are high, the skills are high and the market demand is high. Those places could include cities where there is lots of supply so think of Southern India, think of China, and places were there is demand for Salesforce applications like the UK and Japan. The motivations are different; whether it is a lot of supply (to build a supply for the globe) which is the aim with India as they do not have a large domestic demand.