Salesforce.com's $25m venture capital fund is great for developers, say analysts — as long as providing support costs to a global market doesn't kill the start-ups.
Salesforce, with its venture capital (VC) partners Bay Partners and Bessemer Venture Partners, has announced it will offer around 50 software start-up companies $500,000 each to develop on-demand applications on Salesforce.com's platform, force.com.
The decision comes after Salesforce.com's chief executive Marc Benioff said that most people see Salesforce as only a CRM company — a perception its on-demand competitors such as SAP use against it. Salesforce is using the fund to attract developers to change this perception and boost its offering.
Intelligent Business Research analyst Joseph Sweeney said the investment fund is relatively small, but is a necessary step for Salesforce to take.
"Salesforce does not have a history [with developers] — now they're having to woo developers to the platform. But what that shows is a maturity in the market, an acceptance of SaaS [software-as-a-service], and a maturity in Salesforce," he said.
A spokesperson for Salesforce said: "Especially for developers, platform-as-a-service is pretty attractive. A developer gets free access to development tools, frictionless access to a market of at least 35,000 customers, which are familiar with on-demand."
One local company, Sqwarepeg, has already developed a SMS marketing application using Salesforce's platform. "Now they have customers in Mexico, North America and Eastern Europe. There's just no way that a small company could achieve that level of reach in a traditional channel," said Salesforce's spokesperson.
However, a significant challenge remains for developers: supporting new-found customers, which are based mostly in the northern hemisphere.
In an interview with ZDNet.co.uk's sister site, Builder AU, Sqwarepeg founder Shawn Stilwell said: "If you've got customers coming to you from Europe or the US or Japan, and you're in different time zones, that's something to be ready for."
IBRS's Sweeney agreed the issue is a big question for developers. "Support costs have killed many smaller ISVs. If you can't deliver support, you'll get no repeat customers, your business goes down the tube and you're left trying to fix investments that shouldn't have made it in first place."
Salesforce's spokesperson said smaller companies may be challenged but added they don't need to invest in channel infrastructure, marketing or sales support.
However, it might just be the venture capitalist firm which proves to be the greatest help to developers. Venture capital firms typically use their investments in other countries to match the skills needed to keep investments afloat, said IBRS's Sweeney.
"I would expect over the next two years some of these companies that have been invested in will be making investments in each other and leveraging each other's support streams. Salesforce is small enough to broker these arrangements and, because they're small, hungry and flexible, they are less likely to cast you aside like some of the larger companies."
