Here's how an enterprise software vet and his team have built a $1 billion business with $100 million in annual revenue by putting its own twists on Salesforce for big businesses
- Vlocity is one of the most successful developers onSalesforce’s platform.
- The San Francisco startup customizes Salesforce’s service for companies in five industries, including telecommunications and health care.
- Company CEO David Schmaier and his core team did something similar with great success at Siebel Systems in the 1990s and 2000s.
- Investors are recognizing its promise; it recently secured a $60 million funding round that valued it at $1 billion that was co-led by Salesforce Ventures itself.
- Visit Business Insider’s homepage for more stories.
When David Schmaier attended Salesforce’s Dreamforce conference in fall 2013, he was hoping to find a startup to buy — not to found a company himself.
At the time, Schmaier was on the board of a private equity firm, but he had a long history in the enterprise software industry, and specifically in the customer relationship management part of it, which forms Salesforce’s core market. Thirty years earlier, he had been one of the first employees at customer relationship management (CRM) software pioneer Siebel Systems, and had overseen its effort to customize its software for particular industries.
With Salesforce’s cloud-based service supplanting traditional CRM software, Schmaier was convinced there was an opportunity to repeat what he’d done decades before. In 2007, some of his former colleagues had formedVeeva, which was customizing Salesforce’s CRM system for pharmaceutical and biotechnology companies. Schmaier thought for sure six years later he’d find other startups at Dreamforce working on customizing Salesforce for other industries.
But other than Veeva, he didn’t find any.
He realized “that there really was no company to buy, that you really had to start it yourself,” Schmaier told Business Insider in a recent interview.
Having done CRM customization before, he was convinced he was the best person to start a company that would focus on it for the future.
So Schmaier got together with some of his former colleagues from Siebel and founded Vlocity. Instead of focusing narrowly, like Veeva did, or on more than 20 industries, like he had done with Siebel, Schmaier decided that Vlocity would customize Salesforce for a diverse but focused collection of some of the biggest industries around, including telecommunications, insurance, and healthcare.
He may not intended to start a company originally, but his bet has paid off. San Francisco-based Vlocity now has 700 employees and counts among its customers a slew of household names and major corporations and organizations, including Verizon, Anthem, Allstate, the government of Canada, and the US Department of Agriculture. It’s already hit $100 million in annual revenue. And, according to Schmaier, Vlocity is the fastest-growing company ever to be built on top of Salesforce’s technology platform.
“The company’s going great,” he said. “It’s really kind of a rocketship.”
Vlocity system essentially plugs into Salesforce’s. Depending on the industry a customer participates in, Vlocity’s service will add particular modules to its Salesforce dashboard. So, a telecommunications company might have a module that provides a graph their representatives can view that shows a customer’s devices and service options. For insurance companies, Vlocity offers modules that allow them to add items such as customers’ policies and coverages.
Vlocity customizes Salesforce, saving clients time and effort
Vlocity offers a standard set of modules across industries. Beyond the default batch, customers can pick and pay for which ones they need. But they can also customize the particular modules to match their workflows and business processes. The company’s service is cloud-based, and the startup updates it monthly with new features.
That’s a big advantage for Vlocity and its customers, said Rebecca Wettemann, an analyst at Nucleus Research who covers the CRM market.
“The cloud model offers greater usability and greater flexibility, and the ability to change over time,” she said.
Although Vlocity has several competitors, including Amdocs and Zipari, many of them focus on just one or two industries. Some companies have chosen in the past to create bespoke CRM systems or customize generic ones, including Salesforce, by tapping their own developers or by hiring one of the big consulting firms.
By offering CRM features that are industry specific, Vlocity can help such companies save the time and cost of creating such customized services as well as the ongoing cost of maintaining them, industry analysts said. As such, the company’s service fills a critical niche for Salesforce in particular and for its customers, said Olive Huang, an analyst who focuses on the CRM industry for research firm Gartner. “Salesforce by itself without industry templates will cost the companies too much on customization, implementation will be too long and the total cost of ownership will not be competitive,” Huang said.
It’s one of the latest tech unicorns
While Vlocity isn’t exactly a household name, it’s already caught the attention of investors. The company has raised more than $160 million in venture funding to date.
Salesforce Ventures, the cloud giant’s investment arm, was an early backer of Vlocity. In March, Salesforce Ventures co-led Vlocity’slatest funding round, a $60 million Series C that gave the startup a valuation of more than $1 billion and made it one of Silicon Valley’s latest unicorns.
It’s no wonder why, either. Services like those offered by Vlocity make the larger Salesforce platform more palatable to a wider swath of customers, broadening the potential audience for both companies.
Its other backers include consulting behemoth Accenture, Sutter Hill Ventures, Bessemer Venture Partners, and New York Life, which is one of Vlocity’s key customers.
When considering potential investments, Wildcat Venture Partners evaluates them on four key criteria, or pillars — their product, revenue, business systems, and executive team, said founding partner Bruce Clevelandin a recent blog post. Schmaier put together a team that’s not only has deep experience in the industry but also with fast-paced growth, Cleveland said. And Vlocity is offering a product that’s built on top of Salesforce’s successful platform and offers an obvious value to its business customers.
“With all four pillars covered, it was hard to envision Vlocity not succeeding,” Cleveland said.
Schmaier is building a global company
The company’s biggest challenge going forward is a geographic one, said Gartner’s Huang. Salesforce is expanding rapidly around the world and is going to want to be able to offer potential customers a service that’s tailored for their businesses or industries.
Vlocity could find it difficult to meet that demand, she said. Some of the industries for which it offers its service are covered by regulations that can vary from country to country, meaning that Vlocity may have to customize its offerings not just by industry but by locale as well.
“If they can’t follow Salesforce [quickly] enough, Salesforce will not wait for the market to be taken by competition,” Huang said. “So Salesforce will likely … develop an industry cloud themselves, or give the business to a different … partner.”
Read this:This VC says a shakeout is coming to enterprise software because titans like Oracle and Salesforce have ‘account control’ that no startup can match
For his part, Schmaier doesn’t seem worried about that. Vlocity is already offering its service in 20 countries around the world and counts among its customers some major international companies, including Sky Italia, France’s Orange, and Canada’s Rogers.
“This is an incredibly global company,” he said.
Salesforce is a key partner — and a potential competitor
What’s more, Salesforce is Vlocity’s largest outside investor and has been supportive of what the company is doing, Schmaier said. The two companies’ arrangement allows Salesforce to focus on building out its platform and Vlocity to focus on customizing for particular industries.
“Everybody does what their good at,” he said. There’s nothing to stop Salesforce from getting into Vlocity’s market, he continued, “except for if we’re good at it, and the customers are happy, and if we’re driving value and revenue for them, and they’re an investor, I think that’s reason enough for them to work with us, versus the alternative.”
And the company plans to use some of its new funds to continue its global expansion, Schmaier said. Last year it set up shop in parts of Asia and Latin America, and it plans to fill out its sales teams in those areas.
It also plans to use the new funds to continue to build out new modules and features for its service, he said. Its service collects more data for customers than does Salesforce alone, and Vlocity wants to help customers tap into Salesforce’s artificial intelligence and data analysis capabilities to help make sense of it, he said. He thinks that’s going to be important to Vlocity’s customers.
“This is kind of the core operating system … for each one of these industries,” Schmaier said. “This is like the core DNA of how you run a telco, or how you run an insurance company.”
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