9 ms·
Salesforce Buys Heroku (YC W08) For $212 Million In Cash
- wouterinho 16y agoBiggest YC exit so far?
- revorad 16y agoBy an order of magnitude I think because 280 North was the last biggest one for $20M.
- balac 16y agoI'm glad the Heroku guys got a well deserved exit like this. It also makes me more confident to develop on the platform.
- dawson 16y agoCan you explain why, it makes you more confident? (genuinely interested)
- duck 16y agoI know for my clients they would just like the name recognition that it brings. Selling someone on something they are familiar with is a lot easier.
- thibaut_barrere 16y agoI second that. Some people I know at companies really consider Ruby to be a toy. Having the SalesForces name behind it somehow will really be a change here in my case.
- balac 16y agoThe same reasons mentioned above. I've worked with a lot of very fussy clients and have a big name like Salesforce to through out there when discussing options really helps perceived credibility.
- pavs 16y agoHow did they come up with 212 million valuation? Genuinely interested to know.
- jacquesm 16y agoYou and lots of other people. I doubt it was based on Heroku profits so there must be some other major factor, especially given that this is a cash deal. It will be very interesting to see how they are going to make all that money back, it's not exactly pocket change.
- tortilla 16y agoGoodwill and growth potential.
- maukdaddy 16y agoPartially the time, resources, and cash that Salesforce would need to spend to create a similar product. Also: revenue, future growth, and intangibles (brand, goodwill, etc.)
- bl4k 16y agoIt was the point that Heroku agreed to sell at
- maxer 16y agopg hit the home run on this one
- vidar 16y agoI don't think pg will consider an exit a home run until it exceeds 1B.
- vidar 16y agoSince people seem to dislike my comment, I will explain my point. "A home run" means "ultimate success", you can not expect to do any better than that. Since pg has openly stated that he is looking for the next Google/Facebook type company, 212 million is not "a home run". Its still pretty good!
- jedc 16y agoMy back of the envelope calculation over all YC acquisitions so far has them at ~$12million returned. (Over half of that is from Heroku.) That could arguably be anywhere from $5-$20million based on your dilution assumptions, though. And direct investment costs for 208 startups is <$500k. Even if you add in all the other costs of running the program, YC is pretty f-ing successful. Then you start thinking about the other startups yet to exit (ie, Loopt, Dropbox) and you see the YC team is truly kicking ass.
- cubicle67 16y agoAnyone know what this means for Heroku? I love their service and I'd really hate to see it depart from what it is. I'm really happy for the Heroku guys, but I'm also kind of nervous because I can think of so many ways Salesforce can screw this up.
- dawson 16y ago“The next era of cloud computing is social, mobile and real-time. I call it Cloud 2,” said Marc Benioff, chairman and CEO, salesforce.com I don't think we have anything to worry about...
- pavs 16y agoI do think we have something to worry about when management type milks terms like "web 2.0" and now "Cloud 2.0" and "social".
- dawson 16y agoI was being sarcastic :)
- hristov 16y agoOf course not. He knows almost all the buzz words. Although, he could have added something about game mechanics and location awareness.
- ryanmickle 16y agoLet's get this straight, Marc Benioff doesn't give a damn about startups. His clients are the Fortune 500. When he thinks about the current clients of Heroku, he gags (and sees how much money can be made by selling to CTO and CIOs at companies like Boeing, Dell, Starbucks, etc.).
- balakk 16y agoDoesn't Heroku use EC2? Would that change?
- markbao 16y agoWow, I did not see that coming from Heroku. Congratulations all around!
- othello 16y agoIt's surprising that it comes out of the blue like this. Had there been any rumor of a coming acquisition in the past few weeks?
- mcxx 16y agoIf every Heroku employee would get an equal share from the restricted stock, that means ~ $1M in Salesforce shares per employee. Congrats!
- kondro 16y agoWow. Didn't expect that. Didn't they just do some more capital raising themselves?
- candre717 16y agoI had envisioned Heroku to be a standalone player. It's Paas model was looking like it would be a game-changer. I didn't think they would sell - at least, not this soon. I understand cash is king, but this was a company I had hoped would stand its ground to be something great.
- matwood 16y agoI'm also surprised they sold. $212M is nothing to sneeze at, but maybe Heroku was looking 5 years down the road and not seeing the growth or revenue they had expected? It's also certainly possible the investors pressured the sale to get their money back out of the deal.
- deleted 16y ago[deleted]
- PanMan 16y agoAFAIK Ycombinator invests about 15K for 6%. That 6% would now be 12 million. That's a 800x ROI. Nice :)
- wouterinho 16y agoI imagine YC's share will have been diluted quite a bit, but no doubt it's a great ROI.
- csomar 16y agoIt would be intelligent if YC take a non-diluted portion. That is if the startup raise VC money, the YC % don't get diluted and the founders % get diluted a little more.
- plinkplonk 16y agoThis is great news for Heroku and YC (congratulations folks!). That said, does anyone have any insights on why exactly SalesForce would buy Heroku? What is the business rationale? "This is Salesforce’s fifth acquisition this year. Earlier purchases include Activa Live, Sitemasher and Jigsaw. Salesforce.com also spent $170 million to fully acquire its Japanese subsidiary, Salesforce Japan." Anyone see a pattern? I don't, but then I am not that business savvy.
- swombat 16y agoMy guess as to why is here: http://swombat.com/2010/12/8/salesforce-buys-heroku http://swombat.com/2010/12/8/salesforce-buys-heroku (in short, Salesforce is looking to make a credible entry into the "public IT cloud provider" sector - much like they signalled with database.com yesterday)
- jaxn 16y agoI thought it was interesting that Heroku was specifically mentioned in the Database.com announcement yesterday. Made me think there was some sort of deeper integration. I meant to go to Heroku yesterday and see if there was a database.com plugin. When I saw the announcement today it all made sense.
- jackowayed 16y agoAs I recall, VMWare's new IaaS will give you the option to run in Salesforce's cloud.
- bigiain 16y agoI wonder how much its just Mark poking Larry with a stick. "So you bought Java, eh? Who cares? I don't need to rely on Java, I've got all the cool kids and their RoR apps!" (212M is an expensive stick though...)
- geoffc 16y agoRoR for dynamic HTML apps used to be the coolest thing but now the really new/cool stuff is written as a JSON server talking to AJAX and mobile clients. In this world node.js, clojure and erlang (maybe) are cooler than RoR.
- cuchoperl 16y agoheroku 94% pg 6% (early 2008) --- $3M Series A (mid 2008) Assuming a $2M pre-money: heroku 37.6% pg 2.4% series A 60% --- $10M Series B (2010) Assuming a $5M pre-money: heroku 12.5% pg 0.8% series A 20% series B 66.6% --- $212M Exit: heroku $26.5M pg $1.7M series A $42.4 series B $141.3 --- result: series A $3M -> $42.4M // 14X in 2.5 years series B $10M -> $141M // 14X in 1 year pg $17K -> $1.7M // 100X in 3 years All the pre-money valuations are guesstimates/fiction.
- swombat 16y ago60% dilution at Series A? I don't think so. Typical is 20-30%, afaik.
- cuchoperl 16y agoits a guess. they received Series A in a very early stage, just out of the oven of YC's (may '08)
- swombat 16y agoEven so, giving up percentage is like giving blood. I don't know of any founder who would ever willingly part with 60% of the company - particularly if it's doing well! The only people who give up 60% of a company are the poor guys on dragon's den...
- mlinsey 16y agoThis, and also competent VC's (and Heroku's VCs are top-notch) don't want much more than a third of the company in a single round, as it makes it far too difficult for the company to raise capital that it may need in later rounds.
- robfitz 16y agoYour math is just backwards. You have left them with what's taken away, rather than what they keep. A 1M on 2M pre deal would leave the founders with 66%, not 33%.
- wccrawford 16y agoI really hate it when people to give arbitrary numbers to things like 'Cloud 2'. It's still just cloud computing. 'Cloud 2' doesn't actually -mean- anything. It's not a standard. It's not like you can say something is or isn't Cloud 2 by any objective means. It's marketing speak, and who exactly is he marketing it to? All developers see right through it and know it doesn't mean anything. All clients only care that their products work. What tech they're built on doesn't mean a thing.
- jedschmidt 16y agoI bet the Heroku guys now know what NASA scientists must feel like; Cloud 2 is their Dasani. http://www.theonion.com/articles/cokesponsored-rover-finds-evidence-of-dasani-on-ma,1146/ http://www.theonion.com/articles/cokesponsored-rover-finds-e...
- fookyong 16y agoThe quote came from a press release. He's not talking to developers, he's talking to journalists and shareholders. What would you call it?
- senex 16y agowhois cloud2.com -> DNS01.SALESFORCE.COM :)
- tlrobinson 16y ago"Cloud" itself is often misused to the point where it simply means "the Internet".
- hopeless 16y agoThis sounds like stellar news for Heroku employees and investors. I'm not sure how it's going to be good for Heroku customers (like me) in the long-term. There will be the inevitable brain drain over the course of 1-2years when key staff move away as their contract clauses run out and then we'll be left with Heroku being run by SalesForce :(
- sedachv 16y agoFrom what I understand SalesForce totally shafted Sitemasher's customers by shutting the service down a month of so after the acquisition. At least with Heroku you can move to another hosting provider. Sitemasher was a closed-system "build a web application without programming!" type of service. So I'd actually start worrying about the short-term right now.
- notahacker 16y agoGotta agree with this assessment. I've found deployment to Heroku whilst tinkering with side projects fantastic, whilst Salesforce is the bane of my life in the day job. And whilst they have the in-house infrastructure to actually reduce Heroku prices, the Salesforce focus on the enterprise market hints that they're more likely to raise them. Congratulations to the Heroku team though. Is it DropBox's turn next?
- alnayyir 16y ago>Congratulations to the Heroku team though. Is it DropBox's turn next? Shut up before you jinx us all.
- StavrosK 16y agoJinx us? What could be better? You get to build a product with a clear roadmap, a vast market of disgruntled users of the product that went to shit and basically guaranteed success. I wonder if I should start building Heroku 2 now...
- 16y ago
- hristov 16y agoIt comes out to about $2000 per ap hosted on Heroku. Pretty good considering most of those aps are probably free. Of course they are hoping for growth, and Heroku has been adding almost a hundred apps per day.
- smoody 16y agoIf my "app" on Heroku is counted in that hosted app number, then people must assign a lot of value to a one page web app that simply states "welcomes to rails." I suspect there are other apps on the service that compete direectly with mine.
- Mahh 16y agoI have my account filled with tiny apps that barely do anything from when I was making apps to learn rails. There should be a ton of people like this too.
- erikpukinskis 16y agoYour app probably isn't running, so it's not included in their 106,000 number. They spin down apps every 24 hours, and only start them up when they get a hit.
- selvan 16y agoWow. What does it mean for Engine Yard & its investors...
- vidar 16y agoThis should put a hop in the step of all those Heroku-for-Django startups.
- Jgrubb 16y agoI thought that was Google App Engine?
- vidar 16y agohttp://djangy.com http://djangy.com is one
- rmc 16y agoGoogle App Engine is similar, but not identical to normal Django.
- Jgrubb 16y agoThey give you free-ness up to a rather large number of pageviews/users/whatever, right? Could the process be smoothed to make the workflow as smooth as Heroku makes it, or do the differences in Google's infrastructure make that too much of a pain to automate?
- rmc 16y agoNag, its not that easy to move from normal django to gae. A better way to do heroku-for-django would be do do heroku for django, instead of a complicated gae translation. Using gae you are limited and reliant on Google
- patio11 16y agoPretend Heroku let you use any Rails app with a simple "git push origin master", as long as your app didn't use ActiveRecord. That proviso breaks every Rails book and tutorial, most gems/plugins, and many developers. (Heroku does have a bit of a learning curve: I had to hack the internals of four gems to get a client project working right. Still, easier than mixing AR.)
- m0wfo 16y agoSo each Heroku app is valued at about $2000?
- jacquesm 16y agoI can see EngineYard opening a bottle to celebrate as well, $212M in 'mostly stock' would be landing a big one, to be landing it in cash is very good indeed. Congratulations to everybody, especially to the people that brokered the deal on Herokus side, very impressive. In other news, registrars the world over report a large uptick in domain registrations around the twin themes of rails hosting and sushi...
- Raphael 16y agoYou're saying this establishes the high value of EngineYard, since it is similar to Heroku?
- chrisaycock 16y agoSimilarity should establish the P/E ratio.
- arihelgason 16y agoNot necessarily. The businesses have been on very different trajectories.
- dawson 16y agoI can see Linode opening a bottle to celebrate too :)
- wildmXranat 16y agoAre they related or linked to this deal?
- vegashacker 16y agoI'm guessing dawson meant that now that Heroku has been acquired by Big Company it will start to suck and so people will be looking for new hosting options. Not saying that's what I think, but that's my interpretation of the comment.
- Nrsolis 16y agoI interviewed with Salesforce and I have to tell you that I found their culture a bit ....weird. It's something I couldn't put my finger on but I just had the feeling that they were all in some sort of cult or something. I didn't get the job. Probably a good thing.
- puredemo 16y agoThe cult of enterprise solutions.
- Nrsolis 16y agoIt wasn't that. The office in the area I was looking at was SMALL. That wasn't so much an issue but the vibe of the place was almost like a library.
- puredemo 16y agoI actually might enjoy that. I don't particularly dig companies who try to force everything to be "social" inside the office. There is a time for that, sure, but getting peace and quiet to get in the hacking mindset is more important to me.
- Nrsolis 16y agoI dunno. I enjoy a collaborative work environment. I was sufficiently spooked by their environment that I choked on a little practical exam they had set up as part of the interview process. Anyhow...I didn't get THAT job, but I did get a BETTER one. More money, more autonomy, more interesting work. :)
- puredemo 16y agoYeah, I think it tends to be a difference between introverted / extroverted personalities. I also have somewhat severe ADD; open office layouts are fairly negatively impacting to my productivity.
- SingAlong 16y agoCongrats to the Heroku guys! P.S: Now what happens to the free app quota?
- ig1 16y agoGiven AWS just announced a free-tier, I imagine Salesforce will want to keep the free app quota to remain competitive.
- smoody 16y agoAlso, don't forget about potential future value re: their upcoming node.js support. I suspect that'll be even more popular than their rails service at some point in the not-to-distant future.
- zackattack 16y agoi always thought heroku was the best-designed site i've ever seen
- ph0rque 16y agoSometimes when I'm feeling down I visit https://api.heroku.com/login https://api.heroku.com/login and enjoy the sunset :~)
- Kilimanjaro 16y agoNow database.com makes more sense.
- chopsueyar 16y agoGood work, Heroku!
- wensing 16y agoPlease let the Heroku folks create an interface for Salesforce that doesn't feel like enterprise Java.
- pwim 16y agoI'm happy for Heroku that they got such a great deal, but I have to say I'm disappointed by this. Heroku seemed like they were in a great position to do amazing things. I thought they had a solid revenue model. I had hoped Heroku would be the one doing the acquiring.
- dabeeeenster 16y agoSay "solid revenue model" to yourself whilst someone is waving $200M in our face.
- rdl 16y agoThis is great news for everyone in the general cloud infrastructure space too -- expanding the number of viable potential acquirers for startups.
- Jgrubb 16y agoLots of wellwishers in the Heroku IRC channel this morning...
- acconrad 16y agoEveryone is happy for Heroku (I'm pretty sure this beats Mint for the canonical "ideal exit" case), and everyone is scared as a customer (I have no idea where I would build and alternatively easy-to-use Rails app that was as cheap). ffffuuuuuuuu
- steveklabnik 16y agoAt least you can take heart in Rails being pretty easy to deploy these days. Granted, getting Heroku level reliability, ease of scaling, etc, but since you said 'cheap,' I'll assume you weren't using much of that anyway. ;)
- papertiger 16y agoI've honestly never understood why startups want to be acquired (besides the monetary gain for individual employees). Doesn't acquisition often destroy or dilute the very successes they've worked so hard to build? (I worked for an acquisitive company that worsened nearly every product/company it acquired.) Why not just focus on making your business better? Heroku will now be subject to all kinds of pressures and asinine ideas that may not relate to their core offering. As a Heroku user I am concerned and saddened. Can anyone offer any perspective? I'm puzzled by the acquisition mindset.
- guynamedloren 16y agoMoney.
- hackinthebochs 16y agoDespite what gets repeated in the echo chamber that surrounds hackernews that money isn't the main motivator for entrepreneurs and hackers, it is in fact all about the money. Of course, day-to-day it has to be about much more than money otherwise it would be impossible to stay motivated. But the end goal is almost always about making a boatload of cash.
- jey 16y agoI see two main reasons: - Freedom to move on to the next project. I bet most entrepreneurs are more interested in creating than maintaining. - Money/security. The trend toward payouts when raising major rounds is helping with this issue, but still the resources available change significantly with a big payout, plus you can diversify your income stream to hedge against contingencies.
- space-monkey 16y agoI currently design new products for an established company. When I finish a product, there's a trained staff of production, sales and support people that make the product successful. (Just speculating but) it's quite possible that the Heroku folks think they can't grow as fast without some additional business infrastructure. If this accelerates their trajectory, then they'll quickly get some distance between themselves and the zoo of other (not as slick) app hosting platforms. Just having someone else to take care of the legal side of HR so that you can go back to product development, while at the same time putting enough in the bank to live on the beach forever, may have looked attractive. Lots of possibilities, but a billion dollar cash-out is not the only way to make yourself happy in life.
- c00p3r 16y agoHow it is connected with their CRM business?
- webwright 16y agoWow- congrats. Great bunch of founders who totally deserve this. I think this is the biggest YC exit, no?
- deleted 16y ago[deleted]
- jedc 16y agoYes, based on the spreadsheet I keep: https://spreadsheets.google.com/ccc?key=0AkkhSN3vaY4jdF90b1l1Vnl5NmZjaTBNQWlJYVozMEE&hl=en#gid=0 https://spreadsheets.google.com/ccc?key=0AkkhSN3vaY4jdF90b1l...
- Lewisham 16y agoThe funny (as in strange, not haha) thing is when I read that 200ish number, the first thing that popped into my head was "that seems cheap." I've either been completely miscalibrated by the supposed GroupOn valuation, or I really liked Heroku. Probably both.
- Swannie 16y agoI thought "wow, 200M!!". That's a huge value per customer! (Considering how small most of them are). And yes, the GroupOn valuation is bubble.
- joelg87 16y agoWow, awesome list, good work sir.
- sixwing 16y agoI'm glad that the Heroku team will continue running the company with some degree of independence. They've done great things for the community, and have amazing vision for the product's trajectory. Congrats, guys!
- kristofer 16y agowow. this is surprising. they are RoR honchos.
- sdizdar 16y agoVery very good news for Heroku employees and investors. I also hope that Amazon will start bidding war. However, knowing Salesforce (and fact that they have many very very big enemies in this business) I'm concern about future of Heroku offering in the current form. As far as I know, Salesforce is not a hacker company - they remind me a little of Yahoo! (product managers are running the show). And, don't get me wrong, in this case, not being a "hacker company" is a good thing. But, I assume that Heroku will be transformed to be much profitable and target bigger margin businesses.
- datsro 16y agowill this affect the pricing model for small ruby builds (Free)? I hope not. As a designer/developer this service has been beneficial to sell Ruby to my more technical clientele.
- jcapote 16y agoI just hope some business guy doesn't go in there and "rethink" heroku
- kunley 16y agoI hope this will have them a kick to spread into Europe. For now, as they use only US EC2 regions, it's only possible for many EU-located users to have a prototype or a toy project on Heroku. Believe me, those few routers more and pings > 100ms do make a difference.
- spencerfry 16y agoCongrats, guys! We'll see what comes from this.
- js4all 16y agoCongrats. This is huge. I hope Heroku's Node.JS beta does not suffer from this.
- ivankirigin 16y agofuck yeah!
- marcbenioff 16y agoYou're all Salesforce developers now! Muhahaha!
- jacoblyles 16y agoMan, the death of the IPO market and the increasing oligopoly in the tech marketplace is so depressing.
- jdavid 16y agoThe scary thing is that oracle, ms, apple, ibm, or google could still by a compelling level of salesforce shares on yearly revenue alone.
- thedeuce 16y agoI guess the Heroku guys didn't have porsche. Way to sell out your users at the drop of a dime!
- stephth 16y agoI'm not entirely surprised. Heroku's manual-scale model has shown a strong focus to sell to the enterprises. The App Engine's auto-scale model (no expenses if no traffic, but always ready to face peaks) is largely friendlier to individuals on a budget. I hope these news will help boost projects like appengine-jruby.
- epynonymous 16y ago27M USD, 30 employees, this is sweet.
- kin 16y agoNot that there is any correlation (Heroku's awesome and those guys are simply great talent) but, RoR start-ups seem to be doing amazing nowadays with Hulu in high eval, Groupon rumored to reject a $5B deal, Twitter with its momentum, and now Heroku.
- gsivil 16y agoJust a question: how much money YC will earn from that?
- rkwz 16y agoWhat is the significance of this acquisition? Which companies/competitors (Google, Amazon etc) does it affect?