Salesforce.com Buys Heroku For $212 Million In Cash
Salesforce.com has just announced that it is acquiring Heroku, which provides a Ruby application platform-as-a-service, for approximately $212 million in cash. — That's one hell of an exit for the startup, which was founded in 2007 and has raised only $13 million in funding.
Context & Ripple Effects
This is the second cash acquisition Salesforce.com has closed this year, following April's $142 million purchase of business-directory firm Jigsaw — an acquisition-led expansion pattern that now extends from sales data into developer infrastructure. Heroku, founded in 2007 with just $13 million raised, exits at roughly $212 million, one of the stronger returns of the 2010 venture class.
The strategic logic sits outside Salesforce's core: Force.com serves Apex developers inside its own walls, while Heroku's Ruby platform-as-a-service has become a default deployment target for the open-source web community. Buying it gives Salesforce a bridge to developers its own platform never reached.
First-order effects
- Heroku's founders and investors take home a ~$212 million all-cash exit on $13 million of funding, and Heroku's Ruby hosting customers gain the balance sheet of an enterprise software company behind their infrastructure.
Second-order effects
- Competing platform-as-a-service providers — VMware's SpringSource, Microsoft's Azure, Engine Yard — must now decide whether to counter with their own acquisitions or price cuts, since a public-company owner removes Heroku's funding ceiling.
Third-order effects
- The deal points toward consolidation of early PaaS startups into large SaaS portfolios, making multi-year outcomes for sub-$20-million-funded developer-infrastructure companies more likely to come through acquisition than independent IPOs.
The trend: Enterprise SaaS incumbents are buying developer platforms outright, folding open-source cloud deployment stacks into established application portfolios.