Salesforce Inc. said today it will splash $1.9 billion in cash to buy a startup called Own Co., previously known as OwnBackup Ltd., which sells tools for backing up data in cloud-based applications.
The deal is expected to close by the end of January 2025, assuming its gets approval from regulators. The amount represents a big discount on the $3.35 billion valuation proclaimed by Own in August 2021, when it closed on its last, and biggest, funding round of $240 million.
The deal is notable because it’s Salesforce’s first big acquisition since it announced it would eliminate a committee tasked with looking at mergers and acquisitions just over two years ago.
That decision was taken by Salesforce co-founder and Chief Executive Marc Benioff shortly after activist investors Starboard Value LLP and ValueAct Capital LLC bought stakes in the company and started to apply pressure on it over its slow-growing profitability. In particular, they raised concerns about its seemingly regular tendency to spend billions of dollars on assets such as Tableau Software, Slack and MuleSoft, without seeing a significant return on those investments — at least according to the investors.
Own’s declining value highlights the struggles faced by many cloud software companies in recent years, which are getting less attention from investors than before. The startup was once seen as a hot property, and it closed on a string of increasingly bigger funding rounds in 2017, 2018, 2019, 2020 and two in 2021, with Salesforce Ventures participating in every one of those rounds.
Its prospects were initially boosted by the onset of the COVID-19 pandemic in early 2020 and the institution of remote work policies around the world. But its fortunes began to diminish toward the end of 2021, when central banks began raising interest rates to ward off inflation.
The rising interest rates prompted enterprises to focus more on profitability, which meant many had to reduce spending on technology and consolidate their business operations. As a result, that applied significant pressure on cloud software startups such as Own.
Many of Own’s publicly traded peers, including Anaplan Inc. Avalara Inc., Coupa Software Inc., Qualtrics Inc., Sumo Logic Inc. and Zendesk Inc., opted to go private, while Own itself sought to diversify its business. Having once been focused purely on Salesforce, it pivoted to bring its software to Microsoft Corp.’s Dynamics enterprise offering and later added support for ServiceNow Inc. as well.
Own’s flagship Data Platform provides capabilities around data archiving, seeding, security and analytics, and helps companies to ensure the availability, compliance and security of their most important software-as-a-service data. Its analytics tools also help companies to inform decision-making in order to gain competitive advantages over their rivals.
Salesforce said the importance of data for artificial intelligence initiatives means that its customers are increasingly worried about the need to mitigate the risk of system failures, cyberattacks and human errors. By buying Own and integrating its capabilities within its own software stack, Salesforce will be able to offer customers a more comprehensive set of tools for data protection and loss prevention.
The customer relationship management giant said the acquisition of Own won’t have any impact on its shareholder return policies, adding that the deal will be accretive to cash flow beginning in the second year after it closes.
Though Salesforce has held back on bigger acquisitions recently, it hasn’t shied away from smaller acquisitions, announcing deals to buy startups such as PredictSpring Inc. and Tenyx Inc. in the last few weeks.