In an interview last month Parker Harris and Marc Benioff told the story of how when they first launched the company, they were trying to raise money and nobody would give them a dime. Benioff said he went to every venture capital in Silicon Valley — and was turned down every single time.
This could be a lesson for every startup out there with a vision, who is not able to find conventional financing for your idea. Salesforce found the money, but it took one on one fundraising, rather than the traditional VC route.
The company famously launched in an apartment that Benioff rented, and he put up some of his own money to buy the company’s first computers. Then it was time to go downtown and ask the VCs for money and it did not go well.
“I had to go hat in hand, like I was a high tech beggar, down to Silicon Valley to raise some money…And as I go from venture capitalist to venture capitalist to venture capitalist — and a lot of them are my friends, people I’ve gone to lunch with — and each and every one of them said no,” Benioff said. “Salesforce was never able to raise a single dollar from a venture capitalist,” he added.
He suggested there were a lot of reasons for that including competitors who would call after his meetings and deliberately sabotage him or people who simply didn’t believe in the cloud as a vision of the future of software.
Whatever the reasons, Salesforce was eventually able to raise over $60 million from private individual investors, before going public in 2004. In the context of today’s venture capital environment, it is pretty tough to imagine a guy like Benioff not finding one taker, especially when you consider that he was not exactly an unknown quantity. And still no one would write him a check.
But this wasn’t now. It was in the late 1990s when nobody was thinking about cloud computing and the notion of software on the internet was a distant idea. Benioff was imagining something completely different and not one firm had the vision to see what was coming. Today, Salesforce is a $10 billion company and those folks that turned him down have to be wondering what they were thinking.
“When you start something like Salesforce, you want to surround yourself with people who do believe in you, who do believe you’re going to be successful because you’re going to have a whole bunch of people who are going to tell you that you’re not, Benioff said.
That’s something every entrepreneur should remember.