Salesforce's Acquisition of Datorama Is More Important than Google Acquiring Waze
Increasingly, Israel’s strong suit is not consumer-facing startups like Waze but SaaS companies like Datorama
On Monday, Salesforce announced it agreed to buy Israel-based marketing analytics company Datorama for over $800 million in cash.
Datorama is one of many global mega-acquisitions of SaaS (software as a service) companies this year, but it still stands out given its strong efficiency. The company raised less than $50M throughout its history and grew very efficiently. At the time of acquisition, Datorama was rumored to generate about $100 million of annual recurring revenue and still had $30 million of cash in the bank. This means that the company used only about $20 million to reach such a large revenue scale and an $800 million exit. This growth efficiency is—or at least used to be—a major characteristic of Israeli startups.
Waze’s mega acquisition in 2013 did not generate a wave of new consumer startups in the local ecosystem. We have not seen other Israeli-based consumer startups reach a similar scale ever since, and early employees of Waze have mostly stayed there, and not gone on to build the next generation of consumer startups. The acquisition of Waze was more of a blip, albeit a significant one, in the history of the local startup ecosystem.
But Datorama is an entirely different story. There are many other fast growing SaaS companies in Israel such as JFrog, SiSense, Zerto, Monday, Appsflyer, Yotpo, and Cloudinary. Datorama’s $800 million clearing price sets a new standard for these companies. I am sure many Israeli SaaS startup founders read the news this week and thought to themselves, “I can do better.” The same goes for local investors who are going to push their portfolio companies even further, now that there is a clear role model for a large SaaS exit.
But it is not just the shift in mindset, but also the talent. Unlike some of the other mega exits, Datorama is more of a “typical” SaaS company. Its model is more replicable across other SaaS startups. Early employees of Datorama, who have seen the company scale up, will eventually leave Salesforce and join other Israeli startups, helping them scale too. Previous companies that had mega exits such as Mobileye, Waze, and Trusteer, were mostly more unique and therefore did not generate a pool of talent that kept enriching the Israeli ecosystem.
Datorama, however, is likely to be the first out of a large wave of successful Israeli SaaS companies in years to come.
This article was originally published on Medium.
Amit Karp is a partner at the Israeli office of venture capital firm Bessemer Venture Partners, headquartered in Menlo-Park, California.