Bay Partners is re-branding itself in the wake of several high-profile departures last year by extending its commitment to platform-related micro-investments.
The firm announced last week it has partnered with Salesforce.com (NYSE: CRM) to commit $15 million over three years to early stage startups using the company’s Force.com application platform to develop services. Each initial investment will range between $500,000 and $2 million. Bessemer Venture Partners also joined the investment keiretsu with a $10 million commitment. San Francisco-based Salesforce will provide advisory services to the venture firms.
Bay Partners has been working with startups looking to build applications based on Salesforce for at least two years, according to Partner Salil Deshpande. It has seven startups in the software-as-a-service (SaaS) space and at least three of those have plugged into the software giant’s development platform.
The companies are doing well, Deshpande says. Eloqua, Toronto-based makers of automation software, is booking revenue in the tens of millions, and recently closed another round of venture financing at a significant increase in valuation, Deshpande says. Last year, the company raised $13 million from Bay Partners and JMI Equity.
The partnership with Salesforce came about organically. It turned out that Salesforce maintains an internal list of the 50 or so strategic companies that are developing on its platform. “We came to know that six of them were our investments,” Deshpande says. “They saw the success of our AppFactory announcement and saw some of the deals we were doing and it just made sense for both sides.”
AppFactory, launched last summer, targets startups building applications for social networking site Facebook. Facebook itself copied the idea last month, announcing a $10 million fund focused on application developers. Facebook partnered with Accel Partners and the Founders Fund to launch the program.
Bay Partners is looking to bring on another syndication partner for its Facebook AppFactory program, Deshpande says. He would not specify what company or firm might be tapped.
The firm also plans to launch another platform-oriented investment program soon. Deshpande declined to say if the next platform play would be related to mobile phones, which has been the rumor.
For Bay Partners, the push to back Facebook and Salesforce apps comes as the firm aims to reinvigorate itself since it closed fund XI in 2005 with $290 million in capital commitments.
Last fall, Bay Partners asked investors to amend the terms of its current fund, so that General Partners Chris Noble and Bob Williams could transition to part-time roles. The two have subsequently been dropped from the firm’s website. The departure of Noble and Williams came after firm co-founder John Freidenrich retired during 2005 and General Partner Loring Knoblauch resigned.
A few months after Noble and Williams departed, Dino Vendetti left to join startup firm Formative Ventures. Bay Partners responded by promoting Eric Chin and Neil Sadaranganey each to partner. They joined in 2005, Chin as venture partner and Sadaranganey as an entrepreneur-in-residence.
“Positive change is sometimes easier when there’s already lots of change going on,” Deshpande says.
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