Salesforce Buys Heroku (YC W08) For $212 Million In Cash

http://techcrunch.com/2010/12/08/breaking-salesforce-buys-heroku-for-212-million-in-cash/

by gspyrou • 16 years ago

717 198 16 years ago

techcrunch.com

wouterinho2• 16 years ago

Biggest YC exit so far?

revorad• 16 years ago

By an order of magnitude I think because 280 North was the last biggest one for $20M.

balac2• 16 years ago

I'm glad the Heroku guys got a well deserved exit like this. It also makes me more confident to develop on the platform.

dawson4• 16 years ago

Can you explain why, it makes you more confident? (genuinely interested)

duck• 16 years ago

I know for my clients they would just like the name recognition that it brings. Selling someone on something they are familiar with is a lot easier.

balac2• 16 years ago

The same reasons mentioned above. I've worked with a lot of very fussy clients and have a big name like Salesforce to through out there when discussing options really helps perceived credibility.

pavs2• 16 years ago

How did they come up with 212 million valuation? Genuinely interested to know.

jacquesm2• 16 years ago

You and lots of other people.

I doubt it was based on Heroku profits so there must be some other major factor, especially given that this is a cash deal.

It will be very interesting to see how they are going to make all that money back, it's not exactly pocket change.

tortilla• 16 years ago

Goodwill and growth potential.

maukdaddy• 16 years ago

Partially the time, resources, and cash that Salesforce would need to spend to create a similar product.

Also: revenue, future growth, and intangibles (brand, goodwill, etc.)

bl4k• 16 years ago

It was the point that Heroku agreed to sell at

maxer• 16 years ago

pg hit the home run on this one

vidar6• 16 years ago

I don't think pg will consider an exit a home run until it exceeds 1B.

vidar6• 16 years ago

Since people seem to dislike my comment, I will explain my point. "A home run" means "ultimate success", you can not expect to do any better than that. Since pg has openly stated that he is looking for the next Google/Facebook type company, 212 million is not "a home run". Its still pretty good!

jedc3• 16 years ago

My back of the envelope calculation over all YC acquisitions so far has them at ~$12million returned. (Over half of that is from Heroku.) That could arguably be anywhere from $5-$20million based on your dilution assumptions, though.

And direct investment costs for 208 startups is <$500k. Even if you add in all the other costs of running the program, YC is pretty f-ing successful.

Then you start thinking about the other startups yet to exit (ie, Loopt, Dropbox) and you see the YC team is truly kicking ass.

jedc3• 16 years ago

Damn, I'm an idiot. Make that direct investment costs of 208 startups is <$5million. (Order of magnitude error; shouldn't have been multitasking when I wrote the comment!)

Still, YC has still returned (and potentially as much as quadrupled) direct costs already, without a number of companies still to exit.

cubicle67• 16 years ago

Anyone know what this means for Heroku? I love their service and I'd really hate to see it depart from what it is.

I'm really happy for the Heroku guys, but I'm also kind of nervous because I can think of so many ways Salesforce can screw this up.

dawson4• 16 years ago

“The next era of cloud computing is social, mobile and real-time. I call it Cloud 2,” said Marc Benioff, chairman and CEO, salesforce.com

I don't think we have anything to worry about...

pavs2• 16 years ago

I do think we have something to worry about when management type milks terms like "web 2.0" and now "Cloud 2.0" and "social".

hristov3• 16 years ago

Of course not. He knows almost all the buzz words. Although, he could have added something about game mechanics and location awareness.

ryanmickle• 16 years ago

Let's get this straight, Marc Benioff doesn't give a damn about startups. His clients are the Fortune 500. When he thinks about the current clients of Heroku, he gags (and sees how much money can be made by selling to CTO and CIOs at companies like Boeing, Dell, Starbucks, etc.).

balakk• 16 years ago

Doesn't Heroku use EC2? Would that change?

markbao• 16 years ago

Wow, I did not see that coming from Heroku. Congratulations all around!

othello• 16 years ago

It's surprising that it comes out of the blue like this. Had there been any rumor of a coming acquisition in the past few weeks?

mcxx• 16 years ago

If every Heroku employee would get an equal share from the restricted stock, that means ~ $1M in Salesforce shares per employee. Congrats!

kondro• 16 years ago

Wow. Didn't expect that. Didn't they just do some more capital raising themselves?

candre717• 16 years ago

I had envisioned Heroku to be a standalone player. It's Paas model was looking like it would be a game-changer. I didn't think they would sell - at least, not this soon. I understand cash is king, but this was a company I had hoped would stand its ground to be something great.

matwood• 16 years ago

I'm also surprised they sold. $212M is nothing to sneeze at, but maybe Heroku was looking 5 years down the road and not seeing the growth or revenue they had expected?

It's also certainly possible the investors pressured the sale to get their money back out of the deal.

PanMan• 16 years ago

AFAIK Ycombinator invests about 15K for 6%. That 6% would now be 12 million. That's a 800x ROI. Nice :)

wouterinho2• 16 years ago

I imagine YC's share will have been diluted quite a bit, but no doubt it's a great ROI.

csomar• 16 years ago

It would be intelligent if YC take a non-diluted portion. That is if the startup raise VC money, the YC % don't get diluted and the founders % get diluted a little more.

plinkplonk• 16 years ago

This is great news for Heroku and YC (congratulations folks!). That said, does anyone have any insights on why exactly SalesForce would buy Heroku? What is the business rationale?

"This is Salesforce’s fifth acquisition this year. Earlier purchases include Activa Live, Sitemasher and Jigsaw. Salesforce.com also spent $170 million to fully acquire its Japanese subsidiary, Salesforce Japan."

Anyone see a pattern? I don't, but then I am not that business savvy.

swombat3• 16 years ago

My guess as to why is here:

http://swombat.com/2010/12/8/salesforce-buys-heroku

(in short, Salesforce is looking to make a credible entry into the "public IT cloud provider" sector - much like they signalled with database.com yesterday)

jaxn• 16 years ago

I thought it was interesting that Heroku was specifically mentioned in the Database.com announcement yesterday. Made me think there was some sort of deeper integration. I meant to go to Heroku yesterday and see if there was a database.com plugin. When I saw the announcement today it all made sense.

jackowayed• 16 years ago

As I recall, VMWare's new IaaS will give you the option to run in Salesforce's cloud.

bigiain2• 16 years ago

I wonder how much its just Mark poking Larry with a stick.

"So you bought Java, eh? Who cares? I don't need to rely on Java, I've got all the cool kids and their RoR apps!"

(212M is an expensive stick though...)

geoffc• 16 years ago

RoR for dynamic HTML apps used to be the coolest thing but now the really new/cool stuff is written as a JSON server talking to AJAX and mobile clients. In this world node.js, clojure and erlang (maybe) are cooler than RoR.

hristov3• 16 years ago

One can make a pretty good case that Heroku and the like is where all web development is headed pretty soon.

One thing that can be gleaned from the history of languages and computing platforms is that once computing performance started skyrocketing, it has been the easiest languages and platforms that have been winning. And RoR is very easy and Heroku is a very easy way to deploy and host RoR.

If Heroku becomes the place to be for commercial web apps, if it becomes the visual studio for web apps, those 200 mill will look like a steal.

dasil0032• 16 years ago

The Heroku model is not ideal for commercial apps, it's good for very small apps, but if you scale up it's not cost effective at all. Things that would take a half-hour to setup with puppet on amazon become add-ons that you have to pay large ongoing fees for. Instead of investing in building out infrastructure optimized for your application where you have options on how to grow, you're shoe-horned into a one-size fits all model, that starts out cheap, but has a built-in premium which becomes more and more painful the larger you grow. We host our app on Engine Yard AppCloud which is considerably more open in that they give you access to the cloud "metal" but even there the clock is ticking to where it just makes more sense to hire a full-time systems engineer and build it out ourselves.

Don't get me wrong, I understand the value proposition of a highly tuned blackbox Rails stack, and there is certainly no faster way to get up and running. So it may become the place to be for early stage startups and prototypes. But the particular model that Heroku has is sort of like the Drupal of infrastructure: it's an amazing platform that has everything you need out of the box, but which also comes with a lot of baggage that can easily become an albatross when you are really trying to dial in a growing app.

axod3• 16 years ago

Whilst Amazon cloud, Heroku etc may be hot for startups who don't really mind about throwing money away, I don't think that will last. Both are significantly, prohibitively expensive for companies interested in turning a profit or having a business model.

It's more like "VC funded companies throw money at hosting at the moment".

notahacker2• 16 years ago

The developer-friendly workflow of Heroku meshes very nicely with Salesforce's platform building strategy.

ig14• 16 years ago

Activia Live and Jigsaw relate to Salesforce's core CRM business, Sitemasher and Heroku are both cloud hosting platforms.

Salesforce has been pushing heavily into the cloud to compete with AWS and Azure (see their recent Database.com announcement), these acquisitions give them a strong position in the market.

Heroku in the past has said they plan to offer multiple cloud backends, so it wouldn't surprise me if that's how they got talking to Salesforce.

nikcub4• 16 years ago

"Salesforce has been pushing heavily into the cloud to compete with AWS and Azure"

Just five years too late. They should have built AWS way before anybody else (esp Amazon) did. They were sitting on the opportunity for so long, had a customer base that was already sold on the cloud.

They are now playing catch-up, with acquisitions and the release of Database.com etc.

Huge opportunity missed, the company could have been 4-5x the size it is today.

zackattack2• 16 years ago

About a year ago, some of my friends wanted to use one of SalesForce's extensions to start taking payments for their telephony business. I suggested they use Heroku's pricing page as a template for how to design excellent service pricing.

hasenj2• 16 years ago

Salesforce want to position themselves as a platform-as-a-service provider. They provide the infrastructure for your apps.

smysore• 16 years ago

I think it has something to do with the fact that Microsoft had just invested close to $10M in Heroku in the weeks prior to the acquisition (making Microsoft the biggest investee in Heroku). Right now, Salesforce is positioning themselves against the Microsofts and the Oracles (versus the smaller CRMs like ZoHo, Sugar, etc.); the Heroku purchase was probably more strategic than anything else.

I think this is one of the reasons why Salesforce has agreed to let Heroku "run themselves" instead of taking over and ruining the party. It's also a good sign for Heroku customers since it's unlikely that Salesforce will make a ton of changes to Heroku's service until they can figure out how best to integrate the two services.

cuchoperl3• 16 years ago

heroku 94%

pg 6% (early 2008)

---

$3M Series A (mid 2008) Assuming a $2M pre-money:

heroku 37.6%

pg 2.4%

series A 60%

---

$10M Series B (2010) Assuming a $5M pre-money:

heroku 12.5%

pg 0.8%

series A 20%

series B 66.6%

---

$212M Exit:

heroku $26.5M

pg $1.7M

series A $42.4

series B $141.3

---

result:

series A $3M -> $42.4M // 14X in 2.5 years

series B $10M -> $141M // 14X in 1 year

pg $17K -> $1.7M // 100X in 3 years

All the pre-money valuations are guesstimates/fiction.

swombat3• 16 years ago

60% dilution at Series A? I don't think so. Typical is 20-30%, afaik.

cuchoperl3• 16 years ago

its a guess. they received Series A in a very early stage, just out of the oven of YC's (may '08)

loyaltyspace• 16 years ago

Is that really how much VC dilutes you?

From 94 > 37% series A is incredible, and ending up with 12.5%.

I wouldn't exactly be crying into my beer today if I was them, but I have to wonder if VC was worth it vs building organically for a few more years.

Especially when they are all Amazon based etc. Where did the money go?

earlyresort• 16 years ago

No, the premoney in each stage is too low to be credible.

Generally a venture round will be for between 33% and 20% of the company, trending lower as the company gets further along. 25% is a pretty typical number.

If you assume each of Heroku's two rounds were for 25% of the company, then 94% -> 70.5% after the A -> 52.9% after the B. (It seems counterintuitive to sell 25% of the company twice but end up with more than 50% of it, but this is because the Series B dilutes the Series A as well as the common.) The premoney valuations implied for the A & the B would be $9MM and $30MM respectively.

The reality would be lower, because this doesn't take into consideration things like option plans. If we assume they created a 10% option pool before the A and then used it all, the dilution looks more like this:

94% -> 84.6% (options) -> 63.4% (A) -> 47.5% (B)

Of course these things can still vary pretty widely. But no one's doing $10MM on $5MM premoney unless something has gone pretty wrong. In that case I'd expect the management team to get topped up with additional options to keep them motivated.

As an aside, the calculation of who made what also assumes that the investors have no pro-rata rights, which is wrong. When a company raises $10MM in a Series B, not all $10MM comes from the Series B investor.

nikcub4• 16 years ago

That is a problem with the YC model in that they can't (or don't) fill follow-on rounds and are thus diluted.

Most VCs that invest in an A will set aside 3-4x that to invest in later rounds (Fred Wilson wrote a post about this recently)

(ps. your pre values are way too low (the 3 at A was probably on 10) but the point of dilution still applies. They also would have sliced out a 20-30% option pool at A)

tzury• 16 years ago

s/pg/yc/g

dschobel• 16 years ago

Thanks for the clarification. I was wondering whether PG invests outside of YC if he likes a team more than his cofounders do.

kore• 16 years ago

> $3M Series A (mid 2008) Assuming a $2M pre-money

> $10M Series B (2010) Assuming a $5M pre-money

I know this was just a thought exercise, but shouldn't their valuation have increased between 2008 and 2010?

cuchoperl3• 16 years ago

Yes, you are right. If we assume an increase of the value of $3M between 2008-2010, then a pre-money of $8M in Series B, then the Heroku share would be 20.9% and pg's 1.3%. pg's multiple is 162x.

gdudeman• 16 years ago

Ignition, the lead in the final round, has stated that they made over $50m on the deal, so probably triple that valuation - $10M was on a $25-40m range.

http://www.techflash.com/seattle/2010/12/ignition-backed-her...

mlinsey2• 16 years ago

A 33% per-round dilution would be much more sensible (and more common). In the right fundraising environment this might even be 20% or 25%, but 33% is the right default assumption if you have no information.

Another hidden variable is the presence of liquidation preferences for VCs. Some funding agreements allow VC's to "double-dip", ie take their liquidation preference and then also take their full percentage of the leftover amount. However, with YC advising them and with the Heroku founders having a reputation inside YC as being good fundraisers, I think there's no way Heroku's VC's got this.

If you assume no double-dipping, a 33% dilution per round, a YC-average 6% stake in Heroku, and an average amount per YC startup of $20K, YC's share of Heroku is enough to pay for their investment in every YC company ever up until this point, and also all the companies in the next two batches assuming they are the same size as the most recent (and largest ever) batch. Anything they eventually get from Dropbox, AirBnB, etc would be pure profit.

wccrawford• 16 years ago

I really hate it when people to give arbitrary numbers to things like 'Cloud 2'.

It's still just cloud computing. 'Cloud 2' doesn't actually -mean- anything. It's not a standard. It's not like you can say something is or isn't Cloud 2 by any objective means.

It's marketing speak, and who exactly is he marketing it to? All developers see right through it and know it doesn't mean anything. All clients only care that their products work. What tech they're built on doesn't mean a thing.

jedschmidt• 16 years ago

I bet the Heroku guys now know what NASA scientists must feel like; Cloud 2 is their Dasani.

http://www.theonion.com/articles/cokesponsored-rover-finds-e...

fookyong• 16 years ago

The quote came from a press release. He's not talking to developers, he's talking to journalists and shareholders.

What would you call it?

senex• 16 years ago

whois cloud2.com -> DNS01.SALESFORCE.COM :)

tlrobinson• 16 years ago

"Cloud" itself is often misused to the point where it simply means "the Internet".

hopeless• 16 years ago

This sounds like stellar news for Heroku employees and investors.

I'm not sure how it's going to be good for Heroku customers (like me) in the long-term. There will be the inevitable brain drain over the course of 1-2years when key staff move away as their contract clauses run out and then we'll be left with Heroku being run by SalesForce :(

notahacker2• 16 years ago

Gotta agree with this assessment.

I've found deployment to Heroku whilst tinkering with side projects fantastic, whilst Salesforce is the bane of my life in the day job. And whilst they have the in-house infrastructure to actually reduce Heroku prices, the Salesforce focus on the enterprise market hints that they're more likely to raise them.

Congratulations to the Heroku team though. Is it DropBox's turn next?

alnayyir2• 16 years ago

>Congratulations to the Heroku team though. Is it DropBox's turn next?

Shut up before you jinx us all.

samratjp2• 16 years ago

Yeah, I wouldn't be surprised if Dropbox became the first YC company to hit IPO.

davidedicillo• 16 years ago

Time to start keeping an eye on other hosting solutions. I'm love Heroku and I host a decent number of paying applications on it, but I'm afraid that when the original people will start leaving we'll be left with just another big corporation.

jmtame2• 16 years ago

if you're a fan of python, keep your eye on djangy. those guys are sharp.

yesno3• 16 years ago

Nothing last forever.

Eventually all the "startups that you love" will either close their door or be acquired and I think people should expect that since day 1.

tamersalama• 16 years ago

Why are these the only 2 outcomes? Why not grow a business?

notyourwork• 16 years ago

Google? I do not recall them being "acquired".

_pius• 16 years ago

I'm actually really excited about it as a customer. Heroku's solution is outstanding, but it was clear that they were having trouble scaling up customer support; this acquisition makes it more likely that they'll have the support staff needed to serve their customer base.

Big congrats to them!

hasenj2• 16 years ago

The support staff of a big company? Not really looking forward to that.

sedachv• 16 years ago

From what I understand SalesForce totally shafted Sitemasher's customers by shutting the service down a month of so after the acquisition. At least with Heroku you can move to another hosting provider. Sitemasher was a closed-system "build a web application without programming!" type of service. So I'd actually start worrying about the short-term right now.

hristov3• 16 years ago

It comes out to about $2000 per ap hosted on Heroku. Pretty good considering most of those aps are probably free. Of course they are hoping for growth, and Heroku has been adding almost a hundred apps per day.

smoody2• 16 years ago

If my "app" on Heroku is counted in that hosted app number, then people must assign a lot of value to a one page web app that simply states "welcomes to rails." I suspect there are other apps on the service that compete direectly with mine.

Mahh• 16 years ago

I have my account filled with tiny apps that barely do anything from when I was making apps to learn rails. There should be a ton of people like this too.

erikpukinskis• 16 years ago

Your app probably isn't running, so it's not included in their 106,000 number. They spin down apps every 24 hours, and only start them up when they get a hit.

selvan• 16 years ago

Wow. What does it mean for Engine Yard & its investors...

vidar6• 16 years ago

This should put a hop in the step of all those Heroku-for-Django startups.

Jgrubb4• 16 years ago

I thought that was Google App Engine?

vidar6• 16 years ago

http://djangy.com is one

rmc2• 16 years ago

Google App Engine is similar, but not identical to normal Django.

shimon2• 16 years ago

GAE looks like this at first glance. But it turns out to be focused 90% on scalability, and 10% on easy deployment. The main issue for Django developers is that on GAE, you're using a nonrelational database. Assumptions about the RDBMS run deep in Django and in most Django apps, and great effort (see django-nonrel) is required to present even the thinnest veneer of compatibility.

In my experience (>2 years of GAE consulting for paying clients) I think using GAE is probably the wrong choice for most new projects. If you're new, you need to be able to iterate ideas quickly and you will value tools that (1) give you flexibility, (2) offer a lot of useful reusable libraries, and (3) have a large and stable culture (good docs, stable APIs, people you can hire). And if you have a scalability challenge somewhere down the road, it would make perfect sense to rewrite most of your app on a platform like GAE -- after all, by that point you'll have the basics of design quite solid, so you don't need as much flexibility, and every other part of the effort gets easier when you have money to throw at it.

It is a common misconception, though, that AppEngine serves the same needs as Heroku, or is a Heroku equivalent for Django. I think that's the main reason we didn't see more Herokus-for-Django* earlier.

*Disclaimer: I am a founder of http://djangozoom.com/ .

ig14• 16 years ago

Except that Heroku for Django in the long term is likely to be Heroku (given they've said in the past they plan to expand to other languages).

vidar6• 16 years ago

Then they better get some hardcore Django people onboard. The reason (well, one of the reasons) that Heroku was so successful was that the top people were Ruby hackers themselves.

jacoblyles2• 16 years ago

Unlikely. Development speed is an inverse function of company size after a certain point. Startups will eat Salesforce's lunch at developing something new.

Then Salesforce can just buy them.

shimon2• 16 years ago

endlessvoid94• 16 years ago

Djangy has 600+ registered beta users, and we're inviting more all the time. Check us out!

http://www.djangy.com

m0wfo• 16 years ago

So each Heroku app is valued at about $2000?

jacquesm2• 16 years ago

I can see EngineYard opening a bottle to celebrate as well, $212M in 'mostly stock' would be landing a big one, to be landing it in cash is very good indeed.

Congratulations to everybody, especially to the people that brokered the deal on Herokus side, very impressive.

In other news, registrars the world over report a large uptick in domain registrations around the twin themes of rails hosting and sushi...

Raphael• 16 years ago

You're saying this establishes the high value of EngineYard, since it is similar to Heroku?

chrisaycock• 16 years ago

Similarity should establish the P/E ratio.

dawson4• 16 years ago

I can see Linode opening a bottle to celebrate too :)

wildmXranat• 16 years ago

Are they related or linked to this deal?

Nrsolis3• 16 years ago

I interviewed with Salesforce and I have to tell you that I found their culture a bit ....weird. It's something I couldn't put my finger on but I just had the feeling that they were all in some sort of cult or something.

I didn't get the job. Probably a good thing.

puredemo3• 16 years ago

The cult of enterprise solutions.

Nrsolis3• 16 years ago

It wasn't that.

The office in the area I was looking at was SMALL. That wasn't so much an issue but the vibe of the place was almost like a library.

synnik2• 16 years ago

We got the same impression when evaluating them for our enterprise. 98% of their sales pitch made them sound very sharp, and their technology is impressive.

But that last 2% made us scratch our heads and say, "Really?"

Stuff like telling us that they cannot possibly break our apps when they push new code to the underlying platforms, that we have no need for backups because version control will suffice, etc.

These things are probably true for operational needs, but they seemed to not think deeply about DR or edge cases.

pmorelli• 16 years ago

as part of engineering at sfdc, I promise you we think very deeply about backups, DR and edge cases, as well as backwards compatibility, and not breaking your code/apis.

I'd like to think we have a good track record. not perfect, of course, but don't believe everything the sales dudes say. ;o)

doyoulikeworms• 16 years ago

Could you explain what you mean a bit? I find the salesforce culture to be pretty cool.

Disclosure: I am an engineer at salesforce.com. That said, I'm thrilled about Heroku. It has been my favorite startup since I heard about it.

bigiain2• 16 years ago

It is a bit , umm, different - I always describe my Salesforce Sales Engineer friend as "having drunk the Salesforce kool-aid". To me it seems like he's bought into "the company vision" in much the same way I see in many Apple employees (and customers).

He's a smart guy though, and he's been there a while now, and he's still fully convinced they're "going to change the world".

Maybe they will - I can think of _worse_ companies "winning"...

SingAlong• 16 years ago

Congrats to the Heroku guys!

P.S: Now what happens to the free app quota?

ig14• 16 years ago

Given AWS just announced a free-tier, I imagine Salesforce will want to keep the free app quota to remain competitive.

smoody2• 16 years ago

Also, don't forget about potential future value re: their upcoming node.js support. I suspect that'll be even more popular than their rails service at some point in the not-to-distant future.

zackattack2• 16 years ago

i always thought heroku was the best-designed site i've ever seen

ph0rque• 16 years ago

Sometimes when I'm feeling down I visit https://api.heroku.com/login and enjoy the sunset :~)

Kilimanjaro• 16 years ago

Now database.com makes more sense.

chopsueyar• 16 years ago

Good work, Heroku!

wensing• 16 years ago

Please let the Heroku folks create an interface for Salesforce that doesn't feel like enterprise Java.

pwim• 16 years ago

I'm happy for Heroku that they got such a great deal, but I have to say I'm disappointed by this. Heroku seemed like they were in a great position to do amazing things. I thought they had a solid revenue model. I had hoped Heroku would be the one doing the acquiring.

dabeeeenster• 16 years ago

Say "solid revenue model" to yourself whilst someone is waving $200M in our face.

rdl• 16 years ago

This is great news for everyone in the general cloud infrastructure space too -- expanding the number of viable potential acquirers for startups.

Jgrubb4• 16 years ago

Lots of wellwishers in the Heroku IRC channel this morning...

acconrad• 16 years ago

Everyone is happy for Heroku (I'm pretty sure this beats Mint for the canonical "ideal exit" case), and everyone is scared as a customer (I have no idea where I would build and alternatively easy-to-use Rails app that was as cheap).

ffffuuuuuuuu

steveklabnik• 16 years ago

At least you can take heart in Rails being pretty easy to deploy these days.

Granted, getting Heroku level reliability, ease of scaling, etc, but since you said 'cheap,' I'll assume you weren't using much of that anyway. ;)

papertiger2• 16 years ago

I've honestly never understood why startups want to be acquired (besides the monetary gain for individual employees). Doesn't acquisition often destroy or dilute the very successes they've worked so hard to build? (I worked for an acquisitive company that worsened nearly every product/company it acquired.) Why not just focus on making your business better?

Heroku will now be subject to all kinds of pressures and asinine ideas that may not relate to their core offering. As a Heroku user I am concerned and saddened.

Can anyone offer any perspective? I'm puzzled by the acquisition mindset.

guynamedloren• 16 years ago

Money.

hackinthebochs• 16 years ago

Despite what gets repeated in the echo chamber that surrounds hackernews that money isn't the main motivator for entrepreneurs and hackers, it is in fact all about the money.

Of course, day-to-day it has to be about much more than money otherwise it would be impossible to stay motivated. But the end goal is almost always about making a boatload of cash.

jey• 16 years ago

I see two main reasons:

- Freedom to move on to the next project. I bet most entrepreneurs are more interested in creating than maintaining.

- Money/security. The trend toward payouts when raising major rounds is helping with this issue, but still the resources available change significantly with a big payout, plus you can diversify your income stream to hedge against contingencies.

space-monkey• 16 years ago

I currently design new products for an established company. When I finish a product, there's a trained staff of production, sales and support people that make the product successful. (Just speculating but) it's quite possible that the Heroku folks think they can't grow as fast without some additional business infrastructure. If this accelerates their trajectory, then they'll quickly get some distance between themselves and the zoo of other (not as slick) app hosting platforms. Just having someone else to take care of the legal side of HR so that you can go back to product development, while at the same time putting enough in the bank to live on the beach forever, may have looked attractive. Lots of possibilities, but a billion dollar cash-out is not the only way to make yourself happy in life.

dasil0032• 16 years ago

Why would you want to work on the same thing forever? Sure if you found a Google or a Facebook then you may have an ample playground, but most small companies do not have opportunities that interesting. You can try to force a round peg into a square hole or just take your cash and start something new.

petercooper• 16 years ago

I've honestly never understood why startups want to be acquired (besides the monetary gain for individual employees).

That's like saying one doesn't understand why people play the lottery (besides the monetary gain from winning).

papertiger2• 16 years ago

No, it's not like saying that at all.

Playing or winning the lottery involves nothing but money. An acquisition involves major changes to an organization's structure, its products or services, and the lives of all its employees.

EDIT: Removed snarkiness.

webwright• 16 years ago

Wow- congrats. Great bunch of founders who totally deserve this. I think this is the biggest YC exit, no?

jedc3• 16 years ago

Yes, based on the spreadsheet I keep:

https://spreadsheets.google.com/ccc?key=0AkkhSN3vaY4jdF90b1l...

Lewisham• 16 years ago

The funny (as in strange, not haha) thing is when I read that 200ish number, the first thing that popped into my head was "that seems cheap." I've either been completely miscalibrated by the supposed GroupOn valuation, or I really liked Heroku.

Probably both.

joelg87• 16 years ago

Wow, awesome list, good work sir.

sixwing2• 16 years ago

I'm glad that the Heroku team will continue running the company with some degree of independence. They've done great things for the community, and have amazing vision for the product's trajectory. Congrats, guys!

kristofer• 16 years ago

wow. this is surprising. they are RoR honchos.

sdizdar• 16 years ago

Very very good news for Heroku employees and investors. I also hope that Amazon will start bidding war.

However, knowing Salesforce (and fact that they have many very very big enemies in this business) I'm concern about future of Heroku offering in the current form. As far as I know, Salesforce is not a hacker company - they remind me a little of Yahoo! (product managers are running the show). And, don't get me wrong, in this case, not being a "hacker company" is a good thing. But, I assume that Heroku will be transformed to be much profitable and target bigger margin businesses.

datsro• 16 years ago

will this affect the pricing model for small ruby builds (Free)? I hope not. As a designer/developer this service has been beneficial to sell Ruby to my more technical clientele.

jcapote2• 16 years ago

I just hope some business guy doesn't go in there and "rethink" heroku

kunley• 16 years ago

I hope this will have them a kick to spread into Europe.

For now, as they use only US EC2 regions, it's only possible for many EU-located users to have a prototype or a toy project on Heroku. Believe me, those few routers more and pings > 100ms do make a difference.

spencerfry• 16 years ago

Congrats, guys! We'll see what comes from this.

js4all• 16 years ago

Congrats. This is huge.

I hope Heroku's Node.JS beta does not suffer from this.

ivankirigin• 16 years ago

fuck yeah!

jacoblyles2• 16 years ago

Man, the death of the IPO market and the increasing oligopoly in the tech marketplace is so depressing.

jdavid• 16 years ago

The scary thing is that oracle, ms, apple, ibm, or google could still by a compelling level of salesforce shares on yearly revenue alone.

stephth• 16 years ago

I'm not entirely surprised. Heroku's manual-scale model has shown a strong focus to sell to the enterprises. The App Engine's auto-scale model (no expenses if no traffic, but always ready to face peaks) is largely friendlier to individuals on a budget.

I hope these news will help boost projects like appengine-jruby.

epynonymous• 16 years ago

27M USD, 30 employees, this is sweet.

kin• 16 years ago

Not that there is any correlation (Heroku's awesome and those guys are simply great talent) but, RoR start-ups seem to be doing amazing nowadays with Hulu in high eval, Groupon rumored to reject a $5B deal, Twitter with its momentum, and now Heroku.

gsivil• 16 years ago

Just a question: how much money YC will earn from that?

rkwz• 16 years ago

What is the significance of this acquisition? Which companies/competitors (Google, Amazon etc) does it affect?

Salesforce Buys Heroku (YC W08) For $212 Million In Cash

Related Stories