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Documents: Salesforce acquired Spiff for $419 million in February

Salespeople live and die by commissions, which often make up a large portion of their income, so it’s no surprise that Salesforce paid a premium for a platform that makes it easier to manage commissions for its customers. A few months ago, the company acquired Spiff to help companies set up and manage incentive-based compensation plans. Salesforce’s 10-K filing with the Securities and Exchange Commission early Thursday finally revealed the price it paid: a total of $419 million.

The price, described as fair value on the acquisition date, includes $374 million in cash, the filing said.

The details were revealed in a 10-K filing related to Salesforce’s earnings, released Wednesday. Shares of the publicly traded company fell about 16% after the company reported its first revenue miss in nearly 20 years, in 2006. The company reported quarterly revenue of $9.13 billion, according to the 10-K; the average analyst estimate from Yahoo Finance was $9.15 billion; some had expected the figure as high as $9.37 billion.

Against this backdrop, it’s no surprise that acquisitions are being made to grow future revenue.

The $419 million price tag is a significant increase for Spiff. The startup was most recently valued at $260 million as recently as May 2023, when it raised $50 million, according to PitchBook data.

This is just seven months after the acquisition was announced in December 2023, and the transaction is set to close in February 2024, according to the 10-K report.

Based in Salt Lake City, Utah, Spiff has raised $110 million in funding from investors including Salesforce itself, Lightspeed Venture Partners, Norwest Ventures, and some notable individual backers such as Daniel Dines, the founder of Romanian RPA darling UiPath, who returned as CEO this week as the company slid in the market; and Hanno Renner, the head and founder of HR startup Personio, another major European tech company.

The acquisition and the price are notable because they are very much a sign of the times.

Such a strong deal so soon after a funding round could be seen as a signal that despite the increased pressure on startups right now, strong companies can still fetch high prices.

The IPO window remains largely closed for most mature companies, leading to a tougher funding market overall. Combined with poor economic conditions, some companies are failing to meet growth targets, which has led to lower valuations, distressed sales for those struggling the most, and, in the worst case, more startups getting stuck.

That’s not the case with Spiff. In its last funding round a year ago, the company noted that it had doubled its customer base to 1,000 last year and had seen revenue grow 100%. The company was founded during the pandemic, and in its short time since then, last year it said it had seen revenue grow 800% since then.

Lately, Salesforce has begun leaning into hot areas where it may want to do more to grow its revenue: artificial intelligence and no-code, self-service solutions.

Specifically, Spiff launched a no-code, self-service AI-based toolset last year to help customers build sales commission programs without the need for developers. When the economy is tough, extra flexibility is especially important, which is what Spiff is aiming for with its new technology.

“We’re seeing a lot of commission plans change,” Spiff founder and CEO Jeron Paul told TechCrunch in an interview last year. “Incentives ultimately drive a lot of entry behavior, so when you have a recession, whatever we’re in right now, entry behavior changes a lot, which means your commission plans change a lot.”

To that end, Salesforce said it would record $323 million in goodwill covering “building its workforce and expanding its market opportunity.”

Salesforce also noted in its 10-K filing that it classified $52 million of the Spiff deal’s value as “intangible assets,” which includes the nine-year useful life of the startup’s existing technology and an additional five years of useful life for existing customers.

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