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State Of The Cloud 2019
BYRON DEETER
Partner
BVP
@bdeeter
KRISTINA SHEN
Partner
BVP
@kshenster
ANNA KHAN
Vice President
BV...
Byron Deeter
Partner
BVP
@bdeeter
Kristina Shen
Partner
BVP
@kshenster
State Of The Cloud 2019
www.bvp.com/cloud
Anna Khan...
BESSEMER’S
TOP 10 LAWS
OF CLOUD
COMPUTING
2008
0
HOW MANY $1B+
PRIVATE CLOUD
COMPANIES ARE
THERE, TODAY?
HOW MANY $1B+
PRIVATE CLOUD
COMPANIES ARE
THERE, TODAY?
55
S o u r c e : T e c h C r u n c h , F o r b e s , R e c o d e , M a r k e t W a t c h , M o r g a n S t a n l e y H e a d ...
S A A S T R A N N U A L 2 0 1 9
S o u r c e : A r i L e v y , T w i t t e r
S A A S T R A N N U A L 2 0 1 9
2018 ALONE SAW >$90B
OF LARGE M&A
$1.9B
$2.9B$8B $7.5B
$2.4B $1.6B $1.4B
$33B
S o u r c e : C a p I Q a n d P i t c h b o ...
~$44B ALSO ADDED IN MARKET
CAP THROUGH CLOUD IPOS
S o u r c e : C a p I Q a n d P i t c h b o o k ( M a r k e t C a p a f ...
IN FACT THE BUYING DEMAND FOR
CLOUD SHARES HAS HIT RECORD HIGHS
VCDollarsRaised($B)
$MarketCap($B)
Comb in ed Clou d L iq ...
$0
$200
$400
2010 2011 2012 2013 2014 2015 2016
WE PREDICTED THE CLOUD MARKET
CAP WOULD HIT $500B IN 2020
$BMarketCap
Pu b...
WE PREDICTED THE CLOUD MARKET
CAP WOULD HIT $500B IN 2020
$BMarketCap
Pu b lic Clou d Market Cap
S A A S T R A N N U A L 2...
INSTEAD, WE HIT THE MARK 2 YEARS
EARLIER IN MARCH 2018
$BMarketCap
Pu b lic Clou d Market Cap
S A A S T R A N N U A L 2 0 ...
PUBLIC CLOUD HAS A PATH TO $1T+$BMarketCap
Total Clou d Market Cap
S A A S T R A N N U A L 2 0 1 9
$690B
Feb 5th 2019
$1T
...
THE CLOUD 100 IS
VALUED AT $175B+
S o u r c e : P i t c h b o o k
HOW DO WE
PROTECT FOR
VOLATILITY ?
S A A S T R A N N U A L 2 0 1 9
BVP Nasdaq Emerging Cloud Index
HOW TO BUILD A
RESILIENT COMPANY
Q: WHEN WAS THE
LONGEST BULL
MARKET?
Longest Bull Run in
History ~10 years
2nd Longest Bull
Run 9.5 years
S o u r c e : y a h o o f i n a n c e . S & P 5 0 0 f...
HOW TO BUILD A
RESILIENT COMPANY
GROWTH
(ARR)
S A A S T R A N N U A L 2 0 1 9
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
1 2 3 4 5 6 7 8 9 10 11 12 13 14
$ARR(inM)
Years
YEARS FROM $1M TO $100M ARR
S...
YEARS FROM $1M TO $100M ARR
S A A S T R A N N U A L 2 0 1 9
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
1 2 3 4 5 6 7 8 9 ...
BVP GROWTH BENCHMARK
S A A S T R A N N U A L 2 0 1 9
F rom $ 1 mm ARR
Yearsto$10MARR
Yearsto$100MARR
3Years
7Years
4Years
...
HOW TO BUILD A
RESILIENT COMPANY
GROWTH
(ARR)
S A A S T R A N N U A L 2 0 1 9
RETENTION
IS YOUR
BEST FRIEND
RETENTION FOR DIFFERENT
CUSTOMER SEGMENTS
S A A S T R A N N U A L 2 0 1 9
Gross Retention 80 – 90%70 – 80% 90%+
Net Retent...
S A A S T R A N N U A L 2 0 1 9
RETENTION IS A MAJOR DRIVER
OF VALUATION
$40
$60
$85
$115
$150
$180
$200
50%
42%
35%
30% 2...
S A A S T R A N N U A L 2 0 1 9
AN ADDITIONAL 1% IN NET
RETENTION = $100M OF VALUE
Net Retention 125%
Enterprise
Value $3....
S A A S T R A N N U A L 2 0 1 9
CHURN DRAMATICALLY
DECREASES VALUE
Net Retention 100%
Enterprise
Value $1.4bn
Decreased
Va...
S A A S T R A N N U A L 2 0 1 9
+
HOW TO BUILD A
RESILIENT COMPANY
GROWTH
(ARR)
S A A S T R A N N U A L 2 0 1 9
RETENTION
IS YOUR
BEST FRIEND
IN THE
BANK
S A A S T R A N N U A L 2 0 1 9
S A A S T R A N N U A L 2 0 1 9
QUEEN
MANAGE
YOUR
RUNWAY
Buffer for
contingency plan
18 – 24 months
runway
Hiring is a big
lever
THINK ONE FINANCING AHEAD
ARR Reven u e Mu ltip les of Clou d Comp an ies
S o u r c e : C a p I Q , i n t e r n a l s o u ...
HOW TO BUILD A
RESILIENT COMPANY
GROWTH
(ARR)
S A A S T R A N N U A L 2 0 1 9
RETENTION
IS YOUR
BEST FRIEND
IN THE
BANK
TA...
S A A S T R A N N U A L 2 0 1 9
DEFINING EFFICIENCY
Net New
ARR
Net Burn
=
BVP Efficiency
Score
(<$30M ARR)
S A A S T R A N N U A L 2 0 1 9
BVP Nasdaq Emerging Cloud Index
EFFICIENT
BUSINESSES
ARE
REWARDED
IN ALL
MARKETS
S A A S T R A N N U A L 2 0 1 9
BVP EFFICIENCY SCORE
(<$30M ARR)
BEST
> 1.5x
GOOD BETTERNet New ARR
Net Burn
= < 0.5x 0.5x...
S A A S T R A N N U A L 2 0 1 9
$12
$24
($2)
Ending ARR Net Burn
($ in M)
BEST
> 1.5x
$12M
(= $24 - $12)
$2M
6.0x
BVP Effi...
S A A S T R A N N U A L 2 0 1 9
HOW TO CALCULATE YOUR GRIT SCORE
+++Growth
(ARR)
In The Bank
Targeted
Spend
(Efficiency)
R...
S A A S T R A N N U A L 2 0 1 9
EXAMPLE 1 – TWILIO (<$5M ARR)
+++
%AnnualNet
Retention
%YoYGrowth Years ofRunway NetNewARR...
S A A S T R A N N U A L 2 0 1 9
EXAMPLE 1 – SERVICETITAN (<$5M ARR)
+++
%AnnualNet
Retention
%YoYGrowth Years ofRunway Net...
2019 PREDICTIONS
#1 ROBOTS TO THE RESCUE
AGRICULTURE
ACCOUNTING
CUSTOMER SUPPORT
MARKETING
AUDIT
FRAUD
SALES
HEALTHCARE
S A A S T R A N N U...
#2 PRODUCT HAS PURSE STRINGS
$PRODUCT
SALES
SERVICES SUPPORT
MARKETING
S A A S T R A N N U A L 2 0 1 9
#3 OPENSOURCE MAKES MONEY
BiggestIPOEver
DeepBenchofStrong
Privates
LargestM&As
S A A S T R A N N U A L 2 0 1 9
#4 DEEPER VERTICALIZATION OF MOBILE
VERTICALSOFTWARE
CONSTRUCTION FIELD SERVICES RETAIL SALES
EDUCATIONWORKFORCE MGMT SAFE...
#5 LOW CODE/NO CODE
Developer BusinessAppsEasy
Automation
BESSEMER’S 5
PREDICTIONS
FOR 2019
1 Robots to the rescue
Product has purse strings2
Opensource makes money3
Deeper vertica...
CLOUD REIGNS
$1 TRILLION
Thank You
www.bvp.com/cloud
Bessemer Venture Partners' 2019 State of the Cloud
Bessemer Venture Partners' 2019 State of the Cloud
Bessemer Venture Partners' 2019 State of the Cloud
Bessemer Venture Partners' 2019 State of the Cloud
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Bessemer Venture Partners' 2019 State of the Cloud

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What goes into building an enduring cloud business? Bessemer investors Byron Deeter, Kristina Sheen, and Anna Khan reveal the G.R.I.T. framework and ways for cloud founders to develop new levels of operational rigor. In this presentation, Bessemer unveils insights into the cloud industry, Good, Better, Best frameworks for SaaS startups, and the 2019 technology trends and predictions Bessemer is most excited about.

Follow the Bessemer Cloud Team on Twitter:
@bdeeter
@kshenster
@annarchyy

About Bessemer Venture Partners:
Bessemer Venture Partners was born from innovations in steel that literally forged modern building and manufacturing. Today, we work with people who want to create revolutions of their own. We've been fortunate to be a part of over 120 IPOs in the last 50 years, including Shopify, Yelp, LinkedIn, Skype, LifeLock, Twilio, SendGrid, DocuSign, Wix, Box, and MindBody.

www.bvp.com
@BessemerVP

Published in: Technology
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Bessemer Venture Partners' 2019 State of the Cloud

  1. 1. State Of The Cloud 2019 BYRON DEETER Partner BVP @bdeeter KRISTINA SHEN Partner BVP @kshenster ANNA KHAN Vice President BVP @annarchyy
  2. 2. Byron Deeter Partner BVP @bdeeter Kristina Shen Partner BVP @kshenster State Of The Cloud 2019 www.bvp.com/cloud Anna Khan Vice President BVP @annarchyy
  3. 3. BESSEMER’S TOP 10 LAWS OF CLOUD COMPUTING 2008
  4. 4. 0
  5. 5. HOW MANY $1B+ PRIVATE CLOUD COMPANIES ARE THERE, TODAY? HOW MANY $1B+ PRIVATE CLOUD COMPANIES ARE THERE, TODAY?
  6. 6. 55
  7. 7. S o u r c e : T e c h C r u n c h , F o r b e s , R e c o d e , M a r k e t W a t c h , M o r g a n S t a n l e y H e a d l i n e s
  8. 8. S A A S T R A N N U A L 2 0 1 9 S o u r c e : A r i L e v y , T w i t t e r
  9. 9. S A A S T R A N N U A L 2 0 1 9
  10. 10. 2018 ALONE SAW >$90B OF LARGE M&A $1.9B $2.9B$8B $7.5B $2.4B $1.6B $1.4B $33B S o u r c e : C a p I Q a n d P i t c h b o o k
  11. 11. ~$44B ALSO ADDED IN MARKET CAP THROUGH CLOUD IPOS S o u r c e : C a p I Q a n d P i t c h b o o k ( M a r k e t C a p a f t e r D a y 1 o f T r a d i n g . )
  12. 12. IN FACT THE BUYING DEMAND FOR CLOUD SHARES HAS HIT RECORD HIGHS VCDollarsRaised($B) $MarketCap($B) Comb in ed Clou d L iq u id ity 2 0 1 0 – 2 0 1 8 , an d VC I nvestments Rais ed $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 $100.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 M&A IPO VC Dollars Raised S A A S T R A N N U A L 2 0 1 9 S o u r c e : C a p I Q a n d P i t c h b o o k
  13. 13. $0 $200 $400 2010 2011 2012 2013 2014 2015 2016 WE PREDICTED THE CLOUD MARKET CAP WOULD HIT $500B IN 2020 $BMarketCap Pu b lic Clou d Market Cap S A A S T R A N N U A L 2 0 1 9 $250 S o u r c e : C a p I Q a n d P i t c h b o o k
  14. 14. WE PREDICTED THE CLOUD MARKET CAP WOULD HIT $500B IN 2020 $BMarketCap Pu b lic Clou d Market Cap S A A S T R A N N U A L 2 0 1 9 $0 $200 $400 $600 $800 $1,000 $1,200 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 $500B S o u r c e : C a p I Q a n d P i t c h b o o k
  15. 15. INSTEAD, WE HIT THE MARK 2 YEARS EARLIER IN MARCH 2018 $BMarketCap Pu b lic Clou d Market Cap S A A S T R A N N U A L 2 0 1 9 $0 $200 $400 $600 $800 $1,000 $1,200 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 March 2nd 2018 $500B $500B S o u r c e : C a p I Q a n d P i t c h b o o k
  16. 16. PUBLIC CLOUD HAS A PATH TO $1T+$BMarketCap Total Clou d Market Cap S A A S T R A N N U A L 2 0 1 9 $690B Feb 5th 2019 $1T $0 $200 $400 $600 $800 $1,000 $1,200 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 S o u r c e : C a p I Q a n d P i t c h b o o k
  17. 17. THE CLOUD 100 IS VALUED AT $175B+ S o u r c e : P i t c h b o o k
  18. 18. HOW DO WE PROTECT FOR VOLATILITY ? S A A S T R A N N U A L 2 0 1 9 BVP Nasdaq Emerging Cloud Index
  19. 19. HOW TO BUILD A RESILIENT COMPANY
  20. 20. Q: WHEN WAS THE LONGEST BULL MARKET?
  21. 21. Longest Bull Run in History ~10 years 2nd Longest Bull Run 9.5 years S o u r c e : y a h o o f i n a n c e . S & P 5 0 0 f r o m 1 9 5 0 t o 1 / 2 9 / 2 0 1 9 .
  22. 22. HOW TO BUILD A RESILIENT COMPANY GROWTH (ARR) S A A S T R A N N U A L 2 0 1 9
  23. 23. $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 1 2 3 4 5 6 7 8 9 10 11 12 13 14 $ARR(inM) Years YEARS FROM $1M TO $100M ARR S o u r c e : C a p I Q , i n t e r n a l s o u r c e s a n d c o m p a n y a n n o u n c e m e n t s . N o t e : U s e q u a r t e r l y r e v e n u e t i m e s f o u r a s a p r o x y f o r A R R . N o t e : A s s u m i n g i t t a k e s 2 4 m o n t h s f r o m f o u n d i n g t o $ 1 M A R R i f d o n o t h a v e a c t u a l d a t a . S A A S T R A N N U A L 2 0 1 9 $100
  24. 24. YEARS FROM $1M TO $100M ARR S A A S T R A N N U A L 2 0 1 9 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 1 2 3 4 5 6 7 8 9 10 11 12 13 14 $ARR(inM) Years Pu b lic Clou d Comp an ies 5.3 yrs Top 25% 7.3 yrs Median 10.6 yrs Bottom 25% S o u r c e : C a p I Q , i n t e r n a l s o u r c e s a n d c o m p a n y a n n o u n c e m e n t s . . N o t e : U s e q u a r t e r l y r e v e n u e t i m e s f o u r a s a p r o x y f o r A R R . N o t e : A s s u m i n g i t t a k e s 2 4 m o n t h s f r o m f o u n d i n g t o $ 1 M A R R i f d o n o t h a v e a c t u a l d a t a .
  25. 25. BVP GROWTH BENCHMARK S A A S T R A N N U A L 2 0 1 9 F rom $ 1 mm ARR Yearsto$10MARR Yearsto$100MARR 3Years 7Years 4Years 10Years 2Years 5Years BEST GOOD BETTER
  26. 26. HOW TO BUILD A RESILIENT COMPANY GROWTH (ARR) S A A S T R A N N U A L 2 0 1 9 RETENTION IS YOUR BEST FRIEND
  27. 27. RETENTION FOR DIFFERENT CUSTOMER SEGMENTS S A A S T R A N N U A L 2 0 1 9 Gross Retention 80 – 90%70 – 80% 90%+ Net Retention 90 – 120%80 – 100% 100%+ Average ACV $12 – $50K<$12k $50K+ SMB EnterpriseMidmarket
  28. 28. S A A S T R A N N U A L 2 0 1 9 RETENTION IS A MAJOR DRIVER OF VALUATION $40 $60 $85 $115 $150 $180 $200 50% 42% 35% 30% 20% 11% 0% 20% 40% 60% 80% 100% $0 $50 $100 $150 $200 $250 $300 $350 2013 2014 2015 2016 2017 2018 2019 Net Retention 110% Assumed 2019 Revenue Mult 10x Enterprise Value $2.0bn
  29. 29. S A A S T R A N N U A L 2 0 1 9 AN ADDITIONAL 1% IN NET RETENTION = $100M OF VALUE Net Retention 125% Enterprise Value $3.5bn Increased Value +$1.5bn $40 $66 $102 $148 $209 $276 $347 65% 54% 46% 41% 32% 26% 0% 20% 40% 60% 80% 100% $0 $50 $100 $150 $200 $250 $300 $350 2013 2014 2015 2016 2017 2018 2019
  30. 30. S A A S T R A N N U A L 2 0 1 9 CHURN DRAMATICALLY DECREASES VALUE Net Retention 100% Enterprise Value $1.4bn Decreased Value -$630m $40 $56 $75 $97 $120 $135 $137 40% 34% 29% 24% 13% 1% 0% 20% 40% 60% 80% 100% $0 $50 $100 $150 $200 $250 $300 $350 2013 2014 2015 2016 2017 2018 2019
  31. 31. S A A S T R A N N U A L 2 0 1 9 +
  32. 32. HOW TO BUILD A RESILIENT COMPANY GROWTH (ARR) S A A S T R A N N U A L 2 0 1 9 RETENTION IS YOUR BEST FRIEND IN THE BANK
  33. 33. S A A S T R A N N U A L 2 0 1 9
  34. 34. S A A S T R A N N U A L 2 0 1 9 QUEEN
  35. 35. MANAGE YOUR RUNWAY Buffer for contingency plan 18 – 24 months runway Hiring is a big lever
  36. 36. THINK ONE FINANCING AHEAD ARR Reven u e Mu ltip les of Clou d Comp an ies S o u r c e : C a p I Q , i n t e r n a l s o u r c e s a n d c o m p a n y a n n o u n c e m e n t s . P r i c e d a s o f 1 / 2 3 / 2 0 1 9 N o t e : U s e q u a r t e r l y r e v e n u e t i m e s f o u r a s a p r o x y f o r A R R . I n c l u d e s 5 2 p u b l i c c l o u d c o m p a n i e s i n t h e E M C L O U D . S A A S T R A N N U A L 2 0 1 9 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 1/1/11 5/1/11 9/1/11 1/1/12 5/1/12 9/1/12 1/1/13 5/1/13 9/1/13 1/1/14 5/1/14 9/1/14 1/1/15 5/1/15 9/1/15 1/1/16 5/1/16 9/1/16 1/1/17 5/1/17 9/1/17 1/1/18 5/1/18 9/1/18 1/1/19 Peak – Mar 2014 ~10x Trough – May 2014 5.8x Trough – Feb 2016 4.6x Current 9.8x
  37. 37. HOW TO BUILD A RESILIENT COMPANY GROWTH (ARR) S A A S T R A N N U A L 2 0 1 9 RETENTION IS YOUR BEST FRIEND IN THE BANK TARGETED SPEND (“EFFICIENCY”)
  38. 38. S A A S T R A N N U A L 2 0 1 9 DEFINING EFFICIENCY Net New ARR Net Burn = BVP Efficiency Score (<$30M ARR)
  39. 39. S A A S T R A N N U A L 2 0 1 9 BVP Nasdaq Emerging Cloud Index EFFICIENT BUSINESSES ARE REWARDED IN ALL MARKETS
  40. 40. S A A S T R A N N U A L 2 0 1 9 BVP EFFICIENCY SCORE (<$30M ARR) BEST > 1.5x GOOD BETTERNet New ARR Net Burn = < 0.5x 0.5x – 1.5x
  41. 41. S A A S T R A N N U A L 2 0 1 9 $12 $24 ($2) Ending ARR Net Burn ($ in M) BEST > 1.5x $12M (= $24 - $12) $2M 6.0x BVP Efficiency Score GOOD BETTERNet New ARR Net Burn = < 0.5x 0.5x – 1.5x = BVP EFFICIENCY SCORE (<$30M ARR)
  42. 42. S A A S T R A N N U A L 2 0 1 9 HOW TO CALCULATE YOUR GRIT SCORE +++Growth (ARR) In The Bank Targeted Spend (Efficiency) Retention Is Your Best Friend %AnnualNet Retention %YoYGrowth YearsofRunway NetNewARR/ NetBurn 0.5–1.5x80–150% 1–3Years50–200% = GRIT SCORE 3–4 4–6 >6 GOOD BETTER BEST
  43. 43. S A A S T R A N N U A L 2 0 1 9 EXAMPLE 1 – TWILIO (<$5M ARR) +++ %AnnualNet Retention %YoYGrowth Years ofRunway NetNewARR/ NetBurn 0.5–1.5x80–150% 1–3Years50–200% = GRIT SCORE BEST 1.5 (1.5xEfficiency) 2 (2Years) 3 (300%+Growth) 1.6 (160%Retention) 8.1 G I TR +++ =
  44. 44. S A A S T R A N N U A L 2 0 1 9 EXAMPLE 1 – SERVICETITAN (<$5M ARR) +++ %AnnualNet Retention %YoYGrowth Years ofRunway NetNewARR/ NetBurn 0.5–1.5x80–150% 1–3Years50–200% = GRIT SCORE BEST 3.4 (3.4xEfficiency) 2 (2Years) 2 (200%+Growth) 0.9 (90%Retention) 8.3 G I TR +++ =
  45. 45. 2019 PREDICTIONS
  46. 46. #1 ROBOTS TO THE RESCUE AGRICULTURE ACCOUNTING CUSTOMER SUPPORT MARKETING AUDIT FRAUD SALES HEALTHCARE S A A S T R A N N U A L 2 0 1 9
  47. 47. #2 PRODUCT HAS PURSE STRINGS $PRODUCT SALES SERVICES SUPPORT MARKETING S A A S T R A N N U A L 2 0 1 9
  48. 48. #3 OPENSOURCE MAKES MONEY BiggestIPOEver DeepBenchofStrong Privates LargestM&As S A A S T R A N N U A L 2 0 1 9
  49. 49. #4 DEEPER VERTICALIZATION OF MOBILE VERTICALSOFTWARE CONSTRUCTION FIELD SERVICES RETAIL SALES EDUCATIONWORKFORCE MGMT SAFETY/COMPLIANCE FLEET TRANSPORTATION REAL ESTATE RECRUITING S A A S T R A N N U A L 2 0 1 9
  50. 50. #5 LOW CODE/NO CODE Developer BusinessAppsEasy Automation
  51. 51. BESSEMER’S 5 PREDICTIONS FOR 2019 1 Robots to the rescue Product has purse strings2 Opensource makes money3 Deeper verticalization of mobile4 Low code/no code5
  52. 52. CLOUD REIGNS $1 TRILLION
  53. 53. Thank You www.bvp.com/cloud

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