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State of the Cloud Report
2015Byron Deeter
www.bvp.com/cloud
@bdeeter
AGENDA
• State of the Cloud Industry: Where are we today?
• Metrics that matter: How are we doing?
• The outlook ahead: Wh...
WE’VE HAD SOME SKEPTICS ABOUT CLOUD COMPUTING
THROUGH THE YEARS…
“Mice Nuts”
Vacation time
=
The Innovator’s Dilemma
“Wate...
BVP’s CLOUD INVESTMENTS
1997 2000 2010
ASP Delivery
+
Recurring Rev
Cloud
Computing
(SaaS + PaaS)
SaaS
2015 4
5
THEN…
<$25bn
Total Cloud Market Cap
2008 - Top 10 Public Cloud Companies
($ in mm)
Count Company MarketCap
1 Salesforce ...
…NOW!
Today - Top 10 Public Cloud Companies
($ in mm)
Count Company MarketCap
1 Salesforce $50,537
2 LinkedIn $26,285
3 Wo...
CLOUD REVENUE
Source: Market size IDC, 2014. Public company data per CapIQ. Legacy software cloud revenue per AppsRunTheCl...
CLOUD REVENUE UP 10X IN LAST SIX YEARS
Source: Market size IDC, 2014. Public company data per CapIQ. Legacy software cloud...
CLOUD REVENUE UP 10X IN LAST SIX YEARS
PROJECTED TO GROW OVER 2X IN NEXT FOUR
$18bn
$9bn
$3bn
$26bn
$56.6bn
% of
Total
Num...
SAAS APPROACHING 30% OF APPLICATION SPEND
0%
20%
40%
60%
80%
100%
2013 2014 2015 2016 2017 2018
On Prem SaaS
Source: IDC, ...
THE FIRST CATEGORY HAS FALLEN:
CLOUD CRM IS AT A TIPPING POINT
2013 -2018
CAGR
19.6%
(3.9%)
65%
50% 38%
35%
50% 62%
0%
20%...
2015 CRM BATTLE - CLOUD 1 : ON PREM 0
WE’RE JUST SEEING THE TIP OF THE ICEBERG!
42 Public Pure Play
Cloud Companies
28 Private Cloud
Unicorns
thousands Existing...
300 UP AND COMERS IDENTIFIED IN THE CLOUDSCAPE…
14
Originally published in 2014. Updated versions will be available at www...
...28 OF WHICH HAVE GROWN INTO
PRIVATE CLOUD $1B+ BUSINESSES …
$10
$5
$5 $4
$3 $3 $3 $3
$2 $2 $2 $2 $2 $2 $1 $1 $1 $1 $1 $...
THE CLOUD INDUSTRY HAS OUTPERFORMED
Growth
~160%
69% above the Nasdaq in
same time period
Exits
32
IPOs in BVP Cloud
Index...
STRONG BVP CLOUD INDEX PERFORMANCE IN
THE LAST YEAR
Source: 42 companies in BVP Cloud Index as of 5/29/2015. CapIQ. Legacy...
BVP CLOUD INDEX EXPECTED TO 3X IN 5 YEARS
Public Cloud Market Cap
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
6/2/2010...
AGENDA
• State of the Cloud Industry: Where are we today?
• Metrics that matter: How are we doing?
• The outlook ahead: Wh...
PROFITS & CASH FLOW ARE ULTIMATELY KING
For All Types of Businesses…
Oil Producer Retailer Cloud Company
20
SIX KEY CLOUD VALUATION METRICS
ARR % ARR Growth Retention / Upsell
CAC Payback % Gross Margin Burn Rate / FCF
21
ARR AND ARR GROWTH ARE BEST LEADING INDICATORS
0%
20%
40%
60%
80%
100%
120%
140%
160%
T-4 T-2 T+0 T+2 T+4 T+6 T+8 T+10 T+1...
23
$10 $15
$23
$34
$51
($16)
($24)
($36)
($54)
($81)
($8)
($12) ($18)
($27)
($41)
Year 1 Year 2 Year 3 Year 4 Year 5
CAC P...
RETENTION / UPSELL
1% churn results in ~$20m ARR loss after 4 years
~$20m ARR
delta
between 1%
and 2%
monthly
churn
1% net...
$10 $10 $10 $10
$0
$8
$16
$24
($8)
Year 1 Year 2 Year 3 Year 4
CAC PAYBACK
CAC payback and retention are inter-related - s...
ARR % ARR Growth Retention / Upsell
CAC Payback % Gross Margin Burn Rate / FCF
CLOUD METRICS THAT PUBLIC AND PRIVATE INVES...
GROWTH IS THE BIGGEST DRIVER OF CLOUD VALUATION
y = 15.89x + 1.756
R² = 0.3945
0x
2x
4x
6x
8x
10x
12x
14x
16x
18x
0% 20% 4...
RETENTION IS TYPICALLY THE 2ND MAJOR DRIVER ON
VALUATION
Source: 42 companies in BVP Cloud Index as of 5/29/2015. CapIQ
20...
PRIVATE MARKETS ARE LESS FOCUSED ON RETENTION
RATES IN CURRENT ENVIRONMENT
2015 – Private Cloud Companies2013 – Private Cl...
STRONG BVP CLOUD INDEX PERFORMANCE IN
THE LAST YEAR
100%
260%
80%
100%
120%
140%
160%
180%
200%
220%
240%
260%
280%
1/1/20...
BVP CLOUD INDEX GROWTH DRIVEN FROM ORGANIC
GROWTH NOT MULTIPLE EXPANSION
Source: 42 companies in BVP Cloud Index as of 5/2...
PRIVATE CLOUD MULTIPLES ARE TRADING AT A PREMIUM
TO PUBLIC CLOUD MULTIPLES
5.7x
3.4x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
...
TAKEAWAY: GUARDRAILS FOR VALUATION
Representative SaaS Business ($20mm ARR)
50% 50-100% 100%+
85% 85-95% 95%+
24 mos 12-24...
AGENDA
• State of the Cloud Industry: Where are we today?
• Metrics that matter: How are we doing?
• The outlook ahead: Wh...
THE OUTLOOK AHEAD
• The Cloud Wins
– First category (CRM) goes over 50% cloud in 2016
– Now at 42 public cloud companies i...
INDUSTRY CLOUD ON THE RISE
1
2
3
Software adoption moved from “nice to have” to
“table stakes”
Winner take most dynamic – ...
CYBER SECURITY: A HOT MARKET AND A KEY
THREAT
37
B2D MARKET TAKING OFF
38
FURTHER GROWTH OF IAAS - GREAT FOR SAAS
$2.8
$4.3
$6.0
$8.2
$11.2
$0
$2
$4
$6
$8
$10
$12
2013 2014 2015E 2016E 2017E
AWS R...
MORE M&A AHEAD
40
• Classic Innovator’s Dilemma allowed
cloud entrants to thrive
• Too late to build
• Too expensive to bu...
MOBILE IS A GAME CHANGER FOR THE ENTERPRISE
85%
Americans between 18-29
50%
Internet usage on mobile vs desktop
80%
Workfo...
THE MOST EXPENSIVE REAL ESTATE IN THE WORLD
$ / Sq Ft $5k $10k $20k
The Penthouse @ One
Hyde Park, London $15k
17 Upper Ph...
THE MOST EXPENSIVE REAL ESTATE IN THE WORLD
$ / Sq Ft $5k $10k $20k
The Penthouse @ One
Hyde Park, London $15k
17 Upper Ph...
ENTERPRISE MOBILE HAS MORE MONETIZATION
POTENTIAL THAN CONSUMER MOBILE
 …but enterprise apps are exploding
 # of enterpr...
ENTERPRISE MOBILE WILL DISRUPT CLOUD
45
Become great on mobile, or your next challenger will!
A SPECIAL THANK YOU TO…
• Kristina Shen - great effort and insights in building this report
• Peter, Umair, Adam, Alex, Bo...
Presented at Bessemer Venture Partners & Salesforce Ventures
Cloud CEO Summit, June 2015
For more information visit www.bv...
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"State of the Cloud" Report -- Bessemer Venture Partners (June 2015)

Cloud computing continues to gain momentum and according to this state of the cloud report from Bessemer Venture Partners, the total market cap for the 42 public cloud companies indexed will pass $500 billion by 2020.

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"State of the Cloud" Report -- Bessemer Venture Partners (June 2015)

  1. 1. State of the Cloud Report 2015Byron Deeter www.bvp.com/cloud @bdeeter
  2. 2. AGENDA • State of the Cloud Industry: Where are we today? • Metrics that matter: How are we doing? • The outlook ahead: What does it mean for me as a cloud CEO? 2
  3. 3. WE’VE HAD SOME SKEPTICS ABOUT CLOUD COMPUTING THROUGH THE YEARS… “Mice Nuts” Vacation time = The Innovator’s Dilemma “Water Vapor” & “Nonsense” “It will be gone in two years” 3
  4. 4. BVP’s CLOUD INVESTMENTS 1997 2000 2010 ASP Delivery + Recurring Rev Cloud Computing (SaaS + PaaS) SaaS 2015 4
  5. 5. 5 THEN… <$25bn Total Cloud Market Cap 2008 - Top 10 Public Cloud Companies ($ in mm) Count Company MarketCap 1 Salesforce $7,404 2 Netsuite $2,332 3 Concur $1,590 4 DealerTrack $1,317 5 blackbaud $1,247 6 AthenaHealth $1,161 7 Ariba $805 8 The Ultimate Software $777 9 Taleo $749 10 Constant Contact $594 Source: Public company data per CapIQ. 2008 as of 1/1/2008. Today as of 5/29/2015
  6. 6. …NOW! Today - Top 10 Public Cloud Companies ($ in mm) Count Company MarketCap 1 Salesforce $50,537 2 LinkedIn $26,285 3 Workday $16,915 4 ServiceNow $13,517 5 NetSuite $7,728 6 The Ultimate Software Group $4,924 7 Athenahealth $4,819 8 Veeva $4,186 9 Medidata Solutions $3,302 10 Proofpoint $2,847 6 THEN… Source: Public company data per CapIQ. 2008 as of 1/1/2008. Today as of 5/29/2015 <$25bn Total Cloud Market Cap ~$180bn Total Cloud Market Cap 2008 - Top 10 Public Cloud Companies ($ in mm) Count Company MarketCap 1 Salesforce $7,404 2 Netsuite $2,332 3 Concur $1,590 4 DealerTrack $1,317 5 blackbaud $1,247 6 AthenaHealth $1,161 7 Ariba $805 8 The Ultimate Software $777 9 Taleo $749 10 Constant Contact $594
  7. 7. CLOUD REVENUE Source: Market size IDC, 2014. Public company data per CapIQ. Legacy software cloud revenue per AppsRunTheCloud survey on 2013 revenue and assumed growth cut in half for 2014. Private cloud unicorn data assuming average 20x rev multiple. 2008 market size from Forrester. 2008 7 $5.6bn
  8. 8. CLOUD REVENUE UP 10X IN LAST SIX YEARS Source: Market size IDC, 2014. Public company data per CapIQ. Legacy software cloud revenue per AppsRunTheCloud survey on 2013 revenue and assumed half’d growth for 2014. Private cloud unicorn data assuming average 20x rev multiple. 2008 market size from Forrester. 8 $18bn $9bn $3bn $26bn $56.6bn Public Pure Play Cloud Legacy Software Cloud Revenue Private Cloud Unicorns Private Cloud 2008 2014 $5.6bn
  9. 9. CLOUD REVENUE UP 10X IN LAST SIX YEARS PROJECTED TO GROW OVER 2X IN NEXT FOUR $18bn $9bn $3bn $26bn $56.6bn % of Total Number of Companies 47% 5% 17% 32% thousands 28 11 42 Source: Market size IDC, 2014. Public company data per CapIQ. Legacy software cloud revenue per AppsRunTheCloud survey on 2013 revenue and assumed half’d growth for 2014. Private cloud unicorn data assuming average 20x rev multiple. 2008 market size from Forrester. Public Pure Play Cloud Legacy Software Cloud Revenue Private Cloud Unicorns Private Cloud 2008 20182014 $5.6bn $127.5bn 9
  10. 10. SAAS APPROACHING 30% OF APPLICATION SPEND 0% 20% 40% 60% 80% 100% 2013 2014 2015 2016 2017 2018 On Prem SaaS Source: IDC, Worldwide Enterprise Application Spend by SaaS and On-Prem, 2013-2018. 2013 -2018 CAGR (2.8%) 17.6% SaaS vs On Prem Penetration into Total Application Spend 10
  11. 11. THE FIRST CATEGORY HAS FALLEN: CLOUD CRM IS AT A TIPPING POINT 2013 -2018 CAGR 19.6% (3.9%) 65% 50% 38% 35% 50% 62% 0% 20% 40% 60% 80% 100% 120% 2013 2016 2018 On-Prem Cloud Source: IDC, Worldwide Enterprise Application Spend by SaaS and On-Prem, 2013-2018. Gartner Worldwide CRM Spending By Vendor, 2013. 16% 13% 10% 7%4% 50% Salesforce SAP Oracle Microsoft IBM Other Source: IDC, Worldwide Enterprise Application Spend by SaaS and On-Prem, 2013-2018. Gartner Worldwide CRM Spending By Vendor, 2013. Over 50% of CRM revenue will be cloud In 2016… …and Salesforce is already the market share leader! 11
  12. 12. 2015 CRM BATTLE - CLOUD 1 : ON PREM 0
  13. 13. WE’RE JUST SEEING THE TIP OF THE ICEBERG! 42 Public Pure Play Cloud Companies 28 Private Cloud Unicorns thousands Existing Private Cloud Companies ? New Cloud Companies Yet To Be Formed! Only 3 % Penetrated in IT Spend Source: Gartner, estimates per 2013. Cloud spend of $39bn includes SaaS, PaaS and IaaS. Overall IT spend of $1.428tn includes Data Center Systems, Enterprise Software and IT Services
  14. 14. 300 UP AND COMERS IDENTIFIED IN THE CLOUDSCAPE… 14 Originally published in 2014. Updated versions will be available at www.bvp.com/cloud
  15. 15. ...28 OF WHICH HAVE GROWN INTO PRIVATE CLOUD $1B+ BUSINESSES … $10 $5 $5 $4 $3 $3 $3 $3 $2 $2 $2 $2 $2 $2 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 Private Cloud Companies Valued at $1bn $ in bn 15Source: Valuation estimates based on publically reported press releases.
  16. 16. THE CLOUD INDUSTRY HAS OUTPERFORMED Growth ~160% 69% above the Nasdaq in same time period Exits 32 IPOs in BVP Cloud Index Market Cap +$140bn Of new market cap: from $40bn to ~$180bn 9 Public cloud acquisitions totaling $18.8bn in value 10 Cloud IPOs Public Cloud Market Cap ~$40bnRepresenting BVP Cloud Index Performance In the Last 3 Years BVP Has Funded… 16 Of the 42 Public Cloud Companies ~1 /4Representing Source: BVP Cloud Index and Capital IQ.
  17. 17. STRONG BVP CLOUD INDEX PERFORMANCE IN THE LAST YEAR Source: 42 companies in BVP Cloud Index as of 5/29/2015. CapIQ. Legacy software includes Microsoft, IBM, Oracle, Cisco, SAP, HP, EMC, Adobe, Citrix, ADP Welcome Shopify to the BVP Cloud Index! 42 Pure Play Public Cloud companies 100% 260% 80% 100% 120% 140% 160% 180% 200% 220% 240% 260% 280% 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 BVP Cloud Computing Index 42 Publicly Traded Cloud Companies Indexed as of Jan. 2011 | @ 5/29/15 BVP Cloud Index Nasdaq Index S&P Index Dow Jones 17
  18. 18. BVP CLOUD INDEX EXPECTED TO 3X IN 5 YEARS Public Cloud Market Cap $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 6/2/2010 10/15/2011 2/26/2013 7/11/2014 11/23/2015 4/6/2017 8/19/2018 1/1/2020 ~$1tn ~$500bn ~$300bn We predict the BVP Cloud Index will Hit $500bn market cap by 2020 18 Source: BVP Cloud Index and Capital IQ.
  19. 19. AGENDA • State of the Cloud Industry: Where are we today? • Metrics that matter: How are we doing? • The outlook ahead: What does it mean for me as a cloud CEO? 19
  20. 20. PROFITS & CASH FLOW ARE ULTIMATELY KING For All Types of Businesses… Oil Producer Retailer Cloud Company 20
  21. 21. SIX KEY CLOUD VALUATION METRICS ARR % ARR Growth Retention / Upsell CAC Payback % Gross Margin Burn Rate / FCF 21
  22. 22. ARR AND ARR GROWTH ARE BEST LEADING INDICATORS 0% 20% 40% 60% 80% 100% 120% 140% 160% T-4 T-2 T+0 T+2 T+4 T+6 T+8 T+10 T+12 $201 $253 $124 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 T-4 T-2 T+0 T+2 T+4 T+6 T+8 T+10 T+12 Pre IPO Post IPO 1 Yr IPO 1 Yr 2 Yrs 3 Yrs Top Quartile 91% 61% 42% 36% 33% Median 72% 47% 35% 34% 24% Bottom Quartile 42% 34% 26% 28% 22% Inevitably growth decelerates with scale Public Cloud Company Runrate Revenue Public Cloud Company YoY Growth (Starting From Four Quarters Prior to IPO, $ in m) (Starting From Four Quarters Prior to IPO) Source: SEC fillings. BVP Cloud Index public companies. T = Quarter 22
  23. 23. 23 $10 $15 $23 $34 $51 ($16) ($24) ($36) ($54) ($81) ($8) ($12) ($18) ($27) ($41) Year 1 Year 2 Year 3 Year 4 Year 5 CAC PAYBACK Resulting P&L for 3 companies growing at 50% new bookings with different CAC paybacks Total cash burn: $106M New Bookings S&M Costs Cash Flows (Gross Profit – S&M) 1 Yr CAC Payback 1.5 Yr CAC Payback 2 Yr CAC Payback $10 $15 $23 $34 $51 ($8) ($12) ($18) ($27) ($41) Year 1 Year 2 Year 3 Year 4 Year 5 $10 $15 $23 $34 $51 ($12) ($18) ($27) ($41) ($61) ($4) ($6) ($9) ($14) ($20) Year 1 Year 2 Year 3 Year 4 Year 5 Total cash burn: $0M Total cash burn: $53M Note: Assumed 50% growth in new bookings every year, 80% gross margin, and no other expenses. 23
  24. 24. RETENTION / UPSELL 1% churn results in ~$20m ARR loss after 4 years ~$20m ARR delta between 1% and 2% monthly churn 1% net upsell churn drives additional $35mm ARR Note: Assumes monthly new bookings increases by $10k per month. 24
  25. 25. $10 $10 $10 $10 $0 $8 $16 $24 ($8) Year 1 Year 2 Year 3 Year 4 CAC PAYBACK CAC payback and retention are inter-related - strong upsell can counteract high churn Revenue S&M Costs Cash Flows (Gross Profit – S&M) 1 Yr CAC Payback, 100% Retention 2 Yr CAC Payback, 115% Retention Note: Assumed 80% gross margin, and no other expenses. $10 $12 $13 $15 ($8) $1 $12 $24 ($16) Year 1 Year 2 Year 3 Year 4 Results in same cash flow after 4 years 25
  26. 26. ARR % ARR Growth Retention / Upsell CAC Payback % Gross Margin Burn Rate / FCF CLOUD METRICS THAT PUBLIC AND PRIVATE INVESTORS ARE VALUING TODAY 26
  27. 27. GROWTH IS THE BIGGEST DRIVER OF CLOUD VALUATION y = 15.89x + 1.756 R² = 0.3945 0x 2x 4x 6x 8x 10x 12x 14x 16x 18x 0% 20% 40% 60% 80% 2015RevenueMultiple % '14-'15 Revenue Growth '14-'15 Rev Growth vs 2015 Rev Mult y = 6.612x + 3.034 R² = 0.450 0x 5x 10x 15x 20x 25x 30x 35x 40x 45x 0% 100% 200% 300% 400% 500% ARRMultiple % 1 Yr Forward Growth 1 Yr Forward Growth vs ARR Mult Source: 42 companies in BVP Cloud Index as of 5/29/2015. CapIQ Source: 55 private company transactions Private Cloud CompaniesPublic Cloud Companies +10% Growth Results in +1.5x Rev Mult +10% Growth Results in +0.6x Rev Mult 27
  28. 28. RETENTION IS TYPICALLY THE 2ND MAJOR DRIVER ON VALUATION Source: 42 companies in BVP Cloud Index as of 5/29/2015. CapIQ 2015 - Public Cloud Companies y = 5.8057x1.5288 R² = 0.1819 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 50% 75% 100% 125% 150% 175% 200% % Retention vs 2015 Rev Mult 28
  29. 29. PRIVATE MARKETS ARE LESS FOCUSED ON RETENTION RATES IN CURRENT ENVIRONMENT 2015 – Private Cloud Companies2013 – Private Cloud Companies y = 5.9847x + 2.185 R² = 0.1954 0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 0% 50% 100% 150% 200% ARRMultiple Retention Retention vs ARR Multiple Source: 17 private company transactions y = 1.4953x + 11.845 R² = 0.0019 0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x 35.0x 40.0x 45.0x 0% 50% 100% 150% 200% ARRMultiple Retention Retention vs ARR Multiple Source: 55 private company transactions 29
  30. 30. STRONG BVP CLOUD INDEX PERFORMANCE IN THE LAST YEAR 100% 260% 80% 100% 120% 140% 160% 180% 200% 220% 240% 260% 280% 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 BVP Cloud Computing Index 42 Publicly Traded Cloud Companies Indexed as of Jan. 2011 | @ 5/29/15 BVP Cloud Index Nasdaq Index S&P Index Dow Jones BVP Cloud Index up ~40% in the last year… Source: 42 companies in BVP Cloud Index as of 5/29/2015. CapIQ. Legacy software includes Microsoft, IBM, Oracle, Cisco, SAP, HP, EMC, Adobe, Citrix, ADP. NTM represents next twelve months. 30
  31. 31. BVP CLOUD INDEX GROWTH DRIVEN FROM ORGANIC GROWTH NOT MULTIPLE EXPANSION Source: 42 companies in BVP Cloud Index as of 5/29/2015. CapIQ. Legacy software includes Microsoft, IBM, Oracle, Cisco, SAP, HP, EMC, Adobe, Citrix, ADP. NTM represents next twelve months. 5.7x 3.4x 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x 8.0x 9.0x 10.0x 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 NTM Multiples Over Time BVP Cloud Index Legacy Software Peak - Jan 2014 9.5x …Cloud multiples back down to historical averagesBVP Cloud Index up ~40% in the last year… 100% 260% 80% 100% 120% 140% 160% 180% 200% 220% 240% 260% 280% 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 BVP Cloud Computing Index 42 Publicly Traded Cloud Companies Indexed as of Jan. 2011 | @ 5/29/15 BVP Cloud Index Nasdaq Index S&P Index Dow Jones 31
  32. 32. PRIVATE CLOUD MULTIPLES ARE TRADING AT A PREMIUM TO PUBLIC CLOUD MULTIPLES 5.7x 3.4x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 NTM Multiples Over Time BVP Cloud Index Legacy Software 11.8x Private Cloud Transactions Source: 42 companies in BVP Cloud Index as of 5/29/2015. CapIQ. Note: Private cloud transactions based on 55 private transactions in the last 6 months where 11.8x is average ARR run rate multiple. BVP Cloud Index multiple and Legacy software multiples are both NTM GAAP revenue. 32 Valuation Gap Revenue Multiples
  33. 33. TAKEAWAY: GUARDRAILS FOR VALUATION Representative SaaS Business ($20mm ARR) 50% 50-100% 100%+ 85% 85-95% 95%+ 24 mos 12-24mos <12 mos minimal 100-125% 125%+ 50-60% 60-75% 75%+ Key Factors 1 Yr Fwd Growth CAC Payback Gross $ Retention Upsell Retention Gross Margin Team Product Competitive Dynamics TAM Good Better Best 33
  34. 34. AGENDA • State of the Cloud Industry: Where are we today? • Metrics that matter: How are we doing? • The outlook ahead: What does it mean for me as a cloud CEO? 34
  35. 35. THE OUTLOOK AHEAD • The Cloud Wins – First category (CRM) goes over 50% cloud in 2016 – Now at 42 public cloud companies in BVP Cloud Index – Welcome Shopify! – BVP Cloud Index crosses $500bn by 2020 • Major Trends & Coming Disruptions – Industry cloud comes of age – Cyber security a threat and an opportunity – B2D opportunity for developers and entrepreneurs – Further commoditization of IaaS – Cornered animals: More M&A from legacy vendors ahead – The dawn of enterprise mobile 35
  36. 36. INDUSTRY CLOUD ON THE RISE 1 2 3 Software adoption moved from “nice to have” to “table stakes” Winner take most dynamic – can win 50% of a market Mobile expands the non-desk workforce by 80%$0.0 $1.5 $23.2 $0 $10 $20 $30 2005 2010 2015 Market Cap ($ in bn) # of Companies 0 2 12 Source: Capital IQ Note: Public vertical SaaS companies include 2U, Athenahealth, Benefitfocus, Dealertrack Technologies, Fleetmatics Group, RealPage, Textura, Veeva, Q2 Holdings, Opower, Guidewire, Shopify Public Industry Cloud Companies Notable Private Industry Cloud Companies Drivers of Industry Cloud 36
  37. 37. CYBER SECURITY: A HOT MARKET AND A KEY THREAT 37
  38. 38. B2D MARKET TAKING OFF 38
  39. 39. FURTHER GROWTH OF IAAS - GREAT FOR SAAS $2.8 $4.3 $6.0 $8.2 $11.2 $0 $2 $4 $6 $8 $10 $12 2013 2014 2015E 2016E 2017E AWS Revenue ($ bn) Source: Robert Baird & Co, 2015. Monthly uniques per Comscore, Feb 2015. 39 ~80mm unique visitors a month 50 billion "pins" on Pinterest
  40. 40. MORE M&A AHEAD 40 • Classic Innovator’s Dilemma allowed cloud entrants to thrive • Too late to build • Too expensive to buy • Will be fatal to many Legacy Software vendors are cornered animals today
  41. 41. MOBILE IS A GAME CHANGER FOR THE ENTERPRISE 85% Americans between 18-29 50% Internet usage on mobile vs desktop 80% Workforce are non-desk workers EVERYONE IN ENTERPRISE B2B NOW HAS A SMARTPHONE INTERNET USAGE TIPPED TO MOBILE REACHES AN UNTOUCHED WORKFORCE Source: Pew Research Center, April, 2015, “The Smartphone Difference”. Source: eMarketer 9/14 (2008-2010), eMarketer 4/15 (2011-2015). Note: Other connected devices include OTT and game consoles. Mobile includes smartphone and tablet. Usage includes both home and work. Ages 18+; time spent with each medium includes all time spent with that medium, regardless of multitasking. KPCB Internet trends, 2015 Global Mobile Penetration 1995 - 2014 GLOBAL PENETRATION 1 –> 73% 41
  42. 42. THE MOST EXPENSIVE REAL ESTATE IN THE WORLD $ / Sq Ft $5k $10k $20k The Penthouse @ One Hyde Park, London $15k 17 Upper Phillimore Gardens $6k Buckingham Palace $6k Kennsington Palace $4k $2mm+ Note: Assume each mobile icon is ½” (so 1 sq ft is equal to 576 mobile icons). Assume MAU is equal to mobile app installs. Uber - 450k WAU, 900k MAU (assume WAU x 2 = MAU) as of 12/2013. Valuation of $3.5bn as of 08/2013 Snapchat – 30m MAU at $10bn valuation as of 08/2014 Whatsapp – 450m MAU at $19bn valuation as of 02/2014 Instagram – 30m MAU at $1bn valuation as of 04/2014 42
  43. 43. THE MOST EXPENSIVE REAL ESTATE IN THE WORLD $ / Sq Ft $5k $10k $20k The Penthouse @ One Hyde Park, London $15k 17 Upper Phillimore Gardens $6k Buckingham Palace $6k Kennsington Palace $4k $2mm+ $2.2m $192k $24k $19k Note: Assume each mobile icon is ½” (so 1 sq ft is equal to 576 mobile icons). Assume MAU is equal to mobile app installs. Uber - 450k WAU, 900k MAU (assume WAU x 2 = MAU) as of 12/2013. Valuation of $3.5bn as of 08/2013 Snapchat – 30m MAU at $10bn valuation as of 08/2014 Whatsapp – 450m MAU at $19bn valuation as of 02/2014 Instagram – 30m MAU at $1bn valuation as of 04/2014 43
  44. 44. ENTERPRISE MOBILE HAS MORE MONETIZATION POTENTIAL THAN CONSUMER MOBILE  …but enterprise apps are exploding  # of enterprise mobile apps growing over 210% in 2014  20% of all developers globally are targeting enterprises, up from 16% just six months ago 1 2 1,258 142 Consumer Enterprise # of Apps in IOS (units in 000s) Enterprise 10% of IOS apps Source: Appfigures, Statista (May 2015), Vision Mobile  …and enterprise apps have higher monetization potential 3 31% 56% 26% 25% 25% 12% 9% 4% 9% 3% 0% 20% 40% 60% 80% 100% Enterprise Consumer $0-$1k $1-$10k $10k-$100k $100k-$500k $500K+ 43% of enterprise apps make >$10k / mo vs 19% for consumer apps 44  There are 10x more consumer apps than enterprise…
  45. 45. ENTERPRISE MOBILE WILL DISRUPT CLOUD 45 Become great on mobile, or your next challenger will!
  46. 46. A SPECIAL THANK YOU TO… • Kristina Shen - great effort and insights in building this report • Peter, Umair, Adam, Alex, Bob, Brian, Cecilia, David, Ethan, Felda, Jeff, Jeremy, Kent, Mark, Steve, Sunil & Sunil, Thea, Tiffany, Trevor, Vishal, and the rest of Bessemer’s cloud team • The amazing cloud founders and executive teams we’ve had the privilege of working with and learning from • Our awesome partners @ Bessemer Venture Partners, Salesforce Ventures, & Salesforce.com • To download BVP content: www.bvp.com/cloud – BVP Cloud Industry Report www.bvp.com/cloudreport – BVP Cloud Index @ www.bvp.com/cloud/comps – BVP Cloudscape @ www.bvp.com/cloud – BVP Industry Software Revolution @ www.bvp.com/cloud – BVP Security for Startups – 10 Step Cybersecurity Plan @ www.bvp.com/cyber 46
  47. 47. Presented at Bessemer Venture Partners & Salesforce Ventures Cloud CEO Summit, June 2015 For more information visit www.bvp.com/cloud @bdeeter @kshenster & @ bessemervp©2015 Bessemer Venture Partners

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Cloud computing continues to gain momentum and according to this state of the cloud report from Bessemer Venture Partners, the total market cap for the 42 public cloud companies indexed will pass $500 billion by 2020.

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