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State of the Cloud 2017
The 2017 State of the Cloud report highlights a strong rebound in the cloud market after a rocky start in early 2016, illustrated by various indexes tracking publicly traded cloud companies. The report also notes a significant growth in mergers and acquisitions, with 2016 seeing four times more activity than previous years, and discusses the efficiency and growth benchmarks of leading cloud companies. Additionally, it emphasizes the importance of understanding customer acquisition costs and sales models in cloud business strategies.
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State of the Cloud 2017
- 1. STATE OF THE CLOUDREPORT 2017Byron Deeter & Kristina Shen w w w . b v p . c o m / c l o u d Special Thanks to Anna Khan
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- 4. 4 Source: New YorkStock Exchange
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- 6. 6 Source: Dean DeLisle,Blog Post
- 7. Source: 43 companiesin BVP Cloud Index as of 02/01/2017. CapIQ A ROCKY START TO 2016 BVP Cloud Index (1/1/2016 – 2/12/2016) 43 Publicly Traded Cloud Companies Indexed as of Jan. 2016 | @ 02/01/2017 50% 60% 70% 80% 90% 100% 110% 120% 1/1/2016 1/3/2016 1/5/2016 1/7/2016 1/9/2016 1/11/2016 1/13/2016 1/15/2016 1/17/2016 1/19/2016 1/21/2016 1/23/2016 1/25/2016 1/27/2016 1/29/2016 1/31/2016 2/2/2016 2/4/2016 2/6/2016 2/8/2016 2/10/2016 2/12/2016 BVP Index Nasdaq S&P Dow Jones
- 8. BVP Cloud Index(2/12/2016-2/3/2017) 43 Publicly Traded Cloud Companies Indexed as of Jan. 2016 | @ 02/03/2017 Source: 43 companies in BVP Cloud Index as of 02/03/2017. CapIQ ...BUT THE MARKET COMPLETELY REBOUNDED IN 2H 2016 BVP Cloud Index (1/1/2016 – 2/12/2016) 43 Publicly Traded Cloud Companies Indexed as of Jan. 2016 | @ 02/03/2017 50% 60% 70% 80% 90% 100% 110% 120% 1/1/2016 1/3/2016 1/5/2016 1/7/2016 1/9/2016 1/11/2016 1/13/2016 1/15/2016 1/17/2016 1/19/2016 1/21/2016 1/23/2016 1/25/2016 1/27/2016 1/29/2016 1/31/2016 2/2/2016 2/4/2016 2/6/2016 2/8/2016 2/10/2016 2/12/2016 BVP Index Nasdaq S&P Dow Jones 50% 60% 70% 80% 90% 100% 110% 120% BVP Index Nasdaq S&P Dow Jones
- 9. BVP Cloud Index 43Publicly Traded Cloud Companies Indexed as of Jan. 2011 | @ 02/03/2017 JUST A SMALL BUMP IN A CRAZY RIDE UP! 50% 100% 150% 200% 250% 300% 350% 1/1/2011 3/1/2011 5/1/2011 7/1/2011 9/1/2011 11/1/2011 1/1/2012 3/1/2012 5/1/2012 7/1/2012 9/1/2012 11/1/2012 1/1/2013 3/1/2013 5/1/2013 7/1/2013 9/1/2013 11/1/2013 1/1/2014 3/1/2014 5/1/2014 7/1/2014 9/1/2014 11/1/2014 1/1/2015 3/1/2015 5/1/2015 7/1/2015 9/1/2015 11/1/2015 1/1/2016 3/1/2016 5/1/2016 7/1/2016 9/1/2016 11/1/2016 1/1/2017 BVP Index Nasdaq S&P Dow Jones Source: 43 companies in BVP Cloud Index as of 02/03/2017. CapIQ
- 10. 0 5 10 15 20 25 30 35 40 45 50 2008 2009 20102011 2012 2013 2014 2015 2016 Number of tech IPOs on U.S. Stock exchanges Source: Bloomberg *Tech IPOs less than $5MM are not included | *Listings for this year are through Nov 15 FEWEST TECH IPOS SINCE FINANCIAL CRISIS
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- 12. company 2016-2017 $2.9B $1.4B $1.3B $592M $492M company2015 $6.2B $4.3B $2.3B $989M $826M $694M $331M $6.7B$15.6BTotal 5 OF12 CLOUD IPOS ARE BVP-FUNDED Source: CapIQ Total
- 13. M&A From 2009to Today 4X MORE M&A 2016 THAN ANY OTHER YEAR $1,676 $2,279 $5,627 $13,708 $8,889 $14,921 $17,655 $60,713 $3,700 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: CapIQ
- 14. PUBLIC CLOUD COMPANIES2009 – 2017 Source: CapIQ and public fillings. Note: >$300BN market cap also includes 25 companies that are either public companies that are <$1bn market cap or large private acquisitions >$500m market cap. Salesforce LinkedIn Workday ServiceNow Netsuite Concur Veeva Atlassian Ultimate Software Athenahealth Shopify Ariba Dealertrack Successfactors Appdynamics Tableau $59.9 $29.0 $21.1 $16.0 $9.3 $8.3 $6.2 $6.2 $5.9 $5.4 $5.2 $4.6 $4.0 $3.9 $3.7 $3.9 Xero Taleo LogMeIn Marketo Rightnow New Relic RingCentral Omniture Blackboard Digital Insights Cvent 2U Responsys Qualys Blackline Kenexa $1.9 $1.9 $1.8 $1.8 $1.8 $1.8 $1.8 $1.7 $1.7 $1.7 $1.7 $1.6 $1.6 $1.6 $1.4 $1.4 >$300BN Market Cap Proofpoint Medidata Solutions LogMeIn RealPage Demandware Twilio Exact Target Wix Fleetmatics Lifelock CornerstoneOnDemand Box Skillsoft Zendesk Hubspot $3.7 $3.3 $3.2 $2.9 $2.8 $2.7 $2.6 $2.6 $2.4 $2.4 $2.4 $2.3 $2.3 $2.3 $2.0 Coupa Software Broadsoft SPS Commerce Constant Contact Mindbody Eloqua $1.3 $1.3 $1.2 $1.1 $1.0 $1.0
- 15. 40% OF MARKETCAPACQUIRED Source: CapIQ and public fillings. Note: >$300BN market cap also includes 25 companies that are either public acquisitions <$1bn market cap or large private acquisitions >$500m market cap. Salesforce LinkedIn Workday ServiceNow Netsuite Concur Veeva Atlassian Ultimate Software Athenahealth Shopify Ariba Dealertrack Successfactors Appdynamics Tableau $59.9 $29.0 $21.1 $16.0 $9.3 $8.3 $6.2 $6.2 $5.9 $5.4 $5.2 $4.6 $4.0 $3.9 $3.7 $3.9 Xero Taleo LogMeIn Marketo Rightnow New Relic RingCentral Omniture Blackboard Digital Insights Cvent 2U Responsys Qualys Blackline Kenexa $1.9 $1.9 $1.8 $1.8 $1.8 $1.8 $1.8 $1.7 $1.7 $1.7 $1.7 $1.6 $1.6 $1.6 $1.4 $1.4 >$300BN Market Cap Proofpoint Medidata Solutions LogMeIn RealPage Demandware Twilio Exact Target Wix Fleetmatics Lifelock CornerstoneOnDemand Box Skillsoft Zendesk Hubspot $3.7 $3.3 $3.2 $2.9 $2.8 $2.7 $2.6 $2.6 $2.4 $2.4 $2.4 $2.3 $2.3 $2.3 $2.0 Coupa Software Broadsoft SPS Commerce Constant Contact Mindbody Eloqua $1.3 $1.3 $1.2 $1.1 $1.0 $1.0
- 16. MORE THAN MEETS THEEYE $400B Market Cap Creation in Just the Top 200 Companies $180BN Public $129BN Major Acquisitions $104BN Top 100 Private Cloud Companies ~$400B MARKET CAP Top 200 companies 1,000s of Private Cloud Companies Source: SLWA Blog
- 18. HUGE BACKLOG OFPRIVATE COMPANIES >$100BN MARKET CAP IN CLOUD 100
- 19. HOW DO I SCALE? HOWMUCH SHOULD I BURN? HOW FAST SHOULD I BE GROWING? KEY QUESTIONS FROM TOP PRIVATE CEOS
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- 22. THE NEW GROWTH STANDARD? 8 YEARSTO $1B Dropbox is the Fastest SaaS Company to $1 Billion Revenue Run Rate
- 23. Years from $1Mto $10M ARR HOW DO THE TOP CLOUD COMPANIES PERFORM? $0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 0.5 Yr 1 Yr 1.5 Yr 2 Yrs 2.5 Yrs ARR(in$M) Source: CapIQ, internal sources and company announcements.. Note: Use quarterly revenue times four as a proxy for ARR.
- 24. $0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 0.5 Yr 1Yr 1.5 Yr 2 Yrs 2.5 Yrs ARR(in$M) Years from $1M to $10M ARR HOW DO THE TOP CLOUD COMPANIES PERFORM? Source: CapIQ internal sources and company announcements.. Note: Use quarterly revenue times four as a proxy for ARR.
- 25. $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 1 2 34 5 6 7 8 9 10 11 12 13 14 $ARR(inM) Years YEARS FROM $1M TO $100M ARR Source: CapIQ, internal sources and company announcements.. Note: Use quarterly revenue times four as a proxy for ARR. Note: Assuming it takes 24 months from founding to $1M ARR if do not have actual data.
- 26. YEARS FROM $1MTO $100M ARR $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 5.3 yrs Top 25% Source: CapIQ and internal sources. Includes 46 public or recently acquired public companies from the BVP Cloud Index. Excludes companies who reached $100M ARR prior to public reported periods. Note: Assuming it takes 24 months from founding to $1M ARR if do not have actual data. Use quarterly revenue times four as a proxy for ARR. Public Cloud Companies 7.3 yrs Median 10.6 yrs Bottom 25%
- 27. From $1mm ARR BVPGROWTH BENCHMARK BEST GOOD BETTER Yearsto$10MARR Yearsto$100MARR 3Years 7Years 4Years 10Years 2Years 5Years
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- 29. DEFINING THE EFFICIENCYSCORE % Annual Revenue Growth Rule of 40 += % Profit Margins
- 30. DEFINING THE EFFICIENCYSCORE % Annual Revenue Growth Rule of 40 += % Profit Margins * Burn defined as FCF for this analysis % Annual CARR Growth Efficiency Score += % Burn*
- 31. SHOPIFY2013 GROWTH-DRIVEN EFFICIENCY SCORE Efficiency 112% -4%108% % Burn*% Revenue Growth = VEEVA2013 FCF-DRIVEN EFFICIENCY SCORE Efficiency 62% 19% % FCF% Revenue Growth + = MULTIPLE SUCCESSFUL MODELS OF EFFICIENT GROWTH 81% + * Burn defined as FCF for this analysis
- 32. DIFFERENT EFFICIENCY SCORESAT DIFFERENT STAGES Source: 43 companies in the BVP Cloud Index, CapIQ Note: Average efficiency score of the 43 public cloud companies. Efficiency score defined as % annual CARR growth + % FCF margin. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Prior IPO – 3Y IPO – 2Y IPO – 1Y IPO IPO + 1Y IPO + 2Y IPO + 3Y 73% TIME 56% 53% 45% 38% 35% 32%
- 33. THE BVP EFFICIENCYRULE (>$30M ARR) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% EXPANSION ($30-60M ARR) %CARRGrowth+%FCFMargin 70% 50% 30% IPO (~$100M ARR) PUBLIC ($150M+ ARR)
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- 35. THE BVP EFFICIENCYRULE (<$30M ARR) BVP Efficiency Score Net New ARR Net Cash Burn > 1 For Example: $10 $25 ($10) Ending ARR Net Burn ($ in M) $15M (= $25- $10) $10M = 1.5 BVP Efficiency Score 2016 2017
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- 37. CUSTOMER ACQUISITION COST CACPAYBACK CAC PAYBACK PERIOD (months) TOTAL S&M COSTS LAST QUARTER = NEW CMRR ADDED LAST QUARTER X % GROSS MARGIN
- 38. CAC COCKTAIL CAC COCKTAIL FORMULA SALES #of AEs Quota Inside sales Field /enterprise sales Ramp time Inside sales Field sales Attainment rate $400k-$800k $1-1.5m 1-3mo 6-9mo 70-90% LEAD/OPPORTUNITY GENERATION # of SDRs Opportunities/SDR/month Close rate Marketing Spend (% of Total S&M) Inside/field sales model Freemium/internet sales 15-25 15-30% 25-33% 33-67%
- 39. Find the modelthat works for you UNDERSTANDING YOUR SALES MODEL SMB EnterpriseMidmarket 12 Mos 18-24 Mos3-6 Mos AVG ACV CHURN / UPSELL CAC PAYBACK $12 - $50K<$12k $50K+ 1% Monthly<3% Monthly <1% Monthly, Upsell
- 40. MULTIPLE WAYS TOBE SUCCESSFUL: UPSELL MAJOR DRIVER 12 Mo CAC Payback, 100% Retention 24 Mo CAC Payback, 115% Retention Note: Assumed 80% gross margin, and no other expenses. Revenue Cash Flows (Gross Profit – S&M) S&M Costs Year 1 Year 2 Year 3 Year 4Year 1 Year 2 Year 3 Year 4 $10 $8 $0 $10 $10 $10 $8 $16 $24 $10 $8 $16 $12 $1 $13 $12 $15 $24Result in same cash flow after 4 years
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- 42. ADVANCES IN AIARE AWESOME
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- 44. THE YEAR OFHUMAN ASSISTED AI SECURITY Estimated 1mm unfilled cybersecurity jobs available SALES & MARKETINGCUSTOMER SUPPORT 50% of customer service agents failed to answer a consumers questions HEALTHCARE #1 $12.8B per year on sales acceleration technology 40% of healthcare providers are expanding IT budgets
- 45. Mapping Payments Communication (Messaging/Voice) Email SSO Customer Engagement Storage Enterprise Search Files Background Check Collaboration IaaS UserManagement Identification Social AI Banking Location HealthcareSecurity/Fraud Test/Monitor APIS WILL SERVE AS THE BACKBONE FOR A MAJORITY OF SOFTWARE INFRASTRUCTURE#2
- 46. COST OPTIMIZE YOUR PUBLIC CLOUD INFRASTRUCTURE ASYOU GROW ELECTRONIC CALCULATOR 4 7 GT 7 5 8 + - MRC M- M+ -6 × 9 % BASE INSTANCE + STORAGE COST + PROVISIONED IOPS FOR DATABASES + LOCAL SSD +10% FOR PREMIUM SUPPORT +10% FOR DEDICATED INSTANCES OR HOSTS = TOO EXPENSIVE ARCHITECT FOR SUCCESS IN AN INFINITE COMPUTE WORLD #3
- 47. FIELD SERVICES VERTICALHORIZONTAL CONSTRUCTION RETAILSALES EDUCATIONHEALTHCARE SAFETY / COMPLIANCE AGRICULTUREEVENTS SMBS COMMUNICATION PAPER REPLACEMENT (FORMS/INVOICING) MOBILE UNLOCKS NON- DESK WORKER PRODUCTIVITY #4
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- 49. U.S. Labor Forceby Generation, 1995-2015 Source of Graph: Pew Research Center tabulations of monthly 1995-2015. Current Population Surveys, Integrated Public Use Microdata Series (IPUMS) Source of Data: Fast Company, Rob Hernandez, Future of Work; Forbes, Jeanne Meister, Future Workplace “Multiple Generations @ Work” Survey; PwC, Millennials at Work. MILLENNIALS ARE A MAJORITY OF THE US WORKFORCE think the performance review process is flawed69% “feel in the dark” about how their managers think they are performing 74% expect to stay in job for less than 3 years 91% ranked personal development as #1 reason for accepting a job 65% In millions Boomer s Gen Xers Silents Millennial s
- 50. DIVERSE TEAMS WIN#6 ofcompanies funded by American VCs had “one core foreign born team member such as CEO or CTO.” 75% of U.S. Billion-Dollar startups were founded by immigrant.s 51% of top 10 companies in silicon valley by NASDAQ market cap are run by women. 20% profitability increase when adding 30% more female talent to a company. 15%
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- 52. 7K Alexa/ Echo has skills THE MARKET HASFALLEN IN LOVE WITH VOICE 8.2MM Alexa/Echo‘s sold since late 2014 intro Source: Consumer Intelligence Research Partners
- 53. 11.30% 9.50% 18.70% 19.00% 41.60% When didyou first start using voice search/commands? Source: MindMeld, SEL Blog by Greg Sterling 2016 Within the last 6 monthsBetween 6 months and 1 year agoBetween 1 to 2 years agoBetween 2 to 3 years agoMore than 3 years ago 20%…of queries on the Google mobile app and android devices are voice searches Sundar Pichai Google I/O Keynote May 2016 VOICE
- 54. BVP’S 7 PREDICTIONSFOR 2017 1 APIs will serve as the backbone for a majority of software infrastructure The screenless software movement Mobile unlocks non-desk worker productivity NPS everything Architect for infinite scale without infinite spend The year of human assisted AI Diverse teams win 2 3 4 5 6 7
Editor's Notes
- #5 Twilio opened the IPO markets and proved a developer business had value