Join Bessemer Venture Partners' Alex Ferrara as he takes a look at trends and predictions for the cloud industry in 2019. One of the most popular sessions from SaaStr Annual, this presentation will provide an in-depth look at the cloud computing industry across Europe and globally.

2. ALEX FERRARA
Partner
Bessemer
@alexferrara
State Of The Cloud 2019
www.bvp.com/cloud

3. BESSEMER’S
TOP 10 LAWS
OF CLOUD
COMPUTING
2008

4. 0

5. HOW MANY $1B+
PRIVATE CLOUD
COMPANIES ARE
THERE, TODAY?

6. S A A S T R E U R O P A
2 0 1 9

7. 61

8. S o u r c e : A r i L e v y , T w i t t e r

9. S A A S T R E U R O P A
2 0 1 9
S A A S T R E U R O P A 2 0 1 9

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. ~$61B 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. S A A S T R E U R O P A
2 0 1 9
THE CLOUD 100 IS
VALUED AT $200B+
S o u r c e : P i t c h b o o k

13. 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 .

14. 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

15. HOW TO BUILD A
RESILIENT COMPANY

16. HOW TO BUILD A
RESILIENT COMPANY
GROWTH
(ARR)

17. $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 .
$100

18. YEARS FROM $1M TO $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
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 .

19. BVP GROWTH BENCHMARK
F rom $ 1 mm ARR
Yearsto$10MARR
Yearsto$100MARR
3Years
7Years
4Years
10Years
2Years
5Years
BEST
GOOD
BETTER

20. HOW TO BUILD A
RESILIENT COMPANY
GROWTH
(ARR)
RETENTION
IS YOUR
BEST FRIEND

21. RETENTION FOR DIFFERENT
CUSTOMER SEGMENTS
Gross Retention 80 – 90%70 – 80% 90%+
Net Retention 90 – 120%80 – 100% 100%+
Average ACV $12 – $50K<$12k $50K+
SMB EnterpriseMidmarket

22. 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

23. 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

24. 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

25. +
S A A S T R E U R O P A 2 0 1 9

26. HOW TO BUILD A
RESILIENT COMPANY
GROWTH
(ARR)
RETENTION
IS YOUR
BEST FRIEND
IN THE
BANK

27. S A A S T R E U R O P A
2 0 1 9
MANAGE
YOUR
RUNWAY
Buffer for
contingency plan
18 – 24 months
runway
Hiring is a big
lever

28. 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 .
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
11x

29. HOW TO BUILD A
RESILIENT COMPANY
GROWTH
(ARR)
RETENTION
IS YOUR
BEST FRIEND
IN THE
BANK
TARGETED SPEND
(“EFFICIENCY”)

30. DEFINING EFFICIENCY
Net New
ARR
Net Burn
=
BVP Efficiency
Score
(<$30M ARR)

31. 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

32. BVP EFFICIENCY SCORE
(<$30M ARR)
BEST
> 1.5x
GOOD BETTERNet New ARR
Net Burn
= < 0.5x 0.5x – 1.5x

33. $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)

34. 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

35. 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
+++ =

36. 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
+++ =

38. 2019 PREDICTIONS

39. #1 ROBOTS TO THE RESCUE
Process Automation
ACCOUNTING
CUSTOMER SUPPORT
MARKETING
AUDIT
FRAUD
SALES
HEALTHCARE

40. #2 PRIVACY ENGINEERING & ETHICAL AI
Consumer
Expectations
Regulatory
Frameworks

41. #3 OPENSOURCE MAKES MONEY
BiggestIPOEver
DeepBenchofStrong
Privates
LargestM&As
S A A S T R E U R O P A 2 0 1 9

42. #4 DEEPER VERTICALIZATION OF MOBILE
VERTICALSOFTWARE
CONSTRUCTION FIELD SERVICES
REAL ESTATE
EDUCATION
FLEET TRANSPORTATION
RETAIL SALES
INSURANCE
BANKINGSAFETY/COMPLIANCE

43. #5 LOW CODE/NO CODE
Developer BusinessAppsEasy
Automation

44. BESSEMER’S 5
PREDICTIONS
FOR 2019
1 Robots to the rescue
Privacy Engineering & Ethical AI2
Opensource makes money3
Deeper verticalization of mobile4
Low code/no code5

45. Thank You
www.bvp.com/cloud