Join Bessemer Venture Partners' Byron Deeter and Kristina Shen as they take a look at trends and predictions for the cloud industry in 2019. This marks the company's fifth annual in-depth look at the cloud computing industry.

1. State Of The Cloud 2019
BYRON DEETER
Partner
BVP
@bdeeter
KRISTINA SHEN
Partner
BVP
@kshenster

2. Byron Deeter
Partner
BVP
@bdeeter
Kristina Shen
Partner
BVP
@kshenster
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. 1-56-1011-1516-2020+

8. 55

9. 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

10. 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

11. S A A S T R A N N U A L 2 0 1 9

12. 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

13. ~$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 . )

14. 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

16. $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

17. 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

18. 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

19. 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

20. THE CLOUD 100 IS
VALUED AT $175B+
S o u r c e : P i t c h b o o k

21. 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

22. HOW TO BUILD A
RESILIENT COMPANY

23. Q: WHEN WAS THE
LONGEST BULL
MARKET?

24. 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 .

25. HOW TO BUILD A
RESILIENT COMPANY
GROWTH
(ARR)
S A A S T R A N N U A L 2 0 1 9

26. $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

27. 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 .

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

34. S A A S T R A N N U A L 2 0 1 9
+

35. 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

36. S A A S T R A N N U A L 2 0 1 9

37. S A A S T R A N N U A L 2 0 1 9
QUEEN

38. MANAGE
YOUR
RUNWAY
Buffer for
contingency plan
18 – 24 months
runway
Hiring is a big
lever

39. 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

40. 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”)

41. 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)

42. 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

43. 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

44. 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)

45. S A A S T R A N N U A L 2 0 1 9
FROM GRIT TO GREAT
+++Growth
(ARR)
In The Bank
Targeted
Spend
(Efficiency)
Retention
Is Your Best
Friend
G I TR
%AnnualNet
Retention
%YoYGrowth YrsofRunway NetNewARR/
NetBurn
0.5–1.5x80–150% 1–3Yrs50–200%
= GRIT
SCORE
3–4
4–6
>6
GOOD
BETTER
BEST
HOW TO BUILD A RESILIENT COMPANY?

46. S A A S T R A N N U A L 2 0 1 9
EXAMPLE 1 – TWILIO (<$5M ARR)
+++
%AnnualNet
Retention
%YoYGrowth YrsofRunway NetNewARR/
NetBurn
0.5–1.5x80–150% 1–3Yrs50–200%
= GRIT
SCORE
BEST
1.5
(1.5xEfficiency)
2
(2Years)
3
(300%+Growth)
1.6
(160%Retention)
8.1
G I TR
+++ =

47. S A A S T R A N N U A L 2 0 1 9
EXAMPLE 1 – SERVICETITAN (<$5M ARR)
+++
%AnnualNet
Retention
%YoYGrowth YrsofRunway NetNewARR/
NetBurn
0.5–1.5x80–150% 1–3Yrs50–200%
= GRIT
SCORE
BEST
3.4
(3.4xEfficiency)
2
(2Years)
2
(200%+Growth)
0.9
(90%Retention)
8.3
G I TR
+++ =

49. 2019 PREDICTIONS

50. #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

51. #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

52. #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

53. #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

54. #5 LOW CODE/NO CODE
Developer BusinessAppsEasy
Automation

55. 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

56. CLOUD REIGNS
$1 TRILLION

58. Thank You
www.bvp.com/cloud