SaaStr Annual 2018 Byron Deeter and Kristina Shen of Bessemer Venture Partners deliver State of the Cloud 2018, the definitive guide to the biggest trends in the cloud industry.

1. STATE OFTHE
CLOUD REPORT 2018Byron Deeter, Kristina Shen,Anna Khan
w w w . b v p . c o m / c l o u d

2. 2017a look back

3. 100,000
10,000
1,000
100
10
1.0000
0.1000
0.0100
0.0010
0.0001
2010 2012 2014 2016
USD
BITCOIN
MILLIONAIRES!
Source: Reddit, Bitcoin prince since inception on a log scale

4. WHILETHE JURY IS OUT ON BITCOIN…
4Source: Headline from CNBC article on Erik Finman. Author: Michelle Castillo. June 2017.
Source: Leo Image from Wolf of Wall Street Movie.

5. BOTMANIA;
THE MACHINES
WILLTAKE OVER!

6. REVENGE OFTHE NERDS
Source: VisualCapitalist.com
Top 5 Publicly Traded Companies (by Market Cap)
2006
$446B $383B $327B $293B $273B
6

7. REVENGE OFTHE NERDS
Source: VisualCapitalist.com
Top 5 Publicly Traded Companies (by Market Cap)
2006
2011
$406B $376B $277B $237B $228B
$446B $383B $327B $293B $273B
7

8. REVENGE OFTHE NERDS
Source: VisualCapitalist.com
Top 5 Publicly Traded Companies (by Market Cap)
2006
2011
2016
$582B $556B $452B $364B $359B
$406B $376B $277B $237B $228B
$446B $383B $327B $293B $273B
8

9. 9
Source: Make A GIF

10. 0
4000
8000
12000
16000
2015 2016 2017
IPO MARKET IS OPENING BACK UP, BUT STILL BELOW
HISTORICALAVERAGES
2015
Total
$15.6B
2016
Total
$7.4B
2017
Total
$11.5B
Source: CapIQ. IPO Data from NASDAQ. Companies included are on BVP Cloud Index. Value is determined by market cap end of first day of trading. 10

11. CLOUD INDEX CONTINUESTO OUTPERFORM
Source: BVP Cloud Index.
Coming soon…
11

12. 5
10
0
2
4
6
8
10
12
2006 2016
AverageYears to IPO
2006 vs. 2016
AVERAGEAGE OFATECH COMPANY IPO INCREASED
2X INTHE LAST DECADE
$573m
Average Market Cap at
IPO in 2009
~$1B
Average
value now
Source: Nasdaq, Trever Nath, 2016
Source: CapIQ and Pitchbook. 12

13. $26
$84
0
10
20
30
40
50
60
70
80
90
2013 2017
Total Private Capital Invested in Technology Companies ($B)
ENABLED IN PART BY HUGE GROWTH IN PRIVATE
CAPITALAVAILABLETO SOFTWARE STARTUPS
(3X GROWTH IN FOUR YEARS)
Source: NVCA 2017 Report 13

14. 0
50
100
150
200
250
2013 2014 2015 2016 2017
# of Private CompaniesValued at $1B+
A DECADEAGO,A $1B PRIVATEVALUATIONWAS
UNHEARD OF…NOWTHEREARE MORETHAN 200!
Source: Dow Jones Venture Source, The Wall Street Journal. “WSJ Billion Dollar Startup Club.” Exhibit 10. As of June 30, 2017.
Source: Logos included are a sampling of companies that became ”unicorns” that year. 14

15. 1003
857
769
0
200
400
600
800
1000
1200
2015 2016 2017
# ofVC-Backed Exits, 2015-2017
DESPITE MORE MONEY RAISEDAND MOREVALUABLE
COMPANIES,VC-BACKED EXITS DECLINED FORTHE
3RD CONSECUTIVE YEAR IN 2017
Source: NVCA 2017 Report 15

16. ALMOSTAS MANY PRIVATE CLOUD UNICORNSAS
PUBLIC CLOUD UNICORNSTODAY!
37 44
PRIVATE PUBLIC
16Source: BVP Cloud 100 List & BVP Cloud Index.

17. A NEW
VALUATION
FRAMEWORK

18. Revenue Multiple
RAISING EARLY STAGE FUNDINGA DECADEAGO
%YoYRevenueGrowth
Public
30%
YoY Growth
0x 5x 10x
Private
(A Decade Ago)
100%
YoY Growth
18

19. Revenue Multiple
RAISING EARLY STAGE FUNDINGTODAY
%YoYRevenueGrowth
Private
(A Decade Ago)
100%
YoY Growth
30%
YoY Growth
0x 5x 10x
Private
(TODAY)
100-300%
YoY Growth
20X
Public
19

20. 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012 2013 2014 2015 2016 2017 2018 2019
On Prem SaaS
Source: IDC, Worldwide Enterprise Application Spend by SaaS and
On-Prem, 2013-2018.
75%
25%
15%
85%
SaaS Adoption Easier to Start a Cloud Company
Source: 2016 data from nordicapis.com. 2005-2015 data from
rubenverborgh.girhub.io and 200-2004 data from blog.cutter.com
0
5000
10000
15000
20000
25000
30000
35000
2000 2006 2012 2018
API Growth (# of APIs) from 2000-2018
WHAT’S CHANGED?
20

21. USVC Activity ($B) by Sector
Cloud funding
has grown 4x
and to 50% of
total funding
in 6 years
...AND HIGHVC INTEREST IN CLOUD
21

22. $0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
0.5 Yr 1 Yr 1.5 Yr 2 Yrs 2.5 Yrs 3 Yrs 3.5 Yrs
ARR(in$M)
Years from $1M to $10M ARR
Source: CapIQ internal sources and company announcements..
Note: Use quarterly revenue times four as a proxy for ARR.
HOW FAST DOTOP CLOUD COMPANIES GROW
TODAY?
22

23. THE BVP GROWTH BENCHMARK
From $1mm ARR
GOOD
4
Years
Double
Annually
BETTER
3
Years
Triple,
Double,
Double
BEST
2
Years
Triple,
Triple
Years to
$10MARR
Implied Growth
Multiple byYear
23

24. 4.4x
6.0x
6.9x
15.9x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
2011 2012 2013 2014 2015 2016 2017
Public - BVP Cloud Index - NTM Mult Private - ARR Mult
Revenue Multiples – Public vs Private ($1-20M ARR)
Note:
Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples.
Private - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are included in
2011 (given limited data). 2018 transactions are included in 2017.
PRIVATE MULTIPLES HAVE OUTPACED PUBLIC
MULTIPLES...
24

25. 4.4x
6.0x
6.9x
15.9x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
2011 2012 2013 2014 2015 2016 2017
Public - BVP Cloud Index - NTM Mult Private - ARR Mult
Revenue Multiples – Public vs Private ($1-20M ARR)
Note:
Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples.
Private - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are included in
2011 (given limited data). 2018 transactions are included in 2017.
PRIVATE MULTIPLES HAVE OUTPACED PUBLIC
MULTIPLES...
1.5x
Private /
Public
2.5x
Private /
Public
25

26. 48%
25%
170%
259%
0%
50%
100%
150%
200%
250%
300%
2011 - Public 2017 - Public 2011 - Private 2017 - Private
Median % YoY Growth – Public vs Private ($1-20M ARR)
Note:
Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically).
Private - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. 2010 transactions are included in 2011 (given limited data). 2018 transactions are
included in 2017.
... BUT PRIVATE COMPANIESARE GROWING MUCH
FASTER EACH YEAR
26

27. THE BVPARRG METRIC
ARRG
Multiple
=
ARR
Multiple
Growth
(YoY)

28. THE BVPARRG METRIC: EXAMPLE
6.7x
ARRG
Multiple
=
10x
150%

29. 4.4x
6.0x
6.9x
15.9x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
2011 2012 2013 2014 2015 2016 2017
Public - BVP Cloud Index - NTM Mult Private - ARR Mult
Revenue Multiples – Public vs Private ($1-20M ARR)
Note:
Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples.
Private - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are included in
2011 (given limited data). 2018 transactions are included in 2017.
WHILEARR MULTIPLES LOOK HIGH...
29

30. 4.4x
6.0x6.9x
15.9x
7.7x
7.6x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
2011 2012 2013 2014 2015 2016 2017
Public - BVP Cloud Index - NTM Mult Private - ARR Mult Private - ARRG Mult
Revenue Multiples – Public vs Private ($1-20M ARR)
Note:
Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples.
Private ARR Mult - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are
included in 2011 (given limited data). 2018 transactions are included in 2017.
Private ARRG Mult – Takes ARR multiple and divides by YoY growth rate.
...ARRG MULTIPLES HAVE STAYED FLAT
2.5x
Private
/ Public
1.3x
Private
/ Public
30

31. 4.4x
6.0x6.9x
15.9x
7.7x
7.6x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
2011 2012 2013 2014 2015 2016 2017
Public - BVP Cloud Index - NTM Mult Private - ARR Mult Private - ARRG Mult
Revenue Multiples – Public vs Private ($1-20M ARR)
Note:
Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples.
Private ARR Mult - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are
included in 2011 (given limited data). 2018 transactions are included in 2017.
Private ARRG Mult – Takes ARR multiple and divides by YoY growth rate.
SOME BUMPSALONGTHEWAY...
Public Markets
Over-Valued
31

32. 4.4x
6.0x6.9x
15.9x
7.7x
7.6x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
2011 2012 2013 2014 2015 2016 2017
Public - BVP Cloud Index - NTM Mult Private - ARR Mult Private - ARRG Mult
Revenue Multiples – Public vs Private ($1-20M ARR)
Note:
Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples.
Private ARR Mult - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are
included in 2011 (given limited data). 2018 transactions are included in 2017.
Private ARRG Mult – Takes ARR multiple and divides by YoY growth rate.
SOME BUMPSALONGTHEWAY...
Public Markets
Over-Valued
Private Markets
Over-Valued
32

33. 4.4x
6.0x6.9x
15.9x
7.7x
7.6x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
2011 2012 2013 2014 2015 2016 2017
Public - BVP Cloud Index - NTM Mult Private - ARR Mult Private - ARRG Mult
Revenue Multiples – Public vs Private ($1-20M ARR)
Note:
Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples.
Private ARR Mult - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are
included in 2011 (given limited data). 2018 transactions are included in 2017.
Private ARRG Mult – Takes ARR multiple and divides by YoY growth rate.
DESPITE SEEMINGLY HIGH PRIVATE COMPANY
VALUATIONS, MULTIPLES CAN BE JUSTIFIED!
Growth adjusted, private
valuations are more reasonable
6.7x
Median
ARRG
33

34. SERIESA/BVALUATION FRAMEWORK
GOOD 50- 100%
CARR
%Growth
BETTER
BEST
100- 200%
200%+
1
24
CAC
PAYBACK
Mos
12- 24
<12
2
1-3%
CHURN
(Monthly)
<1%
Net negative
3
<1
CASH FLOW
EFFICIENCY
-1
>1
4
34

35. 2018 PREDICTIONS

36. 2013 CLOUD
ROADMAPS
Mobile Sales ForceAutomation1.
Quantitative Marketing 2.
IT/Data Management3.
CFO Software 4.
Regional SaaS5.
HR 2.0 6.
Consumerized SaaS for SMB7.
PaaS/Business to Developer
(B2D)/Developer Citizenry
8.
36

37. BVP ROADMAP INVESTMENTS
INTHE LAST 5YEARS
MobileSalesForce
Automation1.
Quantitative
Marketing 2.
IT/Data
Management3.
CFOSoftware 4.
Regional
SaaS5.
HR2.0 6.
Consumerized
SaaSforSMB7.
PaaS/BusinesstoDeveloper
(B2D)/DeveloperCitizenry 8.
37

38. 2018 PREDICTIONS
BY CLOUD LAYER
IAAS
PAAS
FAAS
SAAS

39. ...AND SOFTWARE IS GETTING HARDER.
#1 RISE OF SERVERLESS COMPUTING
Bare metal
1950s – 2000s
Virtualization
2000s-2014
Containers
2014 - Present
Serverless
2016 - Present
Hardware
Operating system
Process
Function
Hardware
Operating system
Function
Process
Hardware
FunctionFunction
ProcessProcess
Operating systemOperating system
Hardware
More agility, but also more complexity
39

40. ...AND SOFTWARE IS GETTING HARDER.WHY NOW?
40

41. DRIVEN BY 3 MACROTRENDS
Docker made containers
more dev-friendly
More, scalableAPIs Open Source more available
and accepted
Source: Black Duck Software, 2015, Future of Open Source 41

42. FUTURE IS IN MANAGING CONTAINERSAT SCALE
Increased container usage
How do I use a
cointainer?
How can these containers
work together?
How do I secure and
monitor my containers?
How do I manage
containers at scale?
• Operations management
• DevSecOps
• Visibility
• Testing
• Migration
• New services
42

43. 2018 PREDICTIONS
BY CLOUD LAYER
IAAS
PAAS
FAAS
SAAS

44. Mapping
Payments
Communication
(Messaging/Voice)
Email
SSO
Customer
Engagement
Storage
Enterprise Search
Media
Background Check
Collaboration
IaaS
User Management
Identification
Social
AI
Banking
Location
HealthcareSecurity/Fraud
Test/Monitor
API’S DRIVE INNOVATION
#2
VideoShipping Logistics
44

45. BLOCKCHAIN FINDSA HOME INTHE ENTERPRISE
#3
FOOD AVIATIONRETAIL
45

46. ...AND SOFTWARE IS GETTING HARDER.SOFTWARE AND PAYMENTS USED TO LIVE APART
SOFTWARE VENDORS MERCHANT ACQUIRERS
46

47. ...AND SOFTWARE IS GETTING HARDER.
#4 PAYMENTS-AS-A-SERVICE
47

48. 2018 PREDICTIONS
BY CLOUD LAYER
IAAS
PAAS
FAAS
SAAS

49. THE MOVE FROM SYSTEM OF RECORDTO
SYSTEM OF RESULTS#5
49

50. THE SCREENLESS
SOFTWARE MOVEMENT#6
50

51. VOICE ISTHE NEXT SOFTWARE BATTLEGROUND
devices sold
20M*
*Source: Estimates based on AMZN earnings call. Voicebot.ai, October 2017.
devices sold
7M*
devices sold
?
51

52. 2018 PREDICTIONS
BY CLOUD LAYER
IAAS
PAAS
FAAS
SAAS

53. VALUES CREATEVALUE
#7
53

54. START EARLYAND
REITERATE OFTEN,VISION
ANDVALUES FROM DAY 1
It’s all about the culture
Happy
We are passionate and know how to have a good time.
We cultivate happiness inside and outside the office.
Hungry
We are go-getters and innovators.We always look for
ways to raise the bar.
Humble
We have a people and customer-first mindset.Arm-in-
arm, we play to win as a team.
Honest
We are transparent and honest with ourselves.We act
with integrity and actions that would make our
loved ones proud.
4H’s
54

55. #8 THE CLOUD IS FLAT; INNOVATION OUTSIDE
THEVALLEY
55

56. 2018 PREDICTIONS
BY CLOUD LAYER
IAAS
PAAS
FAAS
SAAS

57. BVP’S 8 PREDICTIONS
FOR 2018
API’s drive innovation
1.
Payments-as-a-
Service
2.
Blockchain in the Enterprise3.
Move from System of Record to
System of Results
4.
Screenless Software Movement
5.
Rise of Serverless Computing
6.
Values CreateValue7.
The Cloud is Flat 8.
57