State of the Cloud 2019 from Bessemer Venture Partners

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

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

6. 1-56-1011-1516-2020+

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

State of the Cloud 2019 from Bessemer Venture Partners

State of the Cloud 2019 from Bessemer Venture Partners

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State of the Cloud 2019 from Bessemer Venture Partners