Overview

Exactly one year ago in early March 2020, we were days away from COVID-19 lockdown where our communities, companies, and healthcare system shifted into emergency response. We didn’t know it then, but this was the beginning of a fundamental and abrupt change to the way we live and work—powered by the cloud-first economy.

As the world adjusted to this major disruption in human behavior, we found new ways to adjust to the New Normal — offline and online. CEO of Microsoft, Satya Nadella, affirmed this trend, too. A few months into the pandemic, he told shareholders: “We’ve seen two years’ worth of digital transformation in two months.”

In State of the Cloud 2021, we explore the major milestones and changes within the cloud economy and original analysis on what’s driving today’s private cloud valuations. In addition, we share new frameworks and emerging strategies to help founders measure growth endurance and drive go-to-market momentum. Plus, we dive into our seven predictions for 2021.

Full deck

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Top takeaways

1. Cloud companies have not just reset in the New Normal, but have thrived with a record-breaking market capitalization of more than $2 trillion.
2. There’s been a changing of the guard afoot: MT SAAS has overtaken FAANG.
3. Cloud multiples are rising to new heights, with both public and private cloud trading over 20x.
4. Cloud growth rates and access to capital are at all-time highs, with the average Cloud 100 company growing 80% YoY and $186 billion going into private cloud companies in 2020 alone.
5. Good-better-best of growth endurance is 70%-75%-80%.
6. GTM strategies have adapted in the New Normal; best practices include product-led growth, usage-based pricing, and the adoption of cloud marketplaces.
7. Read our 2021 Predictions, here.

Dive in to read the full analysis of the report.

Public cloud industry milestones

When we look at how the top five public cloud companies grew over the past year, there’s a clear story of how the pandemic drove the change.

First, Paypal shifted from third place to the largest market capitalization, which was driven by the rise in e-commerce and the increase in digital payments including a QR code system for contactless payments in physical stores. Second, Shopify nearly tripled in market capitalization as small businesses sought to move their business online to continue engaging with their current customers and attract new ones. And last but not least, Zoom replaced ServiceNow in the top five. As Zoom meetings, Zoom backgrounds, and even Zoom fatigue became ubiquitous of the New Normal, the business’ market capitalization grew over 4x to reflect that.

In a year, the top five public cloud companies saw a total 1.7x (or 70%) increase in total market cap — Paypal, Adobe, Salesforce, Shopify and Zoom. Together, these five public companies are collectively worth more than $1 trillion.

Compared to last year when there wasn’t a single company worth more than $200 billion, today each of the top three — Salesforce, Adobe, and Paypal — are each above that mark. While the top three maintain a notable lead given their scale, Shopify and Zoom experienced dramatic revenue growth over the past year.

Switching from the application layer to the infrastructure layer, we see that last year in aggregate, IaaS grew 50%, crossing $150 billion revenue run rate.

AWS continues to maintain its position at the top, steadily owning around a third of the total market size. However, Microsoft’s Azure platform continues to climb, and if they continue at this rate they could surpass AWS in the next three years, in terms of total market share.

When we look at the pure-play cloud leaders and combine the infrastructure and application leaders, we can measure the total public cloud market capitalization through the lens of the Bessemer Cloud Index.

Two years ago, the total public cloud market capitalization was an impressive $690 billion. We predicted that the total public cloud market would cross $1 trillion, but it played out faster than we anticipated.

Coincidentally, exactly one year later on February 5, 2020, we celebrated crossing the $1 trillion milestone. At that time, we projected it would take another couple years to cross $2 trillion, however on February 5, 2021, we stood at an impressive $2.2 trillion. Go to our newly launched Cloud Index to see where we stand today.

Despite a tumultuous first half of the year, 2020 was marked by record-breaking activity in the IPO & M&A environment, especially for the cloud industry. This includes the high-flying IPO of Snowflake, as well as other major public offerings, including Qualtrics, C3, Asana, Sumo Logic, JFrog, BigCommerce, nCino, Agora, and more.

In the public markets more broadly, twice as many companies went public in 2020 than in 2019. Also, more IPOs last year doubled in value during their opening days than any year since 1999.

Raising over $3 billion in its initial public offering, Snowflake became the largest software IPO in history, far surpassing VMware which had held the record since 2007. It also became the fifth-largest tech IPO ever after Facebook, Uber, and Snap, surpassing other 2020 blockbuster IPOs including Airbnb and DoorDash.

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