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The Cloud 100 2021 Benchmarks Report

Bessemer reveals six years of insights and trends on the top 100 private cloud companies.

By Mary D'Onofrio and Janelle Teng 8.9.21

Today Bessemer Venture Partners, Forbes, and Salesforce Ventures announced the 2021 Cloud 100 List, the definitive ranking of the top 100 private cloud companies. And — keeping consistent with previous years’ trends — the 2021 list was even stronger than the last. This year features bigger companies, higher valuations, and more market tailwinds than ever before — so much so, in fact, that the estimated valuation required to make the list was over $1 billion*. That’s right. The bar for this year’s list was so high that each honoree achieved the unicorn milestone. Between Stripe at $95 billion, Databricks at $28 billion, and Checkout at $15 billion, to get on the 2021 Cloud 100 list was a fight among giants. These honorees truly represent the best cloud companies globally.

With six years of Cloud 100 data behind us, in this year’s Benchmarks Report we reveal Bessemer’s analysis and insights into the 2021 Cloud 100 cohort and what it tells us about the state of the private cloud market today.

Top highlights:

  • Private cloud valuations continue to get bigger. The Cloud 100 2021 is worth an aggregate of $518 billion in 2021 vs. $267 billion in 2020, which is a 94% increase year-over-year (YoY). The top 10 Cloud 100 companies alone contribute $200 billion of equity value (38% of list value), and fintech represents the highest value subsector at $146 billion (28% of list value).
  • The threshold to make the Cloud 100 continues to get higher: this year, every company on the list has at least hit the unicorn milestone. In addition, the average cloud company valuation was $5.2 billion, an increase of $2.5 billion YoY.
  • The growth in valuations comes from both increased growth rates for Cloud 100 businesses and higher multiples being paid. The average Cloud 100 valuation multiple increased by approximately 270% in the last six years, from 9x ARR in 2016 to 34x in 2021, while the average Cloud 100 company revenue growth rate increased to 90% YoY.
  • Cloud 100 companies are reaching the unicorn milestone faster than ever before. When we look at the 2021 basket, it took the average Cloud 100 honoree 8.6 years from founding to grow into a unicorn, as compared to 12.1 years in 2016. Cumulatively, the Cloud 100 2021 basket has raised more than $50 billion over its lifetime.
  • The Cloud 100 list continues to produce strong returns. In five years, the total valuation of the 2016 Cloud 100 list has increased by more than 780%, delivering an 8.8x and 54% IRR in that time. The 2017 Cloud 100 basket has delivered an 8.5x and 71% IRR as its aggregate value nears $1 trillion; the 2018 basket a 6.2x and 83% IRR; the 2019 basket a 4.1x and 102% IRR; and the 2020 basket a 2.2x and 117% IRR in just one year alone.

Let’s dig in!

The Cloud 100 2021 at a glance: $518 billion of equity value

The 2021 Cloud 100 list represents an astonishing $518 billion of equity value, with an average $5.2 billion valuation per company. The cumulative value of the Cloud 100 list is up a staggering +94% from the 2020 list’s aggregate value of $267 billion, in just one year.

The Top 10 Cloud Companies represent almost $200 billion of equity value alone. Stripe, which was unseated by Snowflake in 2020, secured its number one spot once again and is the top-ranked cloud company, valued at $95 billion. Joining Stripe on the top ten list includes Databricks (#2), Canva (#3), HashiCorp (#4), Toast (#5), Plaid (#6), Figma (#7), ServiceTitan (#8), Checkout.com (#9), and Freshworks (#10). Representing $200 billion of equity value as a group, these companies individually average a valuation of almost $20 billion, $10.5 billion more than in 2020 and an incredible $16.6 billion more than in the 2016 iteration of the Cloud 100. Some notable financings in this group include ServiceTitan’s $500 million round in March 2021, which put its valuation at $8.3 billion and Canva’s April 2021 round at $15 billion.

Fintech surpassed data infrastructure as the most valuable Cloud 100 category, though sales, marketing, and customer success software continues to have the plurality of companies on the list. With 16 companies, the Sales/Marketing/CX category was the largest category represented on the 2021 Cloud 100 list by company count, including such notable names as Attentive, Yotpo, and Intercom, and it was the second most valuable subsector with $71 billion of value. However, the data changes when looking at aggregate valuation by subsector. With only 12 fintech companies on the list, this subsector holds 28% of the list’s equity value at $146 billion and is the highest valued subsector, anchored by Stripe (18% of the list’s value alone).

There were 29 newcomers to this year’s Cloud 100 list. The highest-ranked new entrant was Attentive, appearing on the list as #12. Other newcomers include Loom and Calendly alongside Bessemer portfolio companies Forter, the leader in fraud prevention software, and PapayaGlobal, an international payroll solution. The biggest mover title goes to world’s leading feature management platform, LaunchDarkly, which announced its Series D today at over a $3 billion valuation.

The globalization of cloud continues. As entrepreneurs, operators, and investors all around the world increasingly recognize the power of the cloud, we’re seeing cloud startups bloom in technology hubs globally. The Cloud serves as the backbone for emerging tech communities across the globe as startup teams have more flexibility and agency than ever before. In the Work from Anywhere movement, we’ve found that remote-first and distributed cloud teams across North and South America, EMEA, and APAC experienced more efficiency, increased scalability, and higher access to diverse pools of talent from all around the world. International representation on the Cloud 100 list reached almost 30% this year, and we expect this trend to continue for many more years to come, making the Cloud 100 more and more geographically diverse. We believe entrepreneurship is borderless, and we’re excited to continue to back cloud entrepreneurs around the world, from Canva in Australia to Mambu in Germany!

Cloud 100 new norms: 34x+ ARR multiples and +90% YoY growth

As we discussed above, the Cloud 100 2021 list is worth an aggregate of $518 billion, an impressive +94% YoY growth over the $267 billion value of the 2020 list, increasing the average Cloud 100 winner’s valuation up a massive $2.5 billion YoY ($1.6 billion if you remove Stripe). Combining all years of the Cloud 100, the growth is even more phenomenal. In six years, the average Cloud 100 valuation has grown by $4.1 billion and a +38% CAGR, from $1.1 billion in 2016 to $5.2 billion today.

As investors in cloud companies and as students of the market today, we find these statistics incredible; they are a credit to the tailwinds behind cloud adoption combined with investors’ understanding of the superiority of the cloud business model broadly. And as we explored in the State of the Cloud 2021, we can attribute much of the growth in valuations to the combination of cloud company revenue growth and the multiples on that revenue expanding.

Across all the companies for which pricing data was disclosed, the 2021 Cloud 100 honorees commanded an average 34x ARR multiple in the most recent round of financing. This average Cloud 100 multiple has increased approximately 270% in the last six years from 9x ARR in 2016. The markets don’t look to be cooling off any time soon, with the average ARR multiple growing 47% in just a year, up from 23x in 2020.

The average Cloud 100 growth rate also continues to accelerate, and top quartile companies are growing faster than ever before. Average growth rate increased from 60% in 2017 to 90% in 2019 given tailwinds for cloud adoption, though it dipped to 80% in 2020, which we largely attributed to COVID headwinds in certain industries. Today, average Cloud 100 growth rates have recovered and are back at 90% as more companies recognize the importance of moving to the cloud during the new normal.

It is also important to note that the top quartile cloud companies continue to pull away from the pack. Since 2017, the growth rates of the top quartile private cloud companies have increased 70%, from 65% in 2017 to 110% in 2021, including a 10% acceleration in the past year alone. We note that many of the fastest-growing companies have been beneficiaries of COVID tailwinds and include companies that facilitate distributed work and collaboration.

Cloud 100 data, however, points to the fact that in the private markets, multiples are expanding even on a growth-adjusted basis. From 2017 to 2021, the average growth-adjusted multiple for Cloud 100 companies increased by 180%, meaning that investors are willing to pay higher prices for the same growth rates; they are not both increasing in lock-step. We believe that this dynamic stems from high investor appetite for strong cloud businesses and the willingness to pay premium valuations for access to these special companies.

For founders, the takeaway is that building a cloud business today is as valuable as it has ever been before. The combination of unprecedented growth rates and increased investor demand have led to a proliferation of Cloud 100 unicorns.

This can be observed in the data. Best-in-class cloud companies are reaching the unicorn milestone faster than ever before. When we look at the 2021 basket, it took the average Cloud 100 Honoree 8.6 years from founding to become a unicorn, as compared to 12.1 years in 2016. The two companies that were fastest to achieve the unicorn milestone on this year’s list were Hopin and Axonius, which have both experienced explosive growth at record-breaking speed. Founded in 2019, Hopin reached unicorn status by the end of 2020, propelled by unprecedented demand for its event technology platform. Axonious was not far behind — founded in 2017 with Bessemer leading its Series A in 2019, the cybersecurity leader entered the unicorn herd in early 2021.

Investor excitement for strong cloud businesses has led to the growth in mega-rounds in Cloud 100 companies. Three-quarters of this year’s Cloud 100 companies have raised $100 million or more in their most recent financing rounds, with the average latest round size of a Cloud 100 company exceeding $225 million. Cumulatively, the Cloud 100 2021 basket has raised more than $50 billion over its lifetime!

Cloud 100 returns: +780% increase in valuation since 2016

The Cloud 100 is the definitive list of the world’s best cloud companies, and that legacy bears out in the returns it produces. In five years, the total valuation of the 2016 Cloud 100 list has increased by more than 780%, delivering an 8.8x and 54% IRR in that time. The 2017 Cloud 100 basket has delivered an 8.5x and 71% IRR as its aggregate value nears $1 trillion; the 2018 basket a 6.2x and 83% IRR; the 2019 basket a 4.1x and 102% IRR; and the 2020 basket a 2.2x and 117% IRR in just one year alone.

Much of the strong Cloud 100 returns — especially in the last year — have been driven by today’s strong market and exit environment for cloud companies. Almost 70% of the Cloud 100 2016 has exited, for an aggregate of $210 billion, while the average exit value has increased from $3Bn then to over $6.7Bn in 2020. Across the entire universe of 234 companies that have ever been on a Cloud 100 list, 86 companies (or 37%) have exited for a total of over $300 billion.

In 2021 alone we have seen over $100 billion of IPO exit value coming from past Cloud 100 winners, including Procore in its $9 billion IPO, UiPath in its $29 billion IPO, and Confluent in its $9 billion IPO. We also saw a direct listing from Squarespace and even a SPAC from DigitalOcean. All of this public market activity is happening against the backdrop of an average 22x multiple for BVP Nasdaq Emerging Cloud Index (^EMCLOUD) companies today.

The Cloud 100 has also delivered a meaningful portion of the public cloud software market capitalization, as measured by the BVP Nasdaq Emerging Cloud Index (^EMCLOUD). Twenty-six of the current ^EMCLOUD component companies are Cloud 100 graduates, contributing over $590 billion of public cloud market capitalization.

Looking into the value creation of public Cloud 100 companies from 2016, \~80% was generated in the public markets, with \~70% for 2017-2018; however, it is noteworthy that the 2019 and 2020 lists have materially less public contribution. Naturally more value will be captured in the public markets as these companies grow in revenue and in their valuations, but given the dynamic of increased multiples in the private markets, there is an argument to be made that companies are now capturing value in the private markets that historically was only reserved for the public markets.

What’s ahead

The Cloud 100 2021 companies have successfully captured industry tailwinds and combined it with strong execution and customer love to create equity value for themselves and value for the world. Most impressively, these companies have achieved such remarkable milestones during a period of unprecedented complexity and challenges, amidst the backdrop of the global pandemic. As this benchmark report has demonstrated, the 2021 Cloud 100 cohort has grown faster than ever before, doing so in a market that craves more supply. We expect that this trend will only continue throughout the rest of 2021 and beyond, and are excited to see what else lies ahead for the world’s best cloud companies.

See you for Cloud 100 2022!

*Note that not all companies’ last disclosed round valuations exceeded $1Bn, but this reflects valuation estimates determined by the combination of Bessemer, Salesforce, Forbes, and the judges.

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2020 Benchmarks

Today, Bessemer Venture Partners, Forbes, and Salesforce Ventures announced the 2020 Cloud 100 List, the definitive ranking of the top 100 private cloud companies. With five years of Cloud 100 data, we reveal Bessemer’s analysis and the top insights of this high-performing cohort and discuss why it’s such a significant achievement for a private cloud company to make the list.

The Cloud 100 serves as the industry benchmark of operating success and helps to measure the strength of the private cloud market.

Top highlights:

  • Private cloud valuations continue to get bigger – the Cloud 100 2020 is worth an aggregate $267 billion in 2020 vs. $166 billion in 2019, which is a 60% increase year-over-year (YoY). In addition, the average cloud company valuation increased by over $1 billion YoY.
  • The threshold to make the Cloud 100 continues to get higher – the median Cloud 100 company is a unicorn, and the average valuation of the Cloud 90-100 is above one billion dollars. This year there are 87 unicorns on the 2020 Cloud 100.
  • The most featured cloud software subsector was sales/marketing/CX software with 19 companies represented. The data/infrastructure subsector is the most valuable with $52 billion of aggregate value, representing 20% of the Cloud 100 list value and 5 of the top 10 ranked companies
  • The Cloud 100 continues to drive massive returns – if you were to have invested in the 2016 basket of Cloud 100 companies, you would have generated a 5.5x gross multiple of invested capital (MOIC) and a 53% internal rate of return (IRR). Fifty-seven percent of the Cloud 100 list from 2016 has exited for $150 billion of value.

Over the past four years, the Cloud 100 has driven outsized returns. If you were to have invested in the Cloud 100 basket in 2016, your investment would have quintupled in the past four years, generating a 53% IRR and an incredible $444 billion of additional equity value.

The 2017 Cloud 100 basket has delivered a 5.1x and 72% IRR; the 2018 basket a 3.5x and 86% IRR; and the 2019 basket has delivered a 1.9x and 90% IRR in just one year. These are the 100 best cloud companies in the world every year. Let’s dig into the top insights from our 2020 benchmarks.

The Cloud 100 2020 List represents $267 billion of equity value

The 2020 Cloud 100 list represents an astonishing $267 billion of equity value, with an average $2.7 billion private valuation per company. This is up a dramatic 60% from the 2019 list’s aggregate value of $166 billion, in just one year.

The 2020 Cloud 100 list represents an astonishing $267 billion of equity value.

Snowflake became the number one ranked cloud company, just in time for it to enjoy the rank before its IPO! After Stripe enjoyed three consecutive years in the top spot, Snowflake supplanted Stripe as the number one ranked private cloud company in the world. Stripe moved down to the second-best private cloud company in the world, while Canva, Databricks, and Toast all joined the top ten for the first time.

In addition, there were 27 newcomers to the list. The highest-ranked new entrant was Checkout.com, appearing on the list as #15 after its June 2020 fundraise valuing the company at $5.5 billion. Other newcomers include some of the graduates from previous Rising Stars lists: LaunchDarkly, Gong, Benchling, and Notion. Keeping consistent with the themes in the broader subsegments of the list, we saw the most newcomers from the design, collaboration, and productivity segment, which includes Notion, Figma, and Miro.

There were some big movers on the list, too. The biggest increase was from Samsara, which moved from #67 in 2019 to #25 in 2020, after another year of growth and a new round of financing that valued it at $5.4 billion. Guild Education enjoyed tailwinds around online education and reskilling that propelled it up 40 spots to #36, and Pendo shot up 41 spots to #53 with its ongoing success in the product management category.

Cloud 100 new norms: 20-25x+ ARR valuation multiples and 100% YoY growth

Across all the companies for which pricing data was disclosed, the average Cloud 100 valuation was \~25x ARR in its most recent round of financing. The median ARR multiple is lower at \~20x, the average anchored higher by some transactions at 50-70x ARR. This represents a premium to the valuations in the public cloud markets, in which the average approximate ARR multiple is 17x; however, whereas the average public cloud company is growing at 35% YoY, the average Cloud 100 company is growing 100% YoY. While the private markets are ascribing nominally larger multiples, on a growth-adjusted basis the best-in-class private cloud companies are actually being valued lower than are public companies. Investors are willing to pay premium prices for premium assets in cloud.

The average Cloud 100 valuation grew by $1 billion year-over-year

Over the past five years, the average Cloud 100 valuation has grown by a tremendous 2.5x, from $1 billion in 2016 to $2.7 billion in 2020. Inspecting the numbers more closely, though, we see that the nominal growth year-over-year from 2016 to 2019 was between $170M-270M. In 2020 that number shoots up dramatically by $1 billion. Put another way, the year-over-year growth ranged from 14-19% from 2016-2019, and in 2020 the average Cloud 100 valuation grew an incredible 60%.

We attribute the growth in valuation to cloud company revenue growth and the multiples on that revenue expanding.

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During COVID we have seen the public cloud software markets hit all-time highs, and these multiples have trickled down to the private markets, with investors willing to pay high prices for best-in-class assets. The global pandemic has also unlocked digital transformation initiatives that have expanded cloud companies’ total addressable markets and highlighted them as relatively safe havens for investment. 

Cloud software can be remotely distributed, does not require on-premises installation, and tends to have lower exposure to high COVID-exposed industries like travel, retail, and dining. As a result, investor demand is high for high-quality cloud companies, which are in relatively short supply.

The average Cloud 90-100 company is a unicorn

The competition to be one of the 100 best private cloud companies has intensified dramatically over the last five years. To make the list in 2016, companies generally had a $300 million valuation; this year, 87% of the list-makers had a valuation above one billion. While some have been minted as unicorns for years, such as Stripe and Canva, some have achieved the title more recently, such as FiveTran and Blend.

The Top 10 Cloud Companies represent almost $100 billion of equity value

The best cloud companies, which rank #1 to #10 on the list, represent almost $100 billion of equity value alone, and they have grown their average valuation 56% YoY, close to the 60% average. However, the scale is larger: the average Cloud 1-10 company is worth $3.4 billion more than it was in 2019, and an incredible $6 billion more than it was five years ago.

For example, Stripe was last privately valued at $36 billion and UiPath at $10 billion. To put that scale into perspective, if these companies were to go public, they would be larger than 50% of the BVP Nasdaq Emerging Cloud Index (^EMCLOUD) component companies; these cloud companies would individually be larger than Dropbox, Smartsheet, Elastic, and Fastly.

Top subcategories by list count and equity value

With 19 companies, the Sales/Marketing/CX category was the largest category represented on the 2020 Cloud 100 list, including such notable names as Intercom, Pipedrive, and Yotpo. This category grew by two net new companies year-over-year.

The Data/Infrastructure category followed with 17 companies, down net three companies from the 2019 list. This decrease was mainly due to exits, including Datadog, Cloudflare, and Acquia, though it nonetheless had a very strong showing including newcomer BigID. Notably, Data/Infrastructure makes up the plurality of the top 10 cloud companies with Snowflake, HashiCorp, Databricks, Confluent, and Rubrik. While challenging to build, data/infrastructure companies operate in massive TAMs that can support huge businesses.

Where we saw the greatest growth is in the Design/Collaboration/Productivity segment, adding four net new companies to the category in 2020. With COVID tailwinds, companies like Canva and Figma have seen tremendous growth in 2020, reflected by their category’s prominent feature on this year’s list, and we expect even more to be featured on the Cloud 100 list in 2021.

Interestingly, vertical software is the category that decreased in count the most, in part due to exits, such as nCino’s IPO, Vlocity’s sale to Salesforce, as well as a deceleration in some COVID-affected industries.

The data changes when looking at aggregate valuation by subsector. The Data/Infrastructure category represents 20% of the total value of the 2020 Cloud 100 list, the most of any category with $52 billion of equity value. The Fintech category is second with a total value of $45 billion, though $36 billion of that is taken by Stripe alone. Without Stripe, Fintech would drop from second place to the ninth most valuable category. Vertical software rounds out the top three with $28 billion of aggregate value, the largest of which is the top-10 company Procore at $5Bn of equity value.

It is worthwhile to note where the big movers were and where they were not. The two categories that had the largest changes in percentage of aggregate valuation were Developer software and Design/Collaboration/Productivity software, both of which increased total valuation by more than 200% YoY.

We have noted the rise of the developer at Bessemer, underpinning much of the trend towards developer tooling, and remote work trends from COVID have actively contributed to investment and interest in collaboration tools.

Cloud 100 Exits

The exit path for Cloud 100 companies continues to validate the list’s quality. Fifty-seven percent of the Cloud 100 from 2016 has exited for an average of $2.6 billion and total of $150 billion, including some household names like Slack, Dropbox, Okta, and Eventbrite.

Almost half of the 2017 list has already exited, a quarter of the 2018 list, and a tenth of the 2019 list, while the average exit value has increased by $4 billion in that time. The average exit off of the 2016 list was $2.6 billion, and from the 2019 list was $6.6 billion.

The Cloud 100 has also delivered a meaningful portion of the public cloud software market capitalization, as measured by the BVP Nasdaq Emerging Cloud Index.

Twenty-two of the 54 ^EMCLOUD component companies are Cloud 100 graduates, contributing over $350 billion of market capitalization of the total $1.6 trillion. As we discussed in the 2019 version of the Cloud 100 benchmarks report, public market demand has led to record high multiples – and therefore valuations – for cloud software companies, which continues to grow. Given this demand, we find that Cloud 100 companies accrete 65% of their value in the public markets.

We added 27 new names to the Cloud 100 basket in 2020, bringing the total number of cloud companies that have ever been on the Cloud 100 lists to 204. Of those 204, an incredible 34% have exited in either strategic or financial M&A or public listings, whether IPO or direct listing. These 70 companies have delivered an aggregate of $193 billion of exit value at the time of their exit.

In 2020 alone there have been 10 exits for Cloud 100 companies, including the recent $5 billion IPO from JFrog and $33 billion IPO from Snowflake. Earlier this year we saw nCino’s $3 billion IPO (that has since traded up to $7 billion+) and Plaid’s $5 billion sale to Visa, for an aggregate of $58 billion of exit value. With the robust cloud IPO backlog including Asana and Sumo Logic, we anticipate more IPOs to come in 2020. The average 2020 exit has been for $5.8 billion, up from the $1 billion average in 2016, reflecting today’s outsized demand for cloud.

What’s ahead

The move to the cloud is the most transformative technology shift since the move to the internet. The Cloud 100 companies are the companies that are best leveraging that trend, creating not only massive equity value for themselves but also value for the world and the people who use their services every day. And as the data proves, they are doing so at the largest scale that they ever have before. We expect that this will only grow in 2021.

See you next year for Cloud 100 2021!

2016-2019 Benchmarks

Cloud 100 is the definitive ranking of the top 100 private cloud companies in the world; these businesses also serve as an industry benchmark and measure the strength of the private cloud market. We are now taking nominations for the fifth class of Cloud 100 companies, with one week left to submit nominations.

While we’ve analyzed these top companies for over four years (2016-2019), for the first time, we’re openly sharing the key insights we’ve gleaned from the performance metrics and trends in order to reveal what underpins the Cloud 100’s yearly rankings.

A few top highlights:

  • Private cloud valuations are getting bigger and the market’s appetite for cloud continues to grow. There were 36 unicorns on the Cloud 100 list in 2016, growing to 60 on the 2019 list.
  • The average Cloud 100 company exit value is nearly $3 billion, delivering powerful returns across both IPOs and M&A. Of the Cloud 100 exits, approximately 70% of them have exited for $1 billion or more, with additional value accretion in the public markets.
  • Each basket of Cloud 100 lists, from 2016 to 2019, has delivered an effective 50-70% internal rate of return (IRR) based on current valuations.

If you were to have invested in the Cloud 100 basket in 2016, your investment would have quintupled in the past four years, generating a 50% IRR and an incredible ~$400 billion of additional equity value. The 2017 Cloud 100 basket has delivered a 4.4x and 63% IRR; the 2018 basket a 2.9x and 70% IRR; and the 2019 basket has delivered a 1.7x and 67% IRR in just one year.

In our very first Cloud 100 Benchmarks Report, we share the insights and observations that not only highlight why getting onto this list is an accomplishment for cloud founders and executives but also help explain the fundamentals of private cloud companies to today’s company leaders.

Private cloud valuations have gotten bigger.

As cloud companies have continued to prove their potential – both with their product leadership and financial performance in the public markets – their valuations in the private market have grown materially.

Average Cloud 100 company valuations

According to the Cloud 100 data, we’ve seen a staggering 58% increase in average valuation over these four years. In 2016, the average Cloud 100 company valuation was $1.1 billion, but only four years later, the average Cloud 100 company was worth $1.7 billion.

estimated valuations of the top 10 cloud 100 companies

Interestingly, the growth in the best cloud companies, which rank #1 to #10 on the list, has been even steeper at 78% over the same four-year period. The average top 10 cloud company on the 2016 list was worth $3.4 billion at the time of publication, and by 2019 the average top 10 cloud company was worth a massive $6 billion.

Where the data changes significantly is in the average valuation of the companies that rank #90 to #100 on the list every year. The average “bottom” ten cloud company on the list was worth approximately $290 million in 2016 and approximately $700 million in 2019, which is a 142% increase. This growth in valuation is likely due to cloud companies winning new business, both gaining net new customers and expanding retained customers, at increasing rates relative to legacy software companies. (For reference, in State of the Cloud 2020, we showed the upward trajectory of cloud consuming legacy software solutions.)

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Cloud company valuations are increasing because both revenue and the multiples on that revenue are going up. Cloud companies are in high demand as both the private and public markets have started to better understand and more highly value cloud’s predictable growth and high margin structures. 

As a microcosm of the broader cloud software environment, the Cloud 100 data set illustrates the overall growth of the cloud category – which we believe will continue to expand from here.

The implication for 2020 Cloud 100 hopefuls is that the minimum valuation to make the list will likely increase again: only unicorns might make the 2020 list. We had 60 unicorns on the 2019 list, and we expect to see even more in 2020.

The average Cloud 100 company exit value is nearly $3 billion and is increasing over time, delivering large cloud returns.

Cloud company exits have gotten bigger, and more frequent, than ever before in the industry’s history.

Of the 178 companies that have appeared on Cloud 100 lists, 65 of them, or 37%, have exited through an initial public offering or M&A, which speaks to the incredible quality of the cohort. What is even more impressive is their exit value. At the time of liquidity (either M&A or IPO), these 65 companies were worth a combined $168 billion. The average exit value was $2.8 billion across the four-year period but has changed substantially over time, going from $1 billion in 2016 to $3.9 billion in 2019 across 20 transactions.

On the M&A front, cloud assets are highly prized and are being actively pursued for strategic acquisitions. The largest recent M&A exits in software (and in technology) have come from cloud, including Salesforce’s $1.3 billion acquisition of Vlocity and Visa’s $5.3 billion acquisition of Plaid in 2020.

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The Cloud 100 lists have doubled as “shopping lists” for strategic and financial acquirers, which have taken out 35 total Cloud 100 companies to date.

On the IPO front, cloud companies are seeing record high valuations in the public markets, with the Bessemer Nasdaq Emerging Cloud Index trading at a \~14x run rate revenue multiple. The public cloud market cap currently stands at approximately $1.4 trillion, and the index has seen \~50% gains in 2020 YTD, far outpacing the returns of other major indices.

Recent, large cloud IPO exits include Zoom’s $9 billion IPO, Datadog’s $8 billion IPO, and Slack’s $19 billion direct listing.

Closer inspection of the average exit value for Cloud 100 companies shows that the average IPO value has carried the blended average up: as the average M&A value fell from \~$2.5 billion in 2017 and 2018 to \~$1.4 billion in 2019, the average IPO value more than doubled from $2.7 billion in 2018 to $5.9 billion in 2019.

The possibility for value accretion in the cloud public markets cannot be understated. Double clicking on the returns for Cloud 100 companies reveals that the public markets account for much of their value creation. For companies that exited via IPO, only ~30% of their market cap was captured by the private markets – the rest was created while public.

Whether a cloud company pursues an M&A or IPO exit tends to be a reflection of the cloud valuation environment. The average Bessemer Nasdaq Emerging Cloud Index run rate multiple was \~6-7x in 2017, increasing to \~9-11x in 2018, and increasing again to ~12-14x in 2019. In lower multiple environments, M&A tends to thrive as buyers can acquire financial or strategic assets for lower valuations. In higher multiple environments, those potential targets would tend towards IPOs as the public markets allow them to capture more upside than cash M&A. In high multiple environments, cloud companies can consider doing stock deals in order to capture some upside that cash deals may leave on the table.

2020 expectations

So far in 2020, we have seen Plaid, Vlocity, Veeam, and Blue Jeans from the previous Cloud 100 lists exit, all via M&A. However, given the high cloud multiple environment and cloud’s resiliency, we should expect to see some large cloud IPOs in the second half of the year. As the trajectory of ^EMCLOUD demonstrates, the IPO window for public markets closed in early March with COVID-19 but has begun to reopen slowly. For example, Bessemer’s portfolio company nCino has recently filed its S-1, and its IPO is expected to happen later this year.

Now that the cloud IPO window has re-opened, we expect to see similar exit activity from previous Cloud 100 lists. Of the top private cloud companies in any given list year, almost an equal number go public as get acquired.

In only four years, 56% of the 2016 Cloud 100 list has exited for a combined $147 billion of value, half via IPO and half via M&A. Forty-five percent of the 2017 Cloud 100 list, and 25% and 7% of 2018 and 2019 lists, respectively, have exited.

Cloud companies have proven to generate massive returns for shareholders and for employees, in both the acquisition and public markets. For Cloud 100 hopefuls, the data set on total company exits speaks to the caliber of the cohort: of the 65 Cloud 100 companies that have exited from all of the Cloud 100 baskets from 2016 to 2019, 44 of them (or 68%) had a billion-dollar exit or more. Being on this list puts you in great company.

*All exit valuations estimated using Pitchbook and CapIQ data.

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