The Cloud 100 2020 Benchmarks Report
Bessemer reveals five years of insights and trends on the top 100 private cloud companies.
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.
- 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 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.
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.
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.
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 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 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.
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.
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.
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!
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.
- 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.
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.
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.
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.)
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.
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.
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.