The Cloud 100 Benchmarks Report

An elite cohort of private cloud businesses, Cloud 100 companies average $1 billion private valuations and $3 billion exits.

By Mary D'Onofrio 6.26.20

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.)

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.

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.

Coming soon

As the basket of the top private cloud companies in any given year, the Cloud 100 list reflects the strength of the private cloud market and a possible indicator for what’s to come. Its growth, exits, and returns consistently point to ongoing momentum in the cloud industry.

We are confident that the next generation of transformative cloud companies will appear on the 2020 Cloud 100 list, many of which will experience the same tremendous success.

Stay tuned to read more about the updated benchmarks based on 2020 data and who makes this year’s list in September. To be considered for Cloud 100 2020, nominate your company today.

*All exit valuations estimated using Pitchbook and CapIQ data.

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