Where the Cloud is Headed
Alex Kayyal, Managing Partner at Salesforce Ventures, Byron Deeter, Partner at Bessemer Venture Partners, and Elliott Robinson, Partner at Bessemer Venture Partners discuss the high bar companies had to reach to make this year’s list, the latest on the cloud economy, and the trends they expect to see over the next year.
Alex Kayyal, Managing Partner at Salesforce Ventures, Byron Deeter, Partner at Bessemer Venture Partners, and Elliott Robinson, Partner at Bessemer Venture Partners
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Alex Kayyal: Hello, everyone. Thank you so much for joining us for the sixth annual Cloud 100. My name is Alex Kayyal, managing partner at Salesforce Ventures, and we’re so excited to have you here today as we celebrate 2021’s Cloud 100. Over the past 18 months, we’ve experienced one of the most challenging periods in recent memory, but also one that has seen unprecedented innovation.
Elliott Robinson: And I’m Elliott Robinson, partner at Bessemer Venture Partners. This is indeed been a banner year across the entire venture capital and startup ecosystem. In the first half of 2021 alone, VCs from around the world have invested a total of $288 billion, which is an all-time record for our industry. Entrepreneurship is gaining momentum around the globe, as more than half of the venture capital dollars raised went to startups based outside of the United States. Powered by cloud technology itself, we’re seeing generational shifts in both established and emerging markets when it comes to opportunities for cross-border collaboration, communication, and the ability to scale world-class remote teams from just about anywhere. But today, we’re all here to celebrate a unique subset of the venture-backed community, the top 100 privately held cloud companies.
Alex Kayyal: With two of the largest cloud portfolios, Salesforce Ventures and Bessemer Venture Partners have partnered with Forbes, the top publication in venture capital. Together, we recognize the leaders in businesses shaping the future of the cloud economy. The global pandemic has changed the way the world works, and we’re not going back to the way things were. Customer and employee expectations have changed, and companies have digitally transformed at a faster pace than ever before. For many founders all over the world, these challenging times have brought a renewed sense of purpose, which we’ve been so grateful to be a part of.
Times of adversity are often the greatest moments of transformation and opportunity. Many of the changes that were instigated by the pandemic are becoming permanent societal norms. We’ve seen a shift to remote and hybrid work, an increased focus on automation, personalization and convenience, and entrepreneurship is on the rise. This is the new normal, and we’re so excited for the role that the cloud ecosystem will play in driving that transformation.
Elliott Robinson: All of you watching today, the people that are leading, building, and fueling the cloud economy are the real trendsetters in the new future of work. And your collective efforts, you are the ones that define best in class culture and the never-ending innovation that helps industries thrive. The tech sector continues to drive value and wealth creation in the broader global economy. And the cloud represents a source of economic opportunity across almost every industry you can think of. Since January, Cloud 100 companies grew their employee ranks by a net average of 26%. That translates to a total of more than 17,000 new hires. And it’s probably no surprise to learn that after the FinTech sector raised a record $33.7 billion from venture capitalists in Q2 alone, FinTech companies on the Cloud 100 list also created the greatest number of new jobs this year to date.
Alex Kayyal: Compared to 2020, U.S. workers are feeling more confident than ever to try for new opportunities. Economists say this signals a healthy labor market, as people gravitate to jobs more suited to their skills, interests, and personal lives. And as employees seek values-driven, supportive, and flexible organizations, great leaders are responding in kind.
For example, Guild Education, co-founded by CEO Rachel Carlson, recently opened a daycare center for their employees. By better catering to working parents, Guild has maintained a 96% retention rate amongst parents during the pandemic and set an example for great leadership. In today’s environment, being values-driven and values-led matters more than ever.
Elliott Robinson: 80% percent of workers also say they want business leaders to speak up on social and political issues, and think companies can do more when it comes to diversity, equity, and inclusion. But it’s not about furthering diversity theater or promoting empty pledges in public statements. It’s about turning your values into tangible, measurable actions that drive exponential impact and generate superior business outcomes.
All of this is exemplified through the culture and products that you build, how you treat your customers and employees, and ultimately who you empower to be the leaders within your organization. Plus, as the cloud economy taps further into talent pools from all over the globe, companies need to rethink and retool their human resources technology stack. For example, companies like Papaya Global help businesses navigate the complexity of a rapidly evolving remote workforce to more effectively manage international taxes, payroll, and benefits across one unified platform.
Alex Kayyal: How we work has undergone a paradigm shift and businesses of all shapes and sizes are re-imagining the tools that are needed to ensure the work from anywhere in the world is a sustainable, long-lasting solution. That could be driving additional team collaboration with solutions such as Miro and Loom, securing remote devices with Tanium, or leveraging tools that enable better sales and service such as Gong, Outreach, and Highspot.
And thanks to the rise of low-code and no-code solutions, our capacity at work continues to expand. Anyone can collaborate on building beautiful designs with Canva and Figma, and in a few clicks, Zapier, Workato, and Monday.com can turn routines into automated processes, helping people do their jobs more efficiently.
Elliott Robinson: We also saw the promise of the work from anywhere movement come to life, as vertical software giants such as Procore, ServiceTitan, and Toast demonstrate that the power of the cloud is not only found in what we think of as the more traditional enterprise software environments, but also for all professionals, from construction to plumbing, landscaping restaurants, and beyond. When we compare this year’s Cloud 100 list to previous years, we’ve never seen so much dramatic change. Companies from the Cloud 100 continue to achieve fantastic success via both large acquisitions and record-breaking IPOs. As you may recall, Snowflake, which earned the number one spot in the 2020 Cloud 100 rankings, went public just moments after Forbes revealed the list, making it not only the largest cloud IPO in history but the largest IPO in the entire history of software. And since last year’s event, we’ve seen more than 19 Cloud 100 honorees also graduate from this prestigious list, including companies such as UiPath, Confluent, Procore, Auth0, DigitalOcean, Gainsight, and many more.
Alex Kayyal: And speaking of publicly traded cloud companies, top CEOs who grew this market into what it is today served as judges and helped us determine this year’s list. Thank you to the many cloud giants and leaders who have given their time and support to participate as their 2021 judges. And of course, we want to recognize the generosity and support of our event partners for helping us bring these amazing speakers to you at home today.
So on behalf of Salesforce Ventures, Forbes, and Bessemer Venture Partners, I’d like to give a big thanks to our sponsors. We really couldn’t run this event without you. Now, over to you, Byron, for an industry update.
Byron Deeter: This time last year, we saw historic rates of digital transformation as companies rapidly transitioned to the cloud as a necessity. After all, it’s even harder to work with legacy on-premise software if no one’s on-premise. But we continue to see these trends and they further accelerate. Because one thing is clear: Cloud is not a fad, it’s a business imperative. Your employees and customers demand it, and increasingly, the cloud is a necessity to survive and to compete in our digital ecosystem.
Even further accelerated by the global pandemic, our digital economy is going through this historic period of re-platforming. Cloud continues to be the growth driver of the tech economy, and it’s no coincidence that the companies with the largest market caps in the world, Microsoft to Amazon, Google Alphabet, and even Alibaba are not only worldwide tech giants, but they have multi-billion dollar cloud business units within them.
Now, for years, investors have talked about the FAANG stocks, the internet revolution with the emergence of Facebook, Apple, Amazon, Netflix, and Google as the flag bearers of the new economy. But as the trends of the internet and mobile mature, there’s a changing of the guard underway. At Bessemer Venture Partners, we coined a new basket of high-performing stocks called MT SAAS, consisting of Microsoft, Twilio, Salesforce, Amazon, Adobe, and Shopify. Last year, MT SAAS outperformed FAANG by over 100%. What MT SAAS illustrates is the power of the cloud and how it will continue to drive technology and innovation forward. Simply put, cloud computing is increasingly consuming software, hardware, and services, and it is, therefore, the most exciting mega-trend in technology, making it one of the most compelling themes impacting global GDP over these coming years. Last year at Cloud 100, we made two predictions. First, we predicted that the public cloud markets would surpass $2 trillion in total market capitalization. Well, we’ve blown through that number. Over the past months, the total market cap of public cloud companies has added another $1.3 trillion of market cap on top of the already impressive $1 trillion, hitting $2.3 trillion in total market cap, and growing 130% over that time. The public cloud markets have never grown this fast in all of our cloud index history. Our second prediction had to do evaluations. In 2020, 87% of the Cloud 100 was already made up of unicorns. Well, we’re excited to announce that in 2021, we’ve crossed another milestone. Every single company on the Cloud 100 has a billion dollar plus valuation. We’ve even seen a few emerging decacorns continue to merge onto this list. This community continues to astound us. When we created the first list six years ago, this milestone seemed inconceivable. And yet today, we’ve had to leave dozens of unicorns off the list because there are just too many in this amazing cloud community. Now, there are thousands of amazing cloud companies worthy of potential inclusion, and now over 150 of them are cloud unicorns. Yet our judges could only pick the 100. This compounding power of the cloud is a model and a thing to witness, especially considering that 15 years ago, there were zero public and private cloud unicorns on the index.
Private cloud valuations are getting bigger and bigger as the market’s appetite for the cloud continues to grow. Over the past six years, the average Cloud 100 valuation has grown by a tremendous 5.2X from $1 billion in 2016 to $5.2 billion in 2021. And when we compare last year’s average cloud valuation, which stood at $2.7 billion, that number has doubled again over this time period. Together, the cumulative value of the Cloud 100 in 2021 totals an impressive $518 billion. Again, almost a complete doubling in just a year with a 94% increase.
As we reflect on how far the cloud economies have come and where it’s headed, it’s amazing to see that today’s Cloud 100, the definitive ranking of private cloud companies has a cumulative value worth more than what the public cloud markets in total that just a few years ago. So, for the investors and founders alike, building a cloud business today has never been more valuable and very different from just a few years ago. We’re seeing more and more of these exciting cloud businesses being built outside the traditional Silicon Valley zip codes.
Alex Kayyal: Indeed, cloud globalization is a macro trend and the pandemic has further accelerated this trend. As an example, in the first half of this year, venture funding to startups in Europe totaled an unprecedented $59 billion. Having been based in London and invested in companies across more than 20 countries across the globe, I’ve seen firsthand how innovation really has no boundaries. Companies such as Stripe and Intercom originating in Ireland, Contentful in Germany, Snyk in Israel, and Culture Amp in Australia have proven that the cloud ecosystem is thriving everywhere. We’re also seeing more companies take a remote-first approach to building their teams. Hopin is a great example. Initially based in the UK, the company now has over 600 employees across the world as they’ve catapulted onto the stage. And with technical talent all over the world, we continue to see mega giants rising out of Asia Pacific, India, and other international markets.
Elliott Robinson: Cloud globalization will continue to fuel innovative startups from all over the world. As Byron mentioned just a minute ago, the cloud will have a sizable impact on global GDP in the next few years, but the footprint of the private cloud market now rivals some of the world’s biggest economies. This year’s Cloud 100 companies have a greater cumulative total value than the individual gross domestic product of 87% of countries on the planet.
Byron Deeter: The cloud universe is expanding in terms of geography, as well as the industries that they serve. Cloud 100 honorees span more than 10 different sub-sectors, including vertical software and enterprise automation, collaboration, productivity, and several more. On the list this year, we’ve seen the most powerful growth in FinTech startups, totaling a cumulative $146 billion in total valuation addition, which makes it more than a quarter of the Cloud 100’s cumulative value.
In second place, data infrastructure businesses making up an impressive $63 billion. When we look at these two leading subcategories and how they’ve grown in cumulative valuation over the past three years alone, it reflects this market upward trajectory. Cloud 100 data infrastructure companies have grown 70%, and the FinTech companies have ballooned an impressive 461%.
As financial services infrastructure is being rebuilt and redesigned for this modern world, we’ve seen this similar transformation happen within the cloud data stack, as amazing startups like Databricks and Fivetran, DataRobot, BigID, and Firebolt are offering better and easier to use infrastructure for accessing, analyzing, and furthering, this use of data. The reason why cloud companies continue to grow in value is because they continue to deliver larger portions of the tech stack to their customers.
For example, vertical software and FinTech are increasingly converging, as leaders such as ServiceTitan, Procore, and Toast shift entire businesses into the cloud and they embed these FinTech solutions. Essentially vertical SaaS giants now process payments and payroll more efficiently and provide more capital and credit on better terms for their customers than many of the traditional banks themselves.
Alex Kayyal: In parallel, we’ve seen e-commerce penetration and payment volumes accelerate massively during the pandemic. In 2020, for example, we saw 10 years worth of growth in e-commerce penetration in a matter of only three months, as consumers shifted their behaviors online. This momentum has sustained this year. This has led to a new crop of companies that are embedding financial services and payments directly into their applications as software and FinTech come together. Interestingly, we’ve seen this impact come through in the B2B payment landscape as well, with companies like Airwallex, Melio, and Razorpay leading the way.
Byron Deeter: We believe that cloud will become a majority of all software very shortly and help us all reimagine entire industries, such as healthcare, automation, gaming, and entertainment. We continue to see how the cloud is forging infrastructure of tomorrow’s digital economy and driving innovation for the future generations. Congratulations!
Alex Kayyal: Congratulations!
Elliott Robinson: Congratulations!
Byron Deeter: Now onto what we’ve all been waiting for, 2021’s Cloud 100.