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Bessemer Report : The State of the Cloud 2020

 

Cloud macro trends, growth strategies for founders, 2020 predictions, and why we believe the future is forged in the cloud.
The cloud industry from 2000-2020

 

In 2000, top private cloud companies included, Salesforce, Netsuite, Trigo Technologies, EchoSign, and Paypal, but there were zero private companies that were valued $1 billion. It wasn’t until 2010 did the industry see a privately held company, LinkedIn, reach a $1 billion+ valuation.

Growing at an average of 35% Compound Annual Growth Rate (CAGR), the public cloud markets hit that $500 billion milestone two years earlier than we expected in March 2018. (We were delighted to be wrong.) Assuming that the industry would continue to grow at that same 35% CAGR, we predicted at Bessemer that we’d reach $1 trillion in a couple of years. (Afterall, at State of the Cloud 2019 we hovered around $690 billion.) But we were wrong again! In a weird twist of fate, exactly one year later on February 5, 2020, we surpassed the $1 trillion market capitalization of the public cloud market.

In 2008 the total market cap of Salesforce, Netsuite, Concur, Blackbaud, and Dealertrack totaled $13.89 billion. By 2015, the market cap increased by 8x with the addition of LinkedIn, ServiceNow, along with Salesforce and Netsuite, as the top five public cloud companies.

By February 2020 the market cap of the top five public cloud companies hovered just around $616 billion. With the recent economic downturn induced by the COVID-19 global pandemic, we did see a significant drop in value due in the top five public cloud companies in the month of March. Though the cloud is feeling the impact of the recession, public markets reflect the clouds relative resiliency. In fact, The Wall Street Journal recently reported: “The 52 stocks on the BVP Nasdaq Emerging Cloud index have averaged a gain of 15% this year compared with the S&P 500’s 11% drop.”

Despite the world economy being in one of the most volatile times since 1929 and seeing a rapid and significant drop in the public markets, the cloud computing industry in its two-decade history has experienced exponential growth. As one of the first institutional investors in cloud computing, we always believed in the cloud and its potential but we have been surprised on how quickly it has surpassed our wildest expectations.

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