State of the Cloud 2023 (Episode 1) - with Janelle Teng, Bessemer Venture Partners

Metrics that Measure Up

In Episode #1 of this 2-episode conversation, Ray discusses the key findings from the Bessemer Venture Partners (BVP) annual "State of the Cloud" report for 2023 with Janelle Teng, Vice President and co-author of this year's report.

Janelle is involved in many different research programs at BVP, including the "State of the Cloud" and the "Scaling to $100M ARR" reports.

In this first episode of the "State of the Cloud 2023" report, we focus on the change in B2B Cloud company valuations in 2022 and the current state of the industry.

Public cloud companies experienced the "SaaSacre" of 2022. Interest rates shocked the cloud industry in 2022 resulting in a greater than 40% reduction in public cloud company value. The forward trading multiple of public cloud companies is now below the long-term average and were halved in 2022.

There are glimmers of hope from the Q123 timeframe. One example is Microsoft reported better than expected earnings in Q1, fueled by the interest in AI. These large tech companies are a great index for the smaller, private Cloud companies. The Cloud index is up about 5% in Q123, which provides hope for the re-emergence of Cloud valuations.

Even with the aggressive pullback in public cloud company valuations, the average BVP Index cloud company has grown 50% faster than a traditional company - over a 10-year horizon.

When will "Venture Capital" funding return to a more normalized state? Janelle asked the 60 investment professionals at BVP when will be the best time for a founder to raise VC money? The top timeframe forecasted was 2H24' with 1H24' being the second forecasted period for raising a round from Venture Capital. However, 1H23' was still in the running - highlighting the excitement around the current AI boom.

The number of VC deals and the amount of VC funding in Q123 was down from the previous year and the previous quarter, so the turnaround in VC deal velocity is still in front of us.

In the second half of my conversation, Episode 2 with Janelle, she shares the TOP 5 predictions for the Cloud in 2023!