Bessemer Venture Partners released their State of the Cloud 2019 report at Saastr 2019 and it was a lot of good news. While a decade ago there were no private Cloud Unicorns, there are 55 today. Add the 44 that are public, there are in total 99 Unicorns in the Cloud ecosystem.
Growth of one cloud company normally facilitates growth in a few others as well. The velocity, according to the report is signaled by the demand in cloud shares which was significantly higher than 2015, a record year. There was a $90B strong M&A activities with IBM purchasing Red Hat for $33B, Microsoft purchasing GitHub for $7.5B and more than $50B added to market cap by Docusign, Dropbox, Elastic and others.
According to BVP, it is operational rigor that separates early stage companies from the most influential cloud leaders. Bessemer recommends the GRIT framework – a critical set of metrics that resilient cloud companies use as yardsticks of success.
So what is GRIT made of?
Growth in ARR – How long does it take companies to go from $1M to $100M. Top 25% it is 5.3 years (Twilio, Service now), median 50% is 7.3 years (Shopify) and Bottom 25% was 10.6 years (Cornerstone on Demand ) according to the study. They took 2 years, 3 years and 4 years respectively to get to $10M.
Retention is key.
SMB’s ( < 12K ACV) retention rate should be between 70-80%, Mid-market (12k -50K ACV) 80-90% and Enterprise (50K+ ACV) 90%+ are standard. If it doesn’t fit into this your Churn needs investigation as it is likely to be some other problem that it signals.
In the Bank (Cash that is)
What is the runway you have. Cash is supreme when it comes to building product, acquiring customers, hire talent or invest in growth. Your cash in hand should cover for 18-24 months, some buffer for contingency and judicious in your hiring.
and finally, Targeted Spend
Founders must ( learn) to spend wisely and Bessemer has created the Bessemer Efficiency Score that measures a companies spending habits.
It will be wise to have a deep look at this report ( link below ) and learn to calculate your GRIT score.
The Report has its share of predictions as well. Here are the highlights:
- Robots will free up human time
- Product development management softwares will see growth
- Open Source makes money
- Deeper verticalization of Mobile and
- Low code or no code will gain traction.
The report and the presentation, video is also in the link, are a must see if you are in SAAS/Cloud business.
State of the cloud 2019 : How to build a resilient business with G.R.I.T.
