Bessemer 2024 Cloud 100 Report

Hi, from Skid Row, New York. It's SaaS Talk with the Metrics Brothers, Growth and CAC.

And I'm Growth, better known as Ray Reich, the founder and CEO of Benchmarkit.

And I'm CAC, better known as Dave Kellogg, EIR at Balderton Capital, independent consultant, and the author of Kelblog.

And together we are the Metrix Brothers.

And we go together like Ben Affleck and Matt Damon.

Okay, Dave, well, I'm glad you didn't say Ben Affleck and J.Lo because that partnership has more breakups than your favorite band, the Grateful Dead.

Well, the Dead hasn't had breakups, they've had keyboardists. That's the high-risk job in the Grateful Dead. Never accept a job playing keyboards, although they've been stable as lately. Speaking of high-risk jobs, you know, that keyboard job is about as bad as being an Alaskan crab fisherman, as far as I can tell.

Crab? So number one, we're going back to the food analogies, but I do love crab, Dave.

Ray, not to get crabby on you here, but not on the first episode of our fall season. We need to talk about today's topic, the Bessemer 2024 Cloud 100.

That's a great idea, Dave. The Bessemer Cloud 100 continues to evolve. It's been one of my favorite reports over the last few years, and there's a few new players and themes this year. But before we jump into that, let's hear a word from our sponsor. The Metrics Brothers is proudly sponsored by Benchmarkit, the B2B AI and software industry's largest, broadest, and most contextualized benchmarking index. Dave Kellogg and Ray Grothright have put the Metrics Brothers podcast on hiatus for the remainder of 2026. All episodes we have ever recorded are still available on your favorite podcasting app. You can reach Dave @Kellogg and Ray on LinkedIn @RayReich. Thank you so much for listening to the Metrics Brothers podcast. Okay, Dave, how about— because this is a report that I've just loved for the last few years. How about if I start with a little summary of the report?

Go for it, Ray.

Okay, so number one, you can see the Bessemer Venture Partners Cloud 100 report on their Atlas site, and it's the 9th year of the Cloud 100 report, and Bessemer partners with Forbes to conduct this research. One of the things that was interesting to me is the 2024 Cloud 100 is worth an aggregate of $820 billion. And that's a 25% year-over-year growth from an enterprise valuation perspective versus 2023. So even though a lot of public cloud companies' valuations have went down over the last 4 to 8 quarters, they've went up, Dave. Yeah.

So look, this is an interesting report because in some ways I think it's a crummy benchmark, but an interesting report. As a benchmark, it's not great because every year they're taking the top 100 companies in the cloud and doing some stats on them, like what's their average ARR multiple or what's the total valuation. So, I think it's an interesting exercise. And it doesn't surprise me with the kind of rich get richer thing that's happening in Silicon Valley and with AI that we're concentrating value in the top companies. That multiple is impressive, for example, like 23x ARR is a very high multiple. I mean, assuming, and we both know that there's some very highly valued AI companies in there. But, but, you know, if you're running your startup and you've got $5 million in ARR and you're growing at 50%, don't expect to be worth $100 billion, right? So, so let's not generalize these statistics, but let's go take a look at them.

I agree.

So let's, let's jump into the Cloud 100 composition. So, so the average— now this is average— Cloud 100 company is worth about $8.2 billion from an enterprise valuation perspective. The median, the median ARR multiple is 16x, which is much higher than the median multiple of public SaaS companies, which is right now around 5.9. Now, it was interesting. They talked about the average Cloud 100 multiple. So not the median, the average has decreased. It was 26x last year for a Cloud 100 basket of companies. This year it's down to 23x. So it is a decline, but the year-over-year revenue growth rate for the top 100 private cloud companies, Dave, to me is pretty amazing 'cause they're almost $100 million ARR just to get in this. It's 70% year-over-year growth.

Yeah, so it's down from the mesosphere to the stratosphere, right? So we're coming down from 26 to 23. So these are still super high valuation multiples, The other thing I'd say, Ray, interesting about this report is that while I give Bessemer some grief for some of their stuff, I like the idea that they've tried to coin the phrase centaur because unicorn I never loved because it's a valuation-based metric and it's based on a small slice of a company. And there's a lot of flaws with unicorn that we've talked about before, but centaur is an ARR-based metric. St. Biscuit, a $100 billion business, is a centaur. So they talk about those in these reports. I think 97 of these companies in fact are centaurs by the end of the year. So good on Bessemer for that.

Yeah, and as you said, and we'll drill down into this as we talk about the top 10 companies in the Cloud 100, but AI, now whenever you're starting at a lower base, it's much easier to have amazing percentage of growth in valuations, but AI was only worth about $35 billion for those companies in the Cloud 100 last year. In the most recent year, AI rose dramatically to $176 billion of enterprise valuation, and that's against $820 billion for the entire Cloud 100, Dave.

Yeah, yeah. Impressive, impressive growth. Why don't we, Ray, in fact, do what you just said, which is move on to look at the top 10 of these, of this cohort.

Okay, so first of all, I'm not going to just read them in order, but 2 of the top 10 are AI native. OpenAI is the number 1 Cloud 100 company, and Anthropic catapulted to number 5. At number 2 is an old friend, Databricks. Stripe is number 3, and Canva's number 4. And then if you go to 6 through 10, it's ServiceTitan, then Scale, then Deal, then Wiz, then Navant. So what's interesting, I just wanted to highlight this again, is the average valuation for these top 10 is $29.9 billion. So Dave, that says that the top 10 represent almost $300 billion of the total Cloud 100s $820 billion of enterprise value.

Yeah, yeah, the concentration is pretty, pretty strong, right? 36% of the value in the top 10 companies. Um, the other thing here, just an absolute scale, these valuations for private companies are mind-blowing. I, I don't think it's a particularly good trend in Silicon Valley that companies aren't going public and are getting these astronomical private valuations, but the average of these top 10 is $30 billion for the top 10 private companies in the cloud. It's mind-blowing, right? Because even if you went public at $500 million in ARR with a 10x multiple, that's quote unquote only $5 billion. And these companies are worth 6 times that.

Yeah. You know, the other thing they did, Dave, and I wonder what you think about this, 'cause they took this Cloud 100 and then they categorized it or segmented it into categories like AI, which as we mentioned is $176 billion of the $820 value. Then they did fintech, which is $172 billion of the $820 billion. Then they did several other categories. Do you think that's a good way to look at it?

I'm not sure what you get by comparing valuation by category, because normally valuation to me, I mean, look, if you're an investor and you care where the money is, I guess you go look at valuation. So, you know, wow, AI is really big or fintech is really big. You know, vertical SaaS is relatively small. So I guess if you're an investor trying to look at just how much value there is in these spaces, it's meaningful. Normally for guys like us, Ray, we're looking at value compared to something else like trailing 12 months revenue or next 12 months revenue or next 12 months EBITDA. So valuation by itself for an operator, I think, is really more discussed in the context of some normalizing metric, you know, value per what.

Yeah.

And the other thing, even though I did look at it, Dave, I was a little surprised that like developer tools was on the very low end. Like I think it was only around 30 of the 100 companies are in— I'm sorry, evaluation or in developer tools. So that did surprise me. So I thought it was a little interesting just to see what the higher value categories were and what the out-of-favor categories are.

Yeah, I'm not sure that that's out of favor. To me, out of favor would be about multiple more than value. Uh, this to me is more just about kind of not quite market size, but kind of market cap size, because that's what it is. And developer tools there, I almost wonder if they mean more DevOps tools. You know, the example company they have there is LaunchDarkly, which is very much a DevOps tool, which helps you roll out new features to companies. So, I mean, you could argue depending on your definition that Databricks is a developer tool. I wouldn't. I'd say it's an analyst tool. But some of these distinctions are arbitrary. I think if LaunchDarkly is the poster child for the category, those are really kind of DevOps developer tools.

Yeah, no, totally understand that. Now, the other thing they did, they broke it down and they showed kind of the valuation trends of the Cloud 100 over these 9 years that they've been doing the report, Dave. And as we mentioned, the Cloud 1 through 10 has, you know, almost an average of $29 billion. But if you looked at that a few years ago, it was only like $3.4 billion. You know what? That's actually not right. It's $3.4 billion for the Cloud 90 through 100. And for all of Cloud 100, it's $7.2 billion. So it pays to be in that top 10 in a big, big market.

Yeah, as we talked about, the valuation is concentrated at the top of the market. This is not new in software. You know, this chart itself here, I can't see the slide number, but they're talking about average valuations over time. I think first, we've been in kind of a bubble. Second, AI is most certainly in kind of a bubble. And by the way, the AI companies, one of the reasons they're bubbles, they're growing at astronomical rates. So again, when you just look at the dollar value, it doesn't show you as much as say ARR multiple would, because I don't think you're going to see this degree of change, but I'm not sure.

Yeah. Now you mentioned this earlier when you talked about the centaur, Dave, which is you kind of liked it, that kind of defining that at $100 million. And what's interesting is for the Cloud 100, The growth to $100 million is down to about 7.8 years. And that is down from 10 years when they first started doing this report. And the AI companies on this list, they're even faster to $100 million at 6.3 years, which there's some parallels to the other kind of growth expectation models we've talked about previously, right?

Yeah, there are. So first, I view this as relatively stable. Right? It's a slow and steady downward trend from 10 to 9.4 to 9 to 8 to 8.7 to— right? Sometimes people— I don't see this chart varying a lot, but if you want to argue, you can see a slowdown tilt in it. The thing that's most interesting is the point you raised, which is, wow, the AI people do it fast. They can get there in 6 years. It takes most people 8. And I think we've talked about that. The growth in AI has been simply astronomical. I think we've also talked about the fact that I like Centaur. I wish I heard Centaur more. personally, because centaur means $100 million ARR company. It's based on the size of the business, not based on the valuation, which is much more volatile and arguably even incorrectly calculated. We could do an episode on that. But look, your point is that the AI companies are growing faster, and they are. They're hitting centaur status in 6.3 years. The other point is, I mean, that is faster than, for example, other growth trajectory rules, which we talked about in the prior episode, like my rule of 5, 6, 7, 8, 9. which is to say it should take 9 years on average to get to $100 million to be in the top quartile. Here, and mine was a top quartile metric. Here they're saying the average. So we have to bear in mind we're looking at slightly different things, is now 8 years. But ballpark, they're saying roughly the same thing. The best companies get to $100 million in 8 or 9 years, which is pretty impressive.

It is. And kind of the next thing I looked at was those multiples. And we touched upon it before where we said, hey, Being at 23x is still pretty darn good. But it's interesting looking at this 9-year history of the Cloud 100 report. And back in 2016, the median multiple was 9x. It hit 34x in 2021. And as we mentioned, it was down to 26x last year and now it's at 23x. I just wonder, as I think about next year, Are we going to continue to see kind of getting closer to public company multiples, or do we think this Cloud 100 is always gonna be much higher than the standard public cloud company?

So public company data isn't here right now. I can't remember if we went on Meritech what it would say the average public company multiple is right now.

It's 5.9.

Okay, 5.9, thank you. So look, there's a couple things going on here. One, these are crème de la crème companies, right? This is not a random sample of private cloud companies. Bessemer's handpicked top 100, so they're going to get a premium because they're high flyers. One of the reasons they're high flyers is that extraordinary growth, much faster than their public counterparts. So I think the median's around 15% these days. It's not very fast, might even be less. The other thing is these companies have in many cases chosen to stay private. Like Databricks could have gone public years ago, right? But more companies are deciding it's not worth the hassle of going public because they can offer secondary liquidity to employees. So they kind of feel like there's no big incentive to get all the extra hassle of going public. So this is a very elite set of companies, arguably more elite than the public ones, right? Hey, we're doing so well that we don't have to go public, um, is kind of the argument. So I'm not surprised how high it is. I would say that these numbers, right, in absolute are just mind-boggling, right? Like when I grew up, I was taught like a price-to-earnings ratio of 15 was high.

Right.

And this is a price-to-revenue ratio, right? It's 23, right? So it's 1.5 times 15, and it's priced to earnings. Earnings, if you say EBITDA is 20% on average, right, that's 5x to get to revenue. So, so these multiples, i.e., a 15x PDE when EBITDA is 20%, or earnings are 20%, not EBITDA, would be equivalent to a 5x— sorry, a, uh, Oh God, I'm going to screw this up. 15 P/E, you got to divide it by 5, a 3x price to revenue, right? If earnings per share, not EPS, but earnings is 20%. So these multiple, basically these are price to revenue multiples that look like price to earnings multiples. First observation, i.e., they're very, very high, but it's a very, very, very elite set of companies.

Well, it's very obvious that the industry has not weaned off growth. Maybe we don't want to talk about growth at any cost, but I look at the Cloud 100. So in 2022, right, the overall cohort grew at an average growth of 100%. Last year it was down to 55%, and we know how hard 2023 was. Dave, the Cloud 100— and these are $100 million and above companies, the growth rate for the whole category, all 100, is 70% over the trailing 12 months. That blew me away that they have a 70% average growth rate for $100 million and above companies.

Yeah, it's impressive. Look, I wish they used median rather than average because I'm betting the median's quite a bit lower, but I'm not sure because basically a couple of super high flyers can pull that average way up. And I'm not sure if this is an average of the growth rates or kind of let's get all the revenues, add them up, and all the revenues, add them up, and look at the growth rate, which would be a different calculation. So I have some questions about what they're actually measuring here. But either way, $100 billion-plus company growing at 70% is really impressive and kind of almost a direct refutation of the law of large numbers, right? If you meet a $20 million company growing at 50%, uh, and you think that their growth retention is 85%, right, they're going to keep growing at 0.8 to the something times 50, uh, you're not going to end up when you're $100 billion growing at 70%. So, um, I think it's impressive. I think it shows growth rates first don't have to go down. They went up, in fact, uh, in several of the years of this chart. I'd say actually 1, 2, 3, 4— in, in all years but 2 of the last 8, they went up, not down. So I'd say more than anything, to me, this is for top-class quality, for top quality companies, the law of large numbers kind of need not apply.

Yeah, well, this tells you how maybe I need to get a life moment, but I'm going to go look at these 100 companies and I'm going to calculate their growth endurance rate over the last 3 years if I can, because that will be really interesting to see what that is.

I'm going to guess it's above 100.

Yeah, it'd be amazing. Okay, last thing. This isn't a surprise, but I threw it in there because you and I have talked a lot about What's driving company growth? Is it new name ARR or is it existing customer expansion ARR? And maybe this isn't that surprising, but new logo ARR for this, the Cloud 100, is driving anywhere from 51 to 57% of their total new ARR, which if you flip that, that says about 43 to 49% of their new ARR is coming from expansion customers. Seems fairly consistent with what other large private SaaS companies— I don't know if you have any insights on that one, Dave.

Yeah, we could debate what the right answer is. I have my rule of 30, as you know, which is I like when 30% is expansion ARR. If it gets too much higher than that, I worry you're not getting enough new logos. If it gets too much lower than that, I'm worried you're not hitting the base. If you extended my rule to be the rule of 30 to 40, um, this, this would like kind of qualify, um, because if you're getting 50%, 57% from new ARR, uh, of new logo, then you're getting 43% from expansion. So these numbers are a little higher than I've seen, but, you know, a lot of these people are on usage-based pricing models, which can also drive expansion. Um, ultimately it's going to come down to the pricing model as well. I like the fact that it's over 50%. I may have to revise my rule at some point, but, but, you know, if you're getting most of your new ARR from expansion, I start to get worried. So I would say as an indicator, this seems to say there's plenty of TAM still out there. And I think it's also indicating kind of expansion-based pricing models are in use as well.

Yeah. Well, I can't believe here we are up in our 20 minutes already. So, you know, my biggest takeaway from the Cloud 100 report is there's so many LinkedIn posts and tweets about how tough it is to be in the SaaS or cloud industry. Boy, I'll tell you, The view from on top here as measured by the top 100 cloud companies, it's a pretty nice place to be, Dave.

Yeah, yeah. Look, I always feel like Silicon Valley has a little bit, or maybe a lot of haves and have-nots, right? Like you'll have companies where we're setting record amounts of venture fundraising, whereas people who, you know, running a $10 million, pretty reasonable company can't raise cash. And the answer is why? Well, they're putting larger and larger amounts of cash in to those big companies. So it can be a very frustrating time for entrepreneurs to be reading about how good it is in the paper, but, but that's not good in your part of town. Um, which, which actually would say we should get some benchmarks going, Ray, for the kind of the rest of us, because people are so intent on benchmarking, you know, uh, what Jupiter Island, Florida looks like, uh, that they're not really, uh, benchmarking the rest of America. So I think there's an interesting opportunity here for those in the numbers business. But yeah, if you're at the top 100 SaaS companies, life is pretty good judging by this report.

I like it, Dave. I've already got a name, SaaS Benchmarks for the Rest of Us.

There you go, Ray. There you go. Heard it here first.

Well, I still am thinking about the opening, right? And neither of us were crabby today, which is really good, but I am hungry, so I'm going to go make myself a crab cake, Dave.

Okay, Ray. Well, enjoy it. Enjoy your late lunch.

Have a good one now. Bye-bye.

Take care.

See you. The Metrics Brothers AI, SaaS, and More is a production of The Metrics Brothers Growth and CAC and a member of the Benchmarkit Podcast Network. By accessing this podcast, you acknowledge that The Metrics Brothers make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided or the humor content of the jokes told.

Ahem, Ray.

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