State of the Cloud 2021 with Bessemer Venture Partners | SaaStr Software Community

Hello, hello.

It is awesome to be back and with this group in particular because it was February 2020 when we were working hard on our State of the Cloud at that point and were shut down. We ended up doing that virtually. But a huge shout out to the SASTR community for pulling this together. And we were just with Jason and the team in the speaker's lounge before this. And what I would love is if we could give a round of applause so loud that they can hear it as a thank you for pulling this off. It was— it is totally fitting that our first event back in person is this community with all of you. Unveiling an updated 2021 state of the cloud for this group.

As Byron said, we are thrilled to be here live in person with you all on the SaaSr stage. For many of you in the crowd, myself included, this is my first #WeOutside moment in the tech community in almost 18 months. But when we take a step back and we think about all the change that's happened in the market, we are just awe-inspired by all the innovation, the growth, and the resilience that we've seen in the face of uncertain times.

The unicorn birth rate has accelerated beyond our wildest dreams. So as we were putting together today's presentation, we asked ourselves, how exactly do you build a unicorn? In today's State of the Cloud 2021 update, we have those answers.

Alrighty, so, uh, we'll dive in, and in traditional fashion, we're going to try to hit it on at least 3 key areas. Uh, the first is to talk a little bit about the state of the industry, what's happening in cloud now and where we're at. The second is we're gonna do a deep dive, and as Mary previewed, uh, for those of you out there in the middle of building your unicorn or about to launch on this endeavor, we're gonna try to give you a little bit of a how-to guide from our lessons learned, uh, over the last 2.5 decades in this industry. And then the third is some predictions, where we think we're going ahead, and we're gonna talk about the mega trends within cloud that we think will propel us for this next great horizon in front of us. So to start, we'll paint the picture for where we were at this 2020 State of the Cloud in February as the world was going through this volatility. We were just passing a major milestone, which was the $1 trillion mark. And if you looked at the pure-play public cloud companies that comprised this index, and this is the BVP Nasdaq Emerging Cloud Index, We had just crossed $1 trillion of combined total market cap. And at the time we made a prediction. We said that we see a clear line of sight to a doubling of that to a $2 trillion mark within the coming years. Now we consider ourselves fairly bullish on cloud. Uh, we've been the largest early investor in the entire segment. Uh, the vast majority of what we as a firm do is cloud investing. And yet even we massively underestimated how fast this next milestone would be passed. In fact, in just over a year, the industry blew past the $2 trillion mark and saw this massive acceleration, uh, as many people said, this pull forward of cloud adoption driven certainly by COVID, um, and the, the distributed work imperative, as well as the realization of this replatforming of software and how that trend was happening at a rapid rate. And so if we now play forward to where we are today, we're about to pass another trillion-dollar milestone. We are within a rounding error, and mind you, yesterday didn't help, so we've, we've lost a little bit of ground in a few percentage points, but we're within a rounding error of a $3 trillion milestone, which is the market cap of just the public cloud companies comprising this mega trend. And we'll dive in in a second to the private companies, and that's where we'll spend most of our time. Buh, but let's look at this over the index and really what's happened over the last 8 years. 12x is the return profile if you'd bought just the average public cloud company. And as I mentioned, we worked with NASDAQ to actually form, uh, a, a formal tracker on this in a basket that's, uh, under this ticker EMCLD. And then WisdomTree actually licensed that into an ETF. and it has continued to perform at a staggering rate. Um, over the last year, it was actually the top performing ETF on all of NASDAQ, which is a statement to the power of this community and what is happening in cloud, in SaaS, and in this, uh, broad-based tech phenomenon. And then if you look just at the top basket, and mind you, these include some companies that, uh, have blended business models, but what we tried to show is what's happening in cloud relative to some of the other mega tech trends. And you hear a lot about this FAANG basket, uh, and really the, the drivers of mobile and the internet, which were the catalysts of a lot of tech adoption over the last several decades. But our thesis internally is that those horizons and the growth rates of those markets are starting to pull back and that you see a changing of the guard. And it's really the cloud basket, and we pulled out 6 names in particular with Microsoft, Twilio, Shopify, Adobe, Amazon, and Salesforce as the 6 new guard flag carriers. And if you look at the relative performance, you see that separation of how they've pulled ahead. And then as you look even over the last year and a half, what you see is this further separation. And we benchmark this relative to also our own index. You see the FAANG index, and really what you see is this next mountain of SaaS businesses being created that we believe will be the story of the next decade. You're all living it. This is your day to day. You've been part of this for years. Um, to you, this seems standard and obvious. It is just becoming that for the rest of the world. Corporate America still has a minority of their software spend going into cloud. Globally, this is still a new phenomenon. Western Europe is just in catch-up mode. China is in the early days. What we see in LATAM, what we see in India, what we see in Japan, this trend is rolling through. And that's the excitement and why we're all here today and part of this ecosystem is because this explosive force is starting to become more and more obvious to the mainstream economy. Now I told you that we were gonna talk about the private side and dive into that, and so probably no better start than in unicorn land. Uh, and each year we work with Forbes magazine and we put together the Cloud 100, which you can think of as the companion, um, offering. So the Cloud Index is the basket of the public stocks. The Cloud 100 is the basket of the top 100 private cloud companies. That group, for the first time in history, was comprised of only unicorns this year. Not only that, but we had to leave 50 companies off the list that were also unicorns but couldn't make the cut from our judges. And so in just a 1-year time period, there was a 74% increase in cloud unicorns, and almost, uh, a new unicorn in the industry is being created per day right now. And in the cloud industry, it was at a rate of more than 1 per week. Ladies and gentlemen, this is the current class. Of the industry at large, there are over 800 across all sectors, geographies, and industries. In the Cloud 100, as I told you, there are 150. In the Cloud 100 alone, that group comprised on their own, not included in that public market cap graph, almost another— or over another half trillion in market cap. These are the names that are leading that cause. These are companies in their own right that include decacorns. Some of these are cash flow positive. These are the IPOs that the public investors are tracking most closely. Um, and this is a sign of what's possible and what inspires all of us, um, to be in this industry and to be part of this transformation. And if you step back and think about what will 2021 be, um, in, in the arc of this tech curve, in this adoption cycle, the numbers are staggering. In fact, we are about to set records on just about every metric that the financial folks track. If you look at IPOs, which may be a starting point, as it's this bridge from the public, from the private to the public, we're about to break records there. Already we are, we've exceeded prior numbers, and if you roll forward to projections for the end of this year, we may cross 2,000 in terms of total tech and venture-backed IPOs, including Toast, which I'm proud to say is a Bessemer portfolio company, that, that was the largest vertical SaaS IPO IPO in history last week and one of the largest software IPOs in history, as well as Procore, another Bessemer company, and a number of others that are steadily setting records and setting new milestones for the industry. Now if you look forward to venture dollars, and probably why a lot of you are here, that have either raised early rounds and are in hyper-scale mode or considering jumping out of your cushy employment to start a business, we want to talk to all of you, or that maybe are about to raise your first rounds. Uh, this is the stat that you probably see all the time. Um, there is a flood of venture dollars coming into, um, tech at large, but in software and cloud specifically, the numbers have never been larger. We will break all records this year in terms of dollars in. Then if you look at it in terms of globalization, that trend is continuing, massive jump year over year. And then if you look at dollar outflows, which are a leading indicator to recycled capital, Record number of exits. Again, record number of IPOs, record amount of M&A dollars. And the stat that's not on here is that there is a record amount of dry powder still waiting to be deployed with all of you. Literally, there has never been more money that have been raised in venture funds and closed, but yot— not yet allocated or spent. And so while we're breaking deployment records, there's still these piles of money waiting to find the next great companies to continue these trends. And this is why there's so much excitement for the entrepreneurs and for the investors. Um, the outcomes have never been larger, and the path to scale has never been faster. One of my first venture investments years ago was Cornerstone On Demand, which went public at, you know, half a billion dollars and, and $60 million of run rate ARR. You know, that's a Series B these days for a lot of companies. And as you look at the timescale here, um, and these are all Bessemer companies that we, we drew from some of their private data in that evolution to, um, to near public. You see that the timescale is accelerated. Um, HashiCorp is still a private company, one of the Cloud 10 on that Cloud 100 list. They've blown through the $100 million ARR mark again, setting a new curve. And then as was announced last week, Canva is now, um, may become the fastest growing cloud company to hit the billion dollar milestone. And these are the milestones that are now possible by private companies. It's not the unicorn mark for valuation, but it's the unicorn mark for ARR. There are private cloud companies that now have line of sight, or in Canva's case and a few others, will be crossing the billion-dollar ARR mark while still private. And I'll tell you, I was a founder, uh, at the start of this cloud wave within 6 months when Salesforce was founded. and two-thirds of my venture capital meetings would end essentially on the first slide, where I would talk about cloud, and at the time it was ASP, and then became SaaS, but essentially why we were so excited about our business model. And venture firms fundamentally said, like, I don't get it. Why would you do— why would you select this business model, where they pay you over, you know, monthly rates, and yet you have all the costs front-loaded? Like, that's the stupidest thing both ways. And one of the meetings, at the end, one of the partners said, you know, I will bet you that Salesforce will never cross a billion dollars in revenue, and will never make a penny of, of profit. Um, I should have taken that bet. I made the bet with my life and starting the company instead. But, um, I just love the fact that fundamentally you have all fought that conventional wisdom. You have all proven that not only is it possible, but increasingly, um, in many cases it's probable when you get the flywheel spinning that the inevitability of cloud adoption is upon us. And that's why we're gonna have some fun today talking about how do you build your unicorn? First on valuation typically, but hopefully also in terms of ARR. And we're gonna turn it over to my partner Elliot to talk you through some of the 10 laws lessons that we've pulled from the companies we've had the privilege of working with on their journeys to this point.

Thank you, Byron. So as Byron mentioned, uh, here at the firm, we kind of do this cloud thing a lot. We've been doing it for a long time. Over the last 20 years, we've had the privilege to work alongside some of the greatest cloud founders to ever do it. And they've worked with us to synthesize our best practices for how you can turn your cloud soonicorn into the next great cloud unicorn. I have to be honest, I just want to give a shout out to whoever brought the life-size unicorn with them, sitting next to them in about 6 rows back. I absolutely love that energy. So what we're going to do today is talk to you about what we call the best of our venture partners, 10 Laws of Cloud. Now, while we don't have time to walk you through each and every law, we're going to identify the 3 and walk you through those that, if you get these right, you'll be well on your way to scaling the next great cloud giant.

Let's see.

OK, law number 1, in the cloud economy, scale wins. I think most of you recognize this face. It's Toby Lukey at Shopify. And he thinks about scale and defines it the same way that we do. There's really two vectors there. Typically, in a category leader in the cloud, you're gonna amass somewhere around 66% or two-thirds of the market share, but scale is also defined by executing a product strategy that allows you to set the pace of innovation, not just for yourself and your company, but for your customers, for your market, and ultimately, your competition. You know, we've seen this play out in a number of different categories. In the video conferencing space, I think many of us have probably heard Eric talk about his days at WebEx when he was leading engineering and he woke up one day and he said, "I don't have a lot of happy customers anymore." He realized he was no longer setting the pace of innovation, or maybe his company was no longer. We saw the same dynamic play out with Skype. And shout out to the entire Zoom team 'cause they've obviously built an incredible product that we all use. And throughout the pandemic, they've helped this community stay connected as well as our colleagues and our loved ones. And they've now achieved more than 64% of market share, and it continues to grow. As you scale and you think about setting the pace of innovation in your product, we talk about something, you know, successfully finding your second act. These are some of my favorite examples. I happened to bump into Edith Harbaugh, a rock star with our cloud founder of LaunchDarkly, and we were talking about their scaled story because we were there pretty early, and they found their roots in feature flag management and then found their second act in experimentation. Twilio, for example, voice, video, and chat. We all kind of know that cloud giant story. You know, another way to sometimes find your second act is through acquisition. Now, they had already played in the email space, but they went much further through their acquisition of SendGrid. And then cloud infrastructure, soon to be a giant, HashiCorp. They focused on security to start with their vault product, and then they moved into provisioning and networking. And what I want to do for the next couple of minutes is talk about one second act that we've seen pervade a bunch of vertical SaaS companies that have just killed it, and that's the power of payments. So if we go back to the Shopify case, you know, in 2012, I believe it was, they launched Shopify Payments. This was all about really at its roots the product experience. How do you make your customer's customer have a great e-commerce experience. It was around reliability, how fast were the transactions, and security. But as you can see on the chart, as the company scaled, the percentage of payment volume and payment revenue helped the company amass humongous scale and maintain a top-line growth rate. We've seen the same thing play out with a great cloud, soon-to-be public company, hopefully, in ServiceTitan. They are the leader in field service and contract work. They launched their payment solution product a couple years back, which allows when a contractor comes to your home or your business and they finish their work, they can, you know, accept your payments over credit card, mobile phone, online, and even over traditional phone. As you see also on the chart, while they're earlier in their phase of growth on the second act in payments, it's definitely going to play a big role in their future growth. And then lastly, the granddaddy of them all, Toast. Now Byron talked about their record-setting IPO. It's a little unfair to talk about payments as a second act with Toast because it was always integral to their product strategy. However, if you look at their recent kind of IPO in the recent years, the payments has totally exploded. But they've also written the book on product innovation when it comes to the second act. They found their second act, their third act, their fourth act. They could basically write like a Hamilton script to cloud product innovation. You know, if you think about it, we've all probably engaged with Toast, whether it's at a point-of-sale terminal or when, you know, maybe a server or waiter asks you to pay your bill at your table. And that was them thinking about, you know, the front of the house. And then they said, well, how can we innovate and find a second act in the back of the house? They did kitchen display management so people in the back of the house could understand how they were interacting with the front of the house. Then they innovated and found another second act. They started thinking about the top of the house for the restaurant owner. How can I do you know, multi-restaurant management solutions. How can I do things like payroll, labor, supply chain? And then they even have something called Toast Capital, which is a loan product which allows restaurant owners to renovate their space, bring in new equipment, and increase the experience for just not only their workers, but their customers as well. I just want to give another special shout out to Toast. Chris and the team have totally crushed it, and they're just scratching the surface even though they have 40,000 customers today. The next law, investing in the sales and marketing learning curve. So our friend Tui at Procore, he's done this extraordinarily well. And just like Toby, he thinks about it similarly to us. It's all about iterating, it's about failing fast, it's about testing things on sales and marketing. The market always changes. The strategy that you have on day one is gonna be even more less valuable by day two and beyond. So as you go across the curve, we're gonna start in, you know, for the founders in the room, what we call the initiation phase. This is founder-led sales. Now as founders, you have superpowers in go-to-market that I guarantee you none of your other employees have. Now why is that? It's because you're basically the head of everything in the early days. You're the VP of marketing, the VP of product, the VP of finance, HR, and you're Certainly, probably the head of sales. And as you mature through this phase, you want to test, right? You want to bring in your first batch of sales reps. Let's call it 2 or 3. But you do not want to even think about moving to the next phase until those reps, based on their booking and sales yield, are covering the fully-bored cost of the sales org. Then you're ready to move. You can finally take one of your many hats off as head of sales and hand it over to sales-led sales, what we call the transition phase. You've got some reps that are working, but you've got to scale a professional org. This is all about building the sales playbook, a repeatable motion, building out some segmentation, maybe even some geographies and some territories. And then the rule of thumb is you want to see kind of 2 to 4x coverage on the fully-bored cost that's evidenced in your bookings and sales yield. And when you do that and you're starting to think about customer success and account management, then you can move into what we call the execution phase. This is really about finding coin-operated reps who can move into your repeatable sales org and scale it as fast as possible. You know, as Tui was talking about, you know, he started to see things after the testing phase that he knew he could scale. But the mantra that we tell our best cloud founders is you got to nail it before you scale it. Thinking about Tui a little bit, you know, he's an interesting founder. You know, probably like many of you in the crowd, He lived the experience. He was in construction management. And the solutions that were there today, he hated the experience. So he went out and custom built a solution to solve the very problems that he had experienced himself. He was the de facto head of sales in the early days, and he tested and brought people in to help him scale the org. And after that was successful, he moved into sales-led sales and brought in Dennis to scale the org. Again, it's about process hygiene. It's about a repeatable playbook. It's about finding these reps that can help your org scale. And as they start to build the channel, build inside sales, kind of separate farmers from net-loot logo sales executives, they moved into the execution phase. Now one thing we're going to talk about in a couple slides from here that we see with the best companies— as you succeed, your customers succeed. And with Procore, they were able to turn some of the small builders and construction managers. And as the product evolved and the sales and marketing org got better, they expanded to be even bigger companies. And ultimately champions for Procore's business where they were selling the product on behalf of the company. There's 3 other kind of strategies that we've seen in the pandemic, or I don't know if we're post-pandemic, mid-pandemic. I'm not sure where we are, but these are 3 strategies that we all know about that we saw really take hold. First up, product-led growth. This is all about how do you retool and rethink the product experience and ultimately the user experience That brings time to value forward, but also presents new opportunities and easy opportunities for people to buy while your sales team isn't there. Usage-based pricing. You know, there was this world where, you know, maybe 2, 3 years ago, you could take your customers and your prospects to that juicy steak dinner to get them over the line. That's really hard to do. So what that means is if you use usage-based pricing, pricing, you lower the barrier of entry for new customers and can also attract your existing customers to use the platform even more, because pricing is transparent. In this model, NDR opportunities are big. Expansion opportunities are really, really big. And we're seeing this trend more and more. And lastly, we'll talk a little bit about cloud marketplaces. These are the marketplaces that are, you know, kind of used in conjunction with the big guys—Azure, GCP, AWS. Gotta give a special shout out to Tackle.io. They're the best startup that we've come across that will help you as an early-stage cloud founder get your product prominently placed, marketed, and priced in these cloud marketplaces. They ran a survey recently, and they found that 74% of B2B SaaS software buyers have either already bought in a cloud marketplace or plan to do so in the next 12 months. And that represents billions of dollars of transaction, in a marketplace where your buyers already are. And the last trend that we saw happen in this new normal is that the traditional sales funnel, that's gone. It's no longer static. It's no longer straight line. Companies and customers and users come in the funnel at different various points in the traditional funnel. So what we've started to advise companies to do is think about how do you build a flywheel that creates champions. It's about how do you captivate them? How do you catalyze their usage and engagement? How do you cultivate them and ultimately create more champions that, again, like in Procore's case, end up selling the business on your behalf? One of the best examples that we saw is a company that Mary and I are lucky enough to be partnered with, and that's Hyperscience, an enterprise automation company out of New York City. When the pandemic happened, they just snapped into the new normal better than just about anyone and started to figure out how do we get this flywheel going. It started with content marketing and their approach to telling their story. They moved really quickly to putting their customer out there because again, that juicy steak dinner or dropping by the office, that was no longer an option. They launched this thing called #ThingsOurCustomersSay, and they launched a pandemic survey to figure out how does usage change, how has engagement changed, and how can we market to you better? In order to catalyze, they slashed time to market. And these big kind of machine learning enterprise tools, a lot of it has to do with customer readiness. And they said, how can we give more bite-sized pieces of the platform and get time to value there quicker? Because again, we can't be on site doing implementation the same way. Then they rethought the way that they go into kind of their culture of bringing the customer into the product innovation experience. In terms of cultivating, They overnight developed a remote-first playbook for their customers that really focused on scalability, ease of use, and self-service. And then at the same time, they put in new automated flags for themselves that when a company was about to get— or a customer was about to get to a point where they went into a new usage tier or upgraded the service, they had a dedicated swap team to make sure that that experience was stellar. And then lastly, They really invigorated how to create champions. They invested heavily in their customer advisory board, more than doubling it. But what we found most exciting was the team said, well, we should really, because we can't go on site in the same way and speak to executives, we should give people proprietary custom reports, analytics, and dashboards so our existing champions and our emerging champions can talk about optimal usage, best use cases, and ultimately articulate ROI inside of their org, which helped expansion and net new logos in their respective industry. The results were astounding. While a lot of companies, particularly in kind of this enterprise automation space, were trying to figure out what do we do, how do we do this, the product, the value prop is still there, but selling it and implementing it is much harder. You know, Peter Brodsky and the team, they saw 250% year-over-year ARR growth, 10x increase in platform usage. Again, this self-sufficiency, how do we drive higher user engagement? 140% overall account growth and 170% net dollar retention from ARR basis. You know, kudos to this team. They snapped in, they got the flywheel going, and the results kind of speak for themselves. So what we've talked about so far in this section is, you know, best-in-practice go-to-market, uh, strategies that can help you increase user metrics and user engagement. And my partner, Mary, who is a SaaS metrics guru, she's going to tie it all together so you can scale your startup as efficiently as humanly possible. Thank you.

Now, the go-to-market and scaling insights that Elliot shared in Cloud Laws 1 and 3 will inform Cloud Law number 5, the 5 C's of cloud. After tracking and, and growing with many cloud companies over time, and even founding some, we at Bessemer identified 5 key metrics that we suggest that you use to track and to scale your cloud company. And we call these the 5 Cs of cloud. They include CARR, or committed annual recurring revenue, CAC payback, customer acquisition cost payback, customer lifetime value, churn, and cash flow. But in recent years, as we've continued to evaluate the growth of cloud companies, we realized that there's another metric, another C, that we can add to the equation. And we introduce here the cash conversion score. It is CARR, or committed annual recurring revenue, divided by total capital raised to date minus cash. And as such, it, it calculates the return on invested capital of $1 ever invested into a cloud company. If a company has a cash conversion score of 1x, $1 of investment yields $1 of top-line recurring revenue. Given how closely it measures return on invested capital, it's therefore no surprise that it's a powerful proxy for returns. Across the Bessemer portfolio, uh, companies that had a cash conversion score of 1x at the time of financing actually yielded an internal rate of return of 120%. 20%. We developed one of our famous good, better, best metrics— good, better, best frameworks that you can use as you scale your cloud company while leveraging the cash conversion score. 0.25 to 0.5x is good. 0.5 to 1x is better. And 1x or more is great. We therefore would like to reintroduce Cloud Law Number 5 as the 6 Cs of cloud. And we encourage you to go to bvp.com/cloud to review and learn more about these metrics. And now that we've explored a little bit about the 6 Cs of cloud that we— you should use to track your cloud business, we'd love to share some insights about the environment in which you would be building your cloud business in today's age of unicorns. Or should we say decacorns? If we look at the top 10 Cloud 100 companies from 2021, they're actually the average to be a decacorn with an average of a $20 billion valuation and an aggregate equity value of $200 billion. 2x increase year over year, which shows the power of the cloud today. Toast and Freshworks, as you'll see here, have already gone public. Looking at the entire Cloud 100 list as a whole, as Byron mentioned, it's at $518 billion, up 94% year over year from 2020 when it was worth $267 billion. This increase in valuation we credit to tailwinds for cloud adoption, investor understanding and appreciation of the cloud business model. And two things that we're gonna explore more here: revenue growth rates expanding and multiples expanding as well. Using the Cloud 100 as a heuristic, you see the cloud multiples are expanding dramatically over time. The average Cloud 100 company, so the top cloud companies in the world at any one moment, had a 9x ARR multiple in 2016. Increasing 270% until 2021, where it earned a 34x multiple. Absolutely incredible. And it's not just that multiples are expanding. Growth rates are increasing as well. Again, out of the best cloud companies in the world, it was— they were growing an average of 60% in 2017, increasing to 90% in 2021. And what you'll see is that the top quartile cloud companies actually accelerated in growth rates to 110%. We found at Bessemer that COVID really opened up some TAM expansion opportunities that cloud companies were able to take advantage of. In particular, beneficiaries were in collaboration, productivity, and data infrastructure software segments. Tying these together, though, we note that investors are actually willing to pay more today than they ever have for the same growth rate. It's the best time in history to build a cloud company. Between increasing growth rates, expanding multiples, and investor sentiment, We're seeing today the rise of unicorns. And in the next couple of slides, we'd like to discuss a few of the other key trends that we're seeing in the private cloud market today. First of all, the growth of cloud is not unique to Silicon Valley. It really is global. At Bessemer, we're lucky to be invested in Mambu in Germany, Canva in Australia, Contractbook in Denmark. And what we've seen is that that, that trend is only going to continue, especially with the growth of technical talent internationally. And beyond just expanding in geography, we're finding that cloud has expanded dramatically in subsector as well. Between BI and analytics, HR, security, vertical software, we're seeing cloud impact absolutely every single industry segment and subsector. Two for which cloud has had, had an outsized impact of late are data infrastructure and fintech, with companies like HashiCorp and Stripe. What we've seen in the last 12 months is that these two segments have grown dramatically thanks to COVID tailwinds and the broader trends towards cloud adoption. And these two segments actually represented the highest total valuation of subsectors on this year's Cloud 100 list. And now that we've discussed the state of the private cloud market today and the trends of the unicorns being built today, I'd like to invite Elliot back up to share what we will be seeing from the unicorns of tomorrow.

Thank you, Mary. Okay, so let's have some fun, right? It's predictions. Who knows if all of these are right, but we do our absolute best. One of the best annual traditions we have at Bessemer is we put the partnership together, our investment team, marketing team, everyone gets together. We sit down and we try to figure out where are gonna be the biggest trends and opportunities for the early-stage cloud founders and unicorns of tomorrow. We're going to walk you through all 7 of them. I'm going to take the first 3 and then I'll pass it off to my, my colleagues here. Prediction number 1, the continued unbundling of the virtual office. So when COVID hit, what happened? We all had to go work from home. While many of us spend hours and hours, maybe even more hours in the pandemic, working out of some of the traditional and legacy office suites like the Microsoft Office suite or maybe even the G Suite. What we saw is the emergence and the superpowering in the remote work environment of some purpose-built dedicated solutions that have really achieved scale. And the kind of meeting and calendaring space, everyone's kind of heard a little bit about Calendly and their story, one of the best bootstrapped and now VC-backed stories to ever happen in SaaS. Undoc, another really interesting yet earlier stage company in that space. I'll shout out two more. You know, everyone went remote. All of you are probably hiring more remote, work from anywhere. Mural and Miro are two of the best collaborative tools out there to make sure that you keep the trains running and people are working just as effectively as they were when everyone was together in the office. And then lastly, I have to give a hat tip to Hopin. You know, two years ago when we were trying to figure out, well, what do we do with Zaster? What do we do with our Cloud 100? We're able to use tools like Hopin to do virtual events and now hybrid events. And I think the hybrid new normal is what we're going to see from events in the future. Prediction number 2, we're bringing SMB back with SaaS. Of course, we've talked a lot about Toast because the restaurant industry was just ravaged in the pandemic, but also in the vertical SaaS play, we've seen a ton of new emerging players. I have to give a shout out to Dave and Song, two of my good friends over at Square. Fryer, who have revolutionized how people think about kind of the barbershop and salon industry. Some other great examples there are Service Monkey in the car and automotive repair space. One of my favorite emerging companies, Sense. They are in the coin-operated laundry space where, you know, it's a legacy business and we're digitizing it and taking it to the cloud. We've talked a lot about remote work. You know, you're probably again hiring people all over the place. But Paya Global, a great company in the HR space. For international payroll and all the tax things you need to think about. And then lastly, I'll give a shout out to my second home, Toronto, Canada. Ada's support will help you manage the problems that your customers have on your behalf in a remote fashion. And then lastly, diversity, equity, inclusion tools, they kind of take their rightful place. I'm going to take a little bit of time. This one's personal for me. I've been a venture capitalist for 16 years. It shouldn't shock anyone in this room that I don't look like your average venture capitalist. Still today. So a lot of these tools, there's this new discussion about what can we do as a community, as companies, and as leaders to help D&I efforts inside of places like Bessemer and the cloud companies that you manage as well. So I'm going to shout out a couple of these. I'm going to start with Cindio. Maria, incredible cloud founder, and her team, they're focused on pay equity. They've got the best platform out there and an analytics suite to make sure that people are getting Equal pay for equal work. In the training space, there is a dynamic founder over at Unpacking. Just Google it, and the moment you see her, you'll say, I need to learn more about this business. And I'll also shout out Diversio, another Toronto-based business that even Bessemer has partnered with to help us understand where our D&I challenges are, but also chart a path for solutions so we can make sure that everyone inside of our company, and they work with our portfolio companies, are having equitable experiences.

Awesome. I'd love to now talk about prediction number 4, which is that data and machine learning infrastructure accelerates to new heights. As more data is being created and is available than ever before, we're seeing trends emerge in the enterprise data stack as well. From moving data to storing it, querying it, visualizing it, monitoring it, the opportunities here are endless. We've partnered with Implied Data and Real-Time Analytics in Firebolt and data warehousing, but the opportunities here are vast. Prediction number 5, the rise of the citizen developer and creator. We are fully in the age of the democratization of software development, and we're seeing tools like Zapier and Webflow completely democratize the ability to do technical software development in enabling non-technical users with technical skill sets. But we're seeing a very similar trend emerge with, with the use of creator economy tools. Users can develop, manage, and distribute unique content without dedicated technical design resources. And tools like this include the likes of Canva, which is a Bessemer portfolio company. I'd love to invite Byron to share the rest of our predictions and to close us out.

Thank you, Mary. Uh, so number 6 double-clicks on the fintech trend that we saw in the late-stage private space, uh, of the Cloud 100. The fastest-growing segment within our Cloud 100 list this year was fintech, and we're seeing that roll through through to the wider end of the funnel for company creation as well. And certainly that is around the unbundling and the neo-bank mindset with the B2B overlay to that as well, and the enabling tech. We're also seeing increasingly our vertical SaaS and our SMB SaaS solutions are embedding fintech products into them, as Elliot talked a lot about in the second act, how it's become a powerful driver for companies like Toast and ServiceTitan for their second acts as you get the payments flow as part of the business interaction. And for those of you building apps out there, we encourage you to think about this much earlier in your company's lifecycle because there are so many enabling technologies now available. Certainly when you get into, you know, security, identity, fraud, and then obviously crypto, in and of itself its own category, but increasingly has a place in the B2B world as well. And that brings us to number 7, which is really a deep dive on one of the themes that you saw in the SMB world as well, which is the verticalization of software. Again, one of the largest IPOs in software history last week was vertical SaaS for restaurants with Toast. In the Bessemer portfolio alone earlier this year, Procore in construction, ACV Auctions in automotive, CSDisco in legal. We're just seeing this rip through the market as increasingly the convergence of cloud and mobile are the unlock for these businesses to replatform The technology wave is behind us and supporting us, and for those of you out there with domain experience and/or interest, the time is now, the tools are there, and the opportunity is bright. We see this in auto with our portfolio company ShopMonkey. Elliot mentioned Squire in the barbershop world, Guild in edtech, and these are just a handful of the names that are all at massive scale already and rolling through this next wave of innovation. And so for those of you who want to think about yourself in these shoes and really to tackle this topic of how to build a unicorn, we want to highlight some of the key themes and then point you to some of the resources that we have online. And so from the takeaway side first, the scale of the opportunities are staggering. And that unlocks all sorts of things. It unlocks hiring for you when you're recruiting talent away from these cushy corporate jobs. It unlocks funding for you. It unlocks partnerships and opportunities in a massive scalable way. The 10 Laws are a resource that we have online. There's much deeper materials there. You can look at references and guides and templates and things, but we called out 3 specifically for you today, which is the scale economy and how scale wins, and the second act, how that can become an increasing part of your strategy, the go-to-market strategies behind those, and talked about 3 go-to-market models, including the scale it before you nail it overlay that applies frankly to all three of them. And then we talked about the five, now the six C's of cloud finance that we really think of as the dashboards for you as founders and executives, and for us as investors, those are the dashboards that we talk about in board meetings. Those are probably the things you should be talking about in your e-staff and team meetings, and they're the leading indicators of business health in the years ahead. And then in terms of the resources that are available for you, I would steer you frankly to our website where we have links not just to our own materials, but a lot of awesome industry resources out there that the cloud community and the investment bank and the analyst world and even other venture firms have created that we think can be helpful for, for all of you. And then 3 specific thought pieces that we've referenced. Mary put out a really thoughtful metrics and template. uh, uh, set of materials on the scale to 100 million that I'd encourage you, uh, you download and re— and look at. Today's presentation of building a cloud unicorn is now live on the website. And so you can go back through these materials. Uh, and then when you're looking for comps and datasets and things, we've referenced this cloud index and, um, the public cloud companies. We went through a full update on our, on our website where we've got a lot of drill downs and analytics that you can look at. You can figure out your comp set, you can pull down your metrics, you can look at their target numbers and their forward projections and how analysts are valuing them, and that's available also in the cloud section of our site under the cloud index. And so on behalf of the group, you can follow us also individually, Twitter hashtags and all that, but more than anything, thank you, and even in this new normal, we're living in an age of unicorns. Thank you for your time and interest.