Let's get back at it!
A deep dive into the Cloud 100 Benchmarks 2023 report
Hello everyone 👋
Guess who's back? Yep, it's me, diving back into the buzzing world of tech trends after a little break from writing (longer than expected)! 😊
Just a quick reminder - every two weeks, I'll be dropping by with the freshest insights and discussions on the thriving European tech scene straight into your inbox.
Kickstarting this series, we'll be delving into the Cloud 100 Benchmarks 2023 Report by Bessemer. It’s going to be a treasure trove of insights and a great conversation starter for your next tech chat.
Are you ready? Let's dive in!
The Cloud 100 Benchmarks Report, produced annually by Bessemer Venture Partners, is a highly anticipated publication that ranks the top 100 private cloud companies in the world. It highlights industry trends, valuations, and growth trajectories, offering a critical resource for industry stakeholders to understand the trends of the cloud sector.
➡️ Find here the link to the report
2022 marked a significant transitional phase in Cloud computing. For the first time ever, the aggregate Cloud 100 list value actually contracted in value year-over-year.
Despite the contraction due to various macroeconomic challenges and industry maturation, there’s a ray of promise — Artificial Intelligence (AI).
1. The rise of AI-Driven powerhouses in the Cloud
Highlights:
OpenAI, after a hefty investment from Microsoft, now boasts a $29 billion valuation, catapulting it to the top spot among Cloud companies, surpassing Stripe, and marking its territory alongside Databricks.
The Design, Collaboration, and Productivity category, rejuvenated by AI infusion, clinches a combined valuation of $110 billion, toppling the Fintech sector.
The domination of AI is hard to contest, with 70 out of 100 cloud companies report adopting AI or ML strategies.
👉 The cloud market is undergoing a pivotal transformation. Even as traditional Cloud giants such as Stripe or Canva retain their significance, the ascendancy of AI-focused firms shows a significant shift in how Cloud companies are valued and which technologies (AI) are driving future growth and innovation.
2. How Cloud companies capture the value of AI
The report delves into the case studies of Cloudinary, Databricks and Deepl which have taken steps into the AI realm to enhance their product offerings and deliver more value to their customers.
Case Study summaries:
Cloudinary: Embedding AI Tooling - Cloudinary harnessed AI to enhance its digital media asset management platform, introducing generative AI features to its image and video APIs, such as Generative Fill and Generative Remove and Replace. These innovations drive user productivity and expand Cloudinary’s market reach, spurring customer growth.
Databricks: Acquisition Strategy - By acquiring MosaicML, Databricks seamlessly bolstered its cloud analytics platform with sophisticated AI and ML analytics. This move not only solidified their value proposition but also provided customers with a unified platform for data management and analysis at scale.
Deepl: AI-Native Approach - Deepl, with its foundation in AI-driven translation, employs neural machine translation (NMT) and deep learning for near-human translations. Their models capture intricate language patterns, adapting to linguistic nuances. Beyond translation, DeepL's continuous AI product innovations, like Deepl Write, allow them to cater to various markets and use cases, fostering deeper customer engagement.
👉 Companies have different strategies to capture the value of AI: either embedding AI, acquiring AI, or developing AI-native approaches. A deep dive reveals that 65 out of 100 have strategically embedded AI, while 5 are crafted as AI-native entities.
3. How to measure success in Cloud? The Centaur Milestone
Highlights:
The average Cloud 100 valuation dipped 10% YoY in 2023 (still 27% higher than 2021). This hints at a more conservative valuation approach in the private market.
Yet, a formidable 95% of the Cloud 100 are on track to either meet or surpass the Centaur milestone by the end of 2023.
Proud members of the Centaur club now include: Zapier, Canva, Cohesity, or Wiz which has announced reaching $100 million ARR faster than ever.
👉 In a context of oscillating valuations, the cloud market is gravitating towards ARR as a its most reliable metric of success. The $100 million ARR threshold (labeled the Centaur status) emerges as a new, more reflective milestone of performance, instead of valuation.
4. All hail to efficiency!
Highlights:
While the macroeconomic turmoil has inevitably left its mark, dragging the average growth rate of Cloud 100 companies down by 55%, 23% of them have already crossed the cash flow positivity threshold, while 58% declare they have meaningfully improved their burn rate.
Peering into the not-so-distant future, nearly two-thirds of the 2023 Cloud 100 will be cash flow breakeven or profitable by the end of 2024.
👉 As valuations and growth rates face headwinds, the focus on operational efficiency becomes paramount. Companies that can grow while maintaining a keen eye on cash flow positivity and profitability are likely to be better positioned for long-term success.
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The cloud industry's trajectory paints a clear picture: AI-driven innovation is paramount, the Centaur milestone encapsulates genuine success, and operational efficiency is the order of the day.
For entrepreneurs and investors, the message is crystal clear: embrace AI-centric strategies, prioritize ARR milestones over valuation, and focus on operational efficiency to achieve success in the evolving cloud landscape.
That's a wrap on this edition, folks! Thanks for tuning in. Stay curious and ready to dive deeper. See you in two weeks with more tech insights!
Take care,
Tim