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Sep 20, 2023 · 25m · saastr

State of the Cloud 2023 with Bessemer Venture Partners

Katie Ray · 10m spoken Mary D'Onofrio · 7m spoken Janelle Teng · 5m spoken
0:00 / 0:00
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

Bessemer Venture Partners presents the 2023 State of the Cloud report, analyzing how software companies are navigating macroeconomic headwinds by prioritizing operational efficiency, cash flow durability, and generative AI adoption.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →

Jason as informed peer 0.0 Guest teaching 0.0 Guest disagreement 0.0 Jason pushing back 0.0
05100:0010:0020:001:18–7:39 · Jason as informed peer 0/10 Public Cloud Software and Market Recovery in 2023 Janelle delivers a keynote presentation on macroeconomic shifts, public SaaS valuation compression, and the transition toward cash flow efficiency. The host is not participating in the monologue.7:43–10:39 · Jason as informed peer 0/10 The Private Cloud Economy and Cloud 100 Benchmarks Mary presents findings from the Cloud 100 dataset regarding private market growth deceleration and multiple contraction. The segment is an uninterrupted presentation without host engagement.10:41–19:53 · Jason as informed peer 0/10 P&L Optimization Tactics and Operational Efficiency Katie outlines tactical P&L optimizations across gross margins, CAC payback hurdle rates, SaaS sprawl reduction, and R&D efficiency. No host interaction takes place.19:56–23:51 · Jason as informed peer 0/10 AI Strategy and Innovation in the Cloud Mary details generative AI adoption frameworks (embedded, acquired, and native AI) among leading Cloud 100 software companies without host dialogue.23:52–25:51 · Jason as informed peer 0/10 Key Takeaways, Conclusion, and Q&A Transition Katie recaps key takeaways regarding durable growth and transitions to the audience Q&A session, with only minimal transitional affirmations from the host.1:18–7:39 · Guest teaching 0/10 Public Cloud Software and Market Recovery in 2023 Janelle delivers a keynote presentation on macroeconomic shifts, public SaaS valuation compression, and the transition toward cash flow efficiency. The host is not participating in the monologue.7:43–10:39 · Guest teaching 0/10 The Private Cloud Economy and Cloud 100 Benchmarks Mary presents findings from the Cloud 100 dataset regarding private market growth deceleration and multiple contraction. The segment is an uninterrupted presentation without host engagement.10:41–19:53 · Guest teaching 0/10 P&L Optimization Tactics and Operational Efficiency Katie outlines tactical P&L optimizations across gross margins, CAC payback hurdle rates, SaaS sprawl reduction, and R&D efficiency. No host interaction takes place.19:56–23:51 · Guest teaching 0/10 AI Strategy and Innovation in the Cloud Mary details generative AI adoption frameworks (embedded, acquired, and native AI) among leading Cloud 100 software companies without host dialogue.23:52–25:51 · Guest teaching 0/10 Key Takeaways, Conclusion, and Q&A Transition Katie recaps key takeaways regarding durable growth and transitions to the audience Q&A session, with only minimal transitional affirmations from the host.1:18–7:39 · Guest disagreement 0/10 Public Cloud Software and Market Recovery in 2023 Janelle delivers a keynote presentation on macroeconomic shifts, public SaaS valuation compression, and the transition toward cash flow efficiency. The host is not participating in the monologue.7:43–10:39 · Guest disagreement 0/10 The Private Cloud Economy and Cloud 100 Benchmarks Mary presents findings from the Cloud 100 dataset regarding private market growth deceleration and multiple contraction. The segment is an uninterrupted presentation without host engagement.10:41–19:53 · Guest disagreement 0/10 P&L Optimization Tactics and Operational Efficiency Katie outlines tactical P&L optimizations across gross margins, CAC payback hurdle rates, SaaS sprawl reduction, and R&D efficiency. No host interaction takes place.19:56–23:51 · Guest disagreement 0/10 AI Strategy and Innovation in the Cloud Mary details generative AI adoption frameworks (embedded, acquired, and native AI) among leading Cloud 100 software companies without host dialogue.23:52–25:51 · Guest disagreement 0/10 Key Takeaways, Conclusion, and Q&A Transition Katie recaps key takeaways regarding durable growth and transitions to the audience Q&A session, with only minimal transitional affirmations from the host.1:18–7:39 · Jason pushing back 0/10 Public Cloud Software and Market Recovery in 2023 Janelle delivers a keynote presentation on macroeconomic shifts, public SaaS valuation compression, and the transition toward cash flow efficiency. The host is not participating in the monologue.7:43–10:39 · Jason pushing back 0/10 The Private Cloud Economy and Cloud 100 Benchmarks Mary presents findings from the Cloud 100 dataset regarding private market growth deceleration and multiple contraction. The segment is an uninterrupted presentation without host engagement.10:41–19:53 · Jason pushing back 0/10 P&L Optimization Tactics and Operational Efficiency Katie outlines tactical P&L optimizations across gross margins, CAC payback hurdle rates, SaaS sprawl reduction, and R&D efficiency. No host interaction takes place.19:56–23:51 · Jason pushing back 0/10 AI Strategy and Innovation in the Cloud Mary details generative AI adoption frameworks (embedded, acquired, and native AI) among leading Cloud 100 software companies without host dialogue.23:52–25:51 · Jason pushing back 0/10 Key Takeaways, Conclusion, and Q&A Transition Katie recaps key takeaways regarding durable growth and transitions to the audience Q&A session, with only minimal transitional affirmations from the host.

speaking balance: gold is Jason, purple is the guest (3 minute bins)

0:00 · Jason 0% · guest 100%0:00 · Jason 0% · guest 100%3:00 · Jason 0% · guest 100%3:00 · Jason 0% · guest 100%6:00 · Jason 0% · guest 100%6:00 · Jason 0% · guest 100%9:00 · Jason 0% · guest 100%9:00 · Jason 0% · guest 100%12:00 · Jason 0% · guest 100%12:00 · Jason 0% · guest 100%15:00 · Jason 0% · guest 100%15:00 · Jason 0% · guest 100%18:00 · Jason 0% · guest 100%18:00 · Jason 0% · guest 100%21:00 · Jason 0% · guest 100%21:00 · Jason 0% · guest 100%24:00 · Jason 0% · guest 100%24:00 · Jason 0% · guest 100%
Sharpest disagreement ▶ 1:18 Recapping the Severe 2022 Market Pullback

Janelle emphasizes how severely cloud valuations were punished relative to general market indices in what Bessemer termed the SaaSacre.

 Hardest push from Jason ▶ 23:52 Host Stage Hand-off Acknowledgment

Because the entire session is an uninterrupted stage keynote, the host offers no pushback and merely provides minimal transitional affirmations.

 Biggest teaching moment ▶ 6:00 Quantifying the Valuation Shift from Growth to Profitability

Janelle teaches the audience the exact mathematical heuristic showing growth's valuation premium over free cash flow dropping from 6:1 to 2:1.

 Jason holds their own ▶ 25:39 Host Session Wrap Facilitation

The host does not challenge or debate any points in the keynote format, remaining entirely in a logistical facilitation role.
the scores for every segment, with the reasoning behind each
ChapterTopicJason as informed peerGuest teachingGuest disagreementJason pushing backWhy
Public Cloud Software and Market Recovery in 2023 0000 Janelle delivers a keynote presentation on macroeconomic shifts, public SaaS valuation compression, and the transition toward cash flow efficiency. The host is not participating in the monologue.
The Private Cloud Economy and Cloud 100 Benchmarks 0000 Mary presents findings from the Cloud 100 dataset regarding private market growth deceleration and multiple contraction. The segment is an uninterrupted presentation without host engagement.
P&L Optimization Tactics and Operational Efficiency 0000 Katie outlines tactical P&L optimizations across gross margins, CAC payback hurdle rates, SaaS sprawl reduction, and R&D efficiency. No host interaction takes place.
AI Strategy and Innovation in the Cloud 0000 Mary details generative AI adoption frameworks (embedded, acquired, and native AI) among leading Cloud 100 software companies without host dialogue.
Key Takeaways, Conclusion, and Q&A Transition 0000 Katie recaps key takeaways regarding durable growth and transitions to the audience Q&A session, with only minimal transitional affirmations from the host.

Statements from this episode (11)

Opinion
D'Onofrio: The IPO window seems to be reopening amidst AI platform shift
“SBB collapsed, market multiples are down, and yet we have a platform shift to AI that is exciting everybody, and the IPO window seems to be reopening.”
Mary D'Onofrio Sep 20, 2023 ▶ 1:01
Assertion Supported
BVP Cloud Index is up over 25% year-to-date in 2023
“Year to date, the BVP cloud index is already up over 25%, indicating that there may be light at the end of this tunnel.”
Janelle Teng Sep 20, 2023 ▶ 3:38
Prediction Not checkable as stated
Teng: Top private cloud companies will follow Klaviyo to IPO shortly
“And at Bessemer, we very much believe that the top private cloud companies will shortly follow suit as well.”
Janelle Teng Sep 20, 2023 ▶ 4:50
Assertion Supported
Teng: Top BVP Cloud Index companies doubled FCF margins to 14%
“Today, the top 10 highest valued BVP cloud index companies are driving an average of 14% free cash flow, and this is double what the same top 10 cohort had achieved just a year ago.”
Janelle Teng Sep 20, 2023 ▶ 6:12
Insight
Teng: Growth-to-FCF valuation premium dropped from 6:1 in 2021 to 2:1
“At peak bull market exuberance, so this was the end of 2021, a one percent improvement in revenue growth had the same impact on valuations As a six percent improvement in free cash flow margin. So said another way, growth was more important than profitability …”
Janelle Teng Sep 20, 2023 ▶ 6:46
Assertion Partly supported
D'Onofrio: Cloud 100 aggregate valuation dropped 11% year-over-year to $659 billion
“This year for the first year, The aggregate value of the Cloud 100 actually decreased year over year by 11%, still to a phenomenal 650, fifty nine billion dollars.”
Mary D'Onofrio Sep 20, 2023 ▶ 8:06
Prediction Not checkable as stated
D'Onofrio: 23% of Cloud 100 will achieve profitability by late 2023
“23% of cloud 100 companies will be profitable by the end of this year, 2023, and two thirds are planning to be profitable by the end of 2024.”
Mary D'Onofrio Sep 20, 2023 ▶ 8:33
Assertion Supported
D'Onofrio: Average Cloud 100 company growth plummeted to 55% in 2023
“The average growth rate in a cloud-one-hundred business in twenty-twenty-two was a hundred percent, and this year went down to 55%.”
Mary D'Onofrio Sep 20, 2023 ▶ 9:13
Assertion Supported
D'Onofrio: Average Cloud 100 valuation multiple compressed to 26x in 2023
“In 2021, the average cloud 100 multiple was 34 times, decreasing to 30 times in 2022, and 26 times in 2023.”
Mary D'Onofrio Sep 20, 2023 ▶ 9:47
Insight
Ray: Sub-60% gross margins make 20% free cash flow structurally impossible
“Public companies that have less than 60% gross margins find it structurally basically impossible to drive more than 20% free cash flow margins.”
Katie Ray Sep 20, 2023 ▶ 12:19
Assertion Supported
D'Onofrio: 55% of Cloud 100 launched Generative AI features within months
“In the past eight months alone, 55% of cloud 100 companies have launched a generative AI product or feature.”
Mary D'Onofrio Sep 20, 2023 ▶ 20:10
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