Oct 30, 2019 · 32m · saastr
State of the Cloud 2019: Europa Edition | SaaStr Software Community
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
At SaaStr Europa 2019, Alex Ferrara of Bessemer Venture Partners analyzes the explosive growth of the global cloud economy, introduces the GRIT benchmarking framework for scaling resilient software businesses, and outlines key investment themes driving the next trillion dollars in cloud innovation.
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
speaking balance: gold is Jason, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 3:45 Dismissing Wall Street skepticism of AWS
Ferrara highlights how Wall Street analysts incorrectly pushed back against Jeff Bezos launching AWS, proving the transformative power of cloud business models.
Hardest push from Jason ▶ 0:04 Conference stage introductionThis is a solo keynote with zero host dialogue or pushback; the announcer simply introduces the speaker.
Biggest teaching moment ▶ 17:15 Compounding value of customer retentionFerrara presents concrete mathematical modeling demonstrating that a 15% improvement in net retention generates $1.5 billion in exit enterprise value.
Jason holds their own ▶ 0:04 Announcer opening welcomeNo host participation exists during the presentation to demonstrate counter-expertise or pushback.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Jason as informed peer | Guest teaching | Guest disagreement | Jason pushing back | Why |
|---|---|---|---|---|---|---|
| Decade in Review: From Zero to Sixty-One Cloud Unicorns | 0 | 0 | 0 | 0 | Solo keynote presentation by Alex Ferrara tracing the ten-year evolution from zero cloud unicorns to sixty-one. No host participation occurs. | |
| Recent Market Dynamics: Mega M&A Deals, IPOs, and Cloud 100 | 0 | 0 | 0 | 0 | Ferrara details mega M&A transactions, recent public market IPOs, and Cloud 100 private market metrics. The host does not speak. | |
| Managing Economic Volatility and Introducing the Resilient Framework | 0 | 0 | 0 | 0 | Ferrara addresses public market volatility and introduces Bessemer's framework for company resilience. There is no host involvement. | |
| Growth Benchmarking: Milestones from One Million to One Hundred Million ARR | 0 | 0 | 0 | 0 | Ferrara breaks down ARR scaling milestones from $1M to $10M and $100M across median, top quartile, and bottom quartile performers. Pure monologue. | |
| Customer Retention as a Multi-Billion Dollar Value Driver | 0 | 0 | 0 | 0 | Ferrara models the compounding valuation impact of net retention across market segments. No host participation. | |
| Runway Planning and Capital Efficiency Benchmarks for Early-Stage SaaS | 0 | 0 | 0 | 0 | Ferrara outlines runway management and defines Bessemer's early-stage efficiency metric of net new ARR divided by net cash burn. Monologue format. | |
| The GRIT Framework: Quantifying SaaS Company Resilience | 0 | 0 | 0 | 0 | Ferrara concludes the GRIT framework explanation and shares future SaaS predictions. No host participation occurs. |
Statements from this episode (16)
Ferrara: There are currently 61 private cloud unicorns globally
“So the answer is, there are actually 61, ah, cloud unicorns. We'll flash them up. Many of these names that you know. Ah, and this is actually the largest we've seen in history.”
Ferrara: Amazon 2019 earnings transcript mentioned AWS 78 times and retail twice
“So this analyst, Artie Levy from CNBC, took the Amazon earnings transcript from earlier this year, and he actually counted the words, counted the number of times that words like AWS or retail or Alexa were mentioned. Retail was mentioned twice. That's it. And …”
Ferrara: AWS is arguably Amazon's biggest value driver toward $1T market cap
“And so, you know, I think we've seen over the last decade that AWS now is arguably the biggest driver of value for Amazon as they are approaching this trillion dollar market cap, ah, market cap milestone.”
Ferrara: 2019 cloud IPO market cap will meet or beat 2018's $44B
“And so, we're expecting that 2019 will likely either exceed, or sorry, rather meet or exceed Ah, the same metrics from, ah, the same stat from 2014, 2018, rather.”
Ferrara: Forbes Cloud 100 private companies command $200B in aggregate value
“Ah, and these clump companies, as of, ah, as of recently, ah, command about two hundred billion dollars of value.”
Ferrara: Private cloud unicorns outnumber public ones for first time
“One, it's notable that just in the last year, for the first time, the number of these private cloud unicorns exceeds that of the public ones”
Ferrara: Building a cloud unicorn often takes more than a decade
“The time that companies are staying private has been extending. It's often much more than a decade to build one of these cloud unicorns.”
Ferrara: Slack Scaled From $1M to $100M ARR in Three Years
“If you look at Slack, and I recognize they're not a public company, but we've included them because they're imminently, ah, they will be, ah, they got to a hundred million of ARR from one million in three years, which is just incredible. I think that's probabl…”
Ferrara: Median Cloud Company Takes 7.3 Years From $1M to $100M ARR
“And what we see is the median company, the median, ah, successful cloud company is getting to this hundred million mark in about 7.3 years. The best companies or the top quartile companies are doing it in a little over five years, and the bottom quartile, it's…”
Ferrara: Mid-market SaaS yields 80-90% gross and 90-120% net revenue retention
“If you're selling into the mid-market with ACVs of something like 12 K or up to 50 K per year, you can expect 80 to 90% gross revenue retention, and net revenue retention, we typically see something in the 90 to, in best cases, a 120%.”
Ferrara: Net new ARR divided by burn beats Rule of 40 under $30M ARR
“We've found that it's not really as relevant for earlier stage companies. So, companies below thirty million of ARR We tend to find that a much better way of measuring efficiency is through looking at this, ah, score of net new ARR divided by cash burn.”
Ferrara: A 0.5x to 1.5x net ARR to burn ratio is very good
“Again, having gone through a large data set, we typically saw that something between 0.5 X and one and a half X represented a very good score, and some of the best companies, as we'll see, have scores above that.”
Ferrara: Shopify grew ARR from $12M to $24M on just $2M burn in 2011
“One example I'll give of one of the best companies out there on this metric was Shopify, which is a company that in around 2011 had about twelve million of ARR. Over the next 12 months, they added Another twelve million of ARR, and it cost them two million to …”
Ferrara: Twilio achieved an 8.1 GRIT score driven by 160% net retention
“They had a 160% annual net retention. They were growing at around 300% per year when they were at this scale. And so with 200, ah, two years of cash in the bank and a 1.5 X efficiency score, their grit score was 8.1, which was, ah, which was very strong.”
Ferrara: ServiceTitan scored an 8.3 GRIT rating driven by 3.4x efficiency
“So Service Titan, ah, over indexed on efficiency with a 3.4 X score. They underindexed a little bit on net retention at around 90%. So with 200% growth, and again, two years of cash in the bank, they had a very similar grit score of about 8.3.”
Ferrara: Data privacy problems stem from poor SaaS engineering, not cybersecurity
“I don't think this is a problem that's gonna be solved by cyber security tools. Ah, I think that this is a problem that results from poor privacy engineering on the part of SaaS application companies over the last decade.”