May 13, 2017 · 28m · saastr
Bessemer Venture Partners: The State of the Cloud, 2017-2018 Edition
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Presented at SaaStr Annual by Bessemer Venture Partners' Byron Deeter and Christina Shen, this keynote delivers the 'State of the Cloud' report, analyzing 2016 market volatility, establishing growth and capital efficiency benchmarks for SaaS startups, and forecasting key technological and organizational trends shaping the cloud ecosystem.
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 0.3 Jason pushing back 0.0
speaking balance: gold is Jason, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 18:05 Byron rejects human-avoiding AI hype
Byron challenges the prevailing Silicon Valley narrative that AI will eliminate human labor, illustrating current limitations with the metaphor of a stranded self-driving car running out of gas.
Hardest push from Jason ▶ 11:45 Christina pushes back on the conventional Rule of 40Christina explicitly reframes industry standard metric assumptions, arguing the standard Rule of 40 is directionally flawed for early-stage scaling businesses.
Biggest teaching moment ▶ 12:45 The 70-50-30 BVP efficiency framework breakdownChristina educates the audience on stage by setting stage-based efficiency benchmarks (70%, 50%, 30%) backed by historical public SaaS financial data.
Jason holds their own ▶ 21:00 Voice search and screenless software data presentationByron demonstrates deep industry expertise by citing rapid adoption stats across Google, Alexa, and Bing voice queries to justify the shift toward screenless UI.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Jason as informed peer | Guest teaching | Guest disagreement | Jason pushing back | Why |
|---|---|---|---|---|---|---|
| Welcome and 2016 Cloud Market Retrospective | 0 | 0 | 0 | 0 | This is a keynote stage presentation where Byron Deeter introduces the 2016 cloud market performance. With no host participation during the presentation, host metrics are zero and the tone is purely instructional. | |
| IPO Slump, M&A Boom, and Forbes Cloud 100 | 0 | 0 | 0 | 0 | Byron continues the keynote monologue, outlining the IPO slump, M&A dynamics, and the introduction of the Forbes Cloud 100. There is no host interaction. | |
| Growth Trajectories and ARR Milestones | 0 | 0 | 0 | 0 | Christina Shen presents data on ARR growth milestones from $1M to $100M across top SaaS companies. The segment is a solo educational presentation without host engagement. | |
| Capital Efficiency and the BVP Efficiency Rule | 0 | 0 | 1 | 0 | Christina introduces the BVP Efficiency Rule, offering a gentle intellectual critique of the traditional 'Rule of 40' as inadequate for scaling SaaS companies. No host is present. | |
| Go-to-Market Scaling and the CAC Payback Framework | 0 | 0 | 0 | 0 | Christina details go-to-market scaling, the CAC cocktail formula, and payback dynamics across enterprise vs SMB tiers in a monologue format. | |
| Predictions on Human-Assisted AI and API Infrastructure | 0 | 0 | 1 | 0 | Byron presents predictions on human-assisted AI and API architecture, mildly pushing back against the prevailing narrative of full AI human replacement. No host dialogue occurs. | |
| Cost-Conscious Cloud Architecture and Mobile Superiority | 0 | 0 | 0 | 0 | Byron concludes the keynote with recommendations on cloud architecture efficiency, mobile differentiation, screenless UI, and founding team diversity. |
Statements from this episode (15)
Deeter: Over 40% of Public Cloud Value Has Been Acquired
“Over 40% of the value of the public cloud companies has been acquired away, strip out Salesforce at the top there, and well over 50% has been acquired.”
Shen: Top quartile cloud companies reach $100M ARR in 5 years
“We mapped the 43 top cloud companies out there, and looked at the top, median, and bottom quartile. And we saw that the top quartile gets from one to a hundred million in just five years. The median in seven, and the bottom quartile in just over 10.”
Shen: Top SaaS companies scale from $1M to $10M in two years
“If you are a good company, you got from one to ten million in AR in just four years. That means you did a little better than a double, double, double, double, and you're on the same growth trajectories as companies like Cornerstone and Mindbody. If you're in t…”
Shen: SaaS efficiency score averages 73% pre-IPO and 32% post-IPO
“Three years pre IPO, the average efficiency score is 73%. Three years post IPO, the average efficiency score is 32%, and so when you're a private early stage company, your efficiency is driven so much by your revenue growth, but as you mature and scale to beco…”
Shen: The 70-50-30 efficiency rule for scaling SaaS companies
“The BVP efficiency rule says if you're greater than thirty million in revenue, you just have to remember three numbers. 70, 50, 30. And that's because when you're expansion stage company and you're, call it 30 to sixty million in ARR, 40 is actually too low of…”
Shen: SaaS companies under $30M ARR should generate more ARR than burn
“We recommend you look at what is your net new ARR relative to your net cash burn, and that ratio should be greater than one.”
Shen: CAC spend typically splits equally across sales reps, marketing, and support
“And so we bucket all these metrics into three core inputs, which is sales rep productivity, marketing spend, and sales support. And roughly what we've seen from companies is this tends to be a third of your total spent.”
Shen: CAC payback benchmarks for SMB, mid-market, and enterprise SaaS
“If you are a mid-market company, 12 month probably is your right number. But if you're selling to enterprise and you've got hundred K ACV deals, you're driving great upsell, you should think of everything as an LTV to CAC ratio. So if you've got a higher LTV, …”
Deeter: The near future belongs to human-assisted AI, not full automation
“Prediction one is that this year and in the coming few years will be the era of the human-assisted AI. Take the most valuable knowledge workers, the high wage employees across your customer base, and figure out how to help them. Figure out how to take you know…”
Deeter: 90% of the time, external APIs outperform internal builds
“Because nine times out of 10, these will be better, faster, and cheaper than your internal team can build, and they're getting in the way of you building the high value layer on top of it.”
Deeter: Pre-IPO startups frequently save over $1M by refactoring AWS infrastructure
“More and more of our companies that are getting ready to go public will come to us and say, wow, we just refactored our code and saved a million dollars on that AWS bill. We've had multiples of that, actually, in many of these discussions”
Deeter: Over 90% of millennials expect to leave before equity vests
“Over 90% of them don't expect to stay around to see their first chunk of equity vest over the typical four year period.”
Deeter: Voice accounts for 20% of Google and 25% of Bing searches
“20% of searches in the Google, ah, engine are through voice today. 25% for Microsoft Bing.”