The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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Bessemer's Talia Goldberg: COGS Is the New CAC in AI Business Models
“I have a saying at Bessemer that I started saying a year ago, which is that COGS are the new CAC, which is that you can spend a lot on, on COGS, but it means that you also can't then be spending a lot on CAC in customer acquisition.”
Lemkin: Growth is twice as important as profitability for SaaS
“Growth is twice as important as profitability. So track both, but profitability is not the goal.”
Lemkin: Bessemer's Byron Deeter will only invest in AI-first startups
“And for example, when I caught up with Byron Dieter, most recently from Bessemer, they're managing 10 or twenty million. Byron's done a ton of the best SaaS companies. If you don't know, he'll only do AI. There's exceptions of course, but if you're not AI firs…”
Deeter: Second-tier debt lenders recalled lines in 2008, killing a startup
“In oh eight, we did see several venture debt providers, not the tier one folks, but the level below them block lines or recall lines. And in, in one very painful case in our portfolio, it killed the company, a company that should not have died because of the c…”
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…”
Lemkin: Startup Growth Is Valued Up To 10x More Than Profitability
“For public companies, growth is still worth twice as much as profitability for startups. It's probably four to 10 times.”
Lemkin: Craft and Bessemer Allocate Over 80% of SaaS Capital to AI
“We had one with David Sachs, who now has three billion at Kraft. And we had an offline discussion with Byron Dieter, who runs Bessemer's cloud practice. And they both said over 80% of our money in SaaS is going to AI.”
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 …”
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.”
Lemkin: 25% of BVP Cloud Companies Grow 100%+ at $100M ARR
“In the BVP Cloud, which I think maybe LaunchSharkly was in, 25% of them are growing more than a hundred percent at a hundred million ARR.”
Deeter: Bessemer takes zero courtesy meetings during downturn
“So we are taking no courtesy meetings right now or over the next several weeks. Any meeting we take, we legitimately think is interesting and could be an investment full stop.”
Lemkin: Failing to raise quickly out of top accelerators creates negative signaling
“I think if you are in a top tier accelerator and you don't get funded quickly, there is a bit of a black star, a scarlet mark. It's not huge, but if you're, it's not just YC, but if you're in a top program, there's an assumption that Bessemer has an army of an…”
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, …”
Shen: Bessemer's initial investment memo gave ServiceTitan a 2% chance at $1B
“I remember way back in the day when we were at Bessemer, it's myself, Byron Dieter, and Tyler Goldberg. We wrote now this very famous memo about service sign. I think we put, what do we say, a two percent chance at a billion dollar outcome.”
Dholakia: Bessemer Dedicates $1B of $4B Dry Powder to AI
“We've dedicated a billion dollars of our four billion in dry powder to go invest in AI companies”
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.”
D'Onofrio: Portfolio companies with 1x Cash Conversion Score yielded 120% IRR
“Across the Bessemer portfolio, companies that had a cash conversion score of one X at the time of financing actually yielded an internal rate of return of a 120%.”
Robinson: Cloud category leaders typically capture two-thirds of market share
“Typically in a category leader in the cloud, you're going to 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 c…”
Robinson: Startups should not scale sales until reps cover fully burdened costs
“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 board cost of the sales org.”
Robinson: SaaS companies with usage-based pricing get 10% higher public valuations
“When you juxtapose folks that have a usage-based pricing model versus those that have more of the traditional enterprise license or traditional SaaS sales model, we found that the folks that focus on the usage-based pricing model have about a 10% higher Public…”
D'Onofrio: Average Cloud 100 multiple surged from 9x to 23x ARR
“With the average cloud, 100 multiple increasing by over a 150% in the last five years from nine X ARR in 2016 to 23 X in 2020.”
Deeter: Some Bessemer portfolio companies dropped 30% to 40% within a week
“We literally have companies that last week said you know, we're seeing no impact that are down 30 or 40% already into this week.”
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: 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: 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: 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”
Shen: Median public cloud company scales $1M to $100M ARR in seven years
“Well, we look at all the public companies, about 55 in total. The median got there in about seven years. The top quartile companies got there in about five years, and the bottom quartile, which were all very successful cloud companies, took about 10 years to g…”
Deeter: Enterprise mobile software will take root through vertical use cases
“We think we're gonna see a lot more of this, and really, Enterprise Mobile is gonna take root through these vertical use cases.”
Shen: Early-stage cloud companies should target a 0.5x to 1.5x efficiency score
“What we see across our portfolio and in the industry is you want to be between .5 and a 1.5 X ratio.”
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: 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: 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: Top-quartile public SaaS multiples fell from 24x to 8x revenue
“And if you look at the top quartile at the peak, so the top 25% of SaaS and cloud companies in the public markets, they're trading at 24 times revenue. Over the last, ah, nine or 10 months, that has now dropped to eight times. That is one-third of what they us…”
Bessemer's cloud portfolio historically averaged 3x growth between $1M-$10M ARR
“The average company in Bessemer's cloud portfolio Has been growing about three X between one and ten million AR and still round about two X or even more than two X above ten million AR.”
Deeter: 2021 Forbes Cloud 100 comprised entirely of unicorns for first time
“That group, for the first time in history, was comprised of only unicorns this year.”
Deeter: Fintech was the fastest-growing segment on the 2021 Cloud 100 list
“The fastest growing segment within our cloud 100 list this year was fintech”
D'Onofrio: Emerging cloud index average multiple rose from 5x to over 20x
“The BVP NASDAQ emerging cloud index and it had its average multiple increased by, from about five times forward run rate revenue in 2010 to over 20 times in 2020.”
D'Onofrio: Over 527 private unicorns reached $1.9T valuation by January 2021
“As of January, 20, 21, there were over 527 private unicorns with a total cumulative value of over 1.9 trillion dollars.”
Robinson: The number of private unicorns doubled in two years
“But what's crazy to us is that the number of private unicorns has actually doubled, ah, in the past two years.”
D'Onofrio: Top-quartile private cloud growth reached and held over 100%
“The top quartile companies have increased their growth rates from 65% in 2017 to over a hundred percent in 2019, and were able to maintain that growth rate in 2020, despite a lot of the headwinds that COVID presented.”
D'Onofrio: Forbes Cloud 100 private cloud companies are worth $267B
“And these companies are worth an impressive two hundred and sixty seven billion dollars and include some companies that Bessemer is really proud to work with, such as Procore, Toast, HashiCorp, and Canva.”
Bessemer: Cloud marketplace transaction volume will reach $3B in 2021
“If you look forward to just 2021, we're predicting about a three billion dollar total transaction volume for this go to market strategy.”
Deeter: Bessemer raised a top-off fund to invest aggressively in 2008
“For us in oh seven oh eight. We once things stay stabilized and we've done the triage, we did the exact opposite. We actually raised an opportunity top off fund to be more aggressive. And we had LPs that said, you know, now's a buying opportunity and supported…”
Deeter: Bessemer invested in Twilio, Shopify, and Pinterest during 2008 crisis
“Three in the Bessemer portfolio alone, we had Twilio, Shopify, and Pinterest were all, you know, seed and series A investments coming out of that O eight crisis.”