State of the Cloud Report 2018

1. STATE OF THE CLOUD REPORT 2018Byron Deeter, Kristina Shen, Anna Khan w w w . b v p . c o m / c l o u d

2. 2017a look back

3. 100,000 10,000 1,000 100 10 1.0000 0.1000 0.0100 0.0010 0.0001 2010 2012 2014 2016 USD BITCOIN MILLIONAIRES! Source: Reddit, Bitcoin prince since inception on a log scale

4. WHILE THE JURY IS OUT ON BITCOIN… 4Source: Headline from CNBC article on Erik Finman. Author: Michelle Castillo. June 2017. Source: Leo Image from Wolf of Wall Street Movie.

5. BOTMANIA; THE MACHINES WILL TAKE OVER!

6. REVENGE OF THE NERDS Source: VisualCapitalist.com Top 5 Publicly Traded Companies (by Market Cap) 2006 $446B $383B $327B $293B $273B 6

7. REVENGE OF THE NERDS Source: VisualCapitalist.com Top 5 Publicly Traded Companies (by Market Cap) 2006 2011 $406B $376B $277B $237B $228B $446B $383B $327B $293B $273B 7

8. REVENGE OF THE NERDS Source: VisualCapitalist.com Top 5 Publicly Traded Companies (by Market Cap) 2006 2011 2016 $582B $556B $452B $364B $359B $406B $376B $277B $237B $228B $446B $383B $327B $293B $273B 8

9. 0 4000 8000 12000 16000 2015 2016 2017 IPO MARKET IS OPENING BACK UP, BUT STILL BELOW HISTORICAL AVERAGES 2015 Total $15.6B 2016 Total $7.4B 2017 Total $11.5B Source: CapIQ. IPO Data from NASDAQ. Companies included are on BVP Cloud Index. Value is determined by market cap end of first day of trading. 10

10. CLOUD INDEX CONTINUES TO OUTPERFORM Source: BVP Cloud Index. Coming soon… 11

11. 5 10 0 2 4 6 8 10 12 2006 2016 Average Years to IPO 2006 vs. 2016 AVERAGE AGE OF A TECH COMPANY IPO INCREASED 2X IN THE LAST DECADE $573m Average Market Cap at IPO in 2009 ~$1B Average value now Source: Nasdaq, Trever Nath, 2016 Source: CapIQ and Pitchbook. 12

12. $26 $84 0 10 20 30 40 50 60 70 80 90 2013 2017 Total Private Capital Invested in Technology Companies ($B) ENABLED IN PART BY HUGE GROWTH IN PRIVATE CAPITALAVAILABLE TO SOFTWARE STARTUPS (3X GROWTH IN FOUR YEARS) Source: NVCA 2017 Report 13

13. 0 50 100 150 200 250 2013 2014 2015 2016 2017 # of Private Companies Valued at $1B+ A DECADE AGO, A $1B PRIVATE VALUATION WAS UNHEARD OF…NOW THERE ARE MORE THAN 200! Source: Dow Jones Venture Source, The Wall Street Journal. “WSJ Billion Dollar Startup Club.” Exhibit 10. As of June 30, 2017. Source: Logos included are a sampling of companies that became ”unicorns” that year. 14

14. 1003 857 769 0 200 400 600 800 1000 1200 2015 2016 2017 # of VC-Backed Exits, 2015-2017 DESPITE MORE MONEY RAISED AND MORE VALUABLE COMPANIES, VC-BACKED EXITS DECLINED FOR THE 3RD CONSECUTIVE YEAR IN 2017 Source: NVCA 2017 Report 15

15. ALMOST AS MANY PRIVATE CLOUD UNICORNS AS PUBLIC CLOUD UNICORNS TODAY! 37 44 PRIVATE PUBLIC 16Source: BVP Cloud 100 List & BVP Cloud Index.

16. A NEW VALUATION FRAMEWORK

17. Revenue Multiple RAISING EARLY STAGE FUNDING A DECADE AGO %YoYRevenueGrowth Public 30% YoY Growth 0x 5x 10x Private (A Decade Ago) 100% YoY Growth 18

18. Revenue Multiple RAISING EARLY STAGE FUNDING TODAY %YoYRevenueGrowth Private (A Decade Ago) 100% YoY Growth 30% YoY Growth 0x 5x 10x Private (TODAY) 100-300% YoY Growth 20X Public 19

19. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2012 2013 2014 2015 2016 2017 2018 2019 On Prem SaaS Source: IDC, Worldwide Enterprise Application Spend by SaaS and On-Prem, 2013-2018. 75% 25% 15% 85% SaaS Adoption Easier to Start a Cloud Company Source: 2016 data from nordicapis.com. 2005-2015 data from rubenverborgh.girhub.io and 200-2004 data from blog.cutter.com 0 5000 10000 15000 20000 25000 30000 35000 2000 2006 2012 2018 API Growth (# of APIs) from 2000-2018 WHAT’S CHANGED? 20

20. US VC Activity ($B) by Sector Cloud funding has grown 4x and to 50% of total funding in 6 years ... AND HIGH VC INTEREST IN CLOUD 21

21. $0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 0.5 Yr 1 Yr 1.5 Yr 2 Yrs 2.5 Yrs 3 Yrs 3.5 Yrs ARR(in$M) Years from $1M to $10M ARR Source: CapIQ internal sources and company announcements.. Note: Use quarterly revenue times four as a proxy for ARR. HOW FAST DO TOP CLOUD COMPANIES GROW TODAY? 22

22. THE BVP GROWTH BENCHMARK From $1mm ARR GOOD 4 Years Double Annually BETTER 3 Years Triple, Double, Double BEST 2 Years Triple, Triple Years to $10MARR Implied Growth Multiple byYear 23

23. 4.4x 6.0x 6.9x 15.9x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 2011 2012 2013 2014 2015 2016 2017 Public - BVP Cloud Index - NTM Mult Private - ARR Mult Revenue Multiples – Public vs Private ($1-20M ARR) Note: Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples. Private - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are included in 2011 (given limited data). 2018 transactions are included in 2017. PRIVATE MULTIPLES HAVE OUTPACED PUBLIC MULTIPLES... 24

24. 4.4x 6.0x 6.9x 15.9x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 2011 2012 2013 2014 2015 2016 2017 Public - BVP Cloud Index - NTM Mult Private - ARR Mult Revenue Multiples – Public vs Private ($1-20M ARR) Note: Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples. Private - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are included in 2011 (given limited data). 2018 transactions are included in 2017. PRIVATE MULTIPLES HAVE OUTPACED PUBLIC MULTIPLES... 1.5x Private / Public 2.5x Private / Public 25

25. 48% 25% 170% 259% 0% 50% 100% 150% 200% 250% 300% 2011 - Public 2017 - Public 2011 - Private 2017 - Private Median % YoY Growth – Public vs Private ($1-20M ARR) Note: Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically). Private - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. 2010 transactions are included in 2011 (given limited data). 2018 transactions are included in 2017. ... BUT PRIVATE COMPANIES ARE GROWING MUCH FASTER EACH YEAR 26

26. THE BVPARRG METRIC ARRG Multiple = ARR Multiple Growth (YoY)

27. THE BVPARRG METRIC: EXAMPLE 6.7x ARRG Multiple = 10x 150%

28. 4.4x 6.0x 6.9x 15.9x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 2011 2012 2013 2014 2015 2016 2017 Public - BVP Cloud Index - NTM Mult Private - ARR Mult Revenue Multiples – Public vs Private ($1-20M ARR) Note: Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples. Private - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are included in 2011 (given limited data). 2018 transactions are included in 2017. WHILE ARR MULTIPLES LOOK HIGH... 29

29. 4.4x 6.0x6.9x 15.9x 7.7x 7.6x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 2011 2012 2013 2014 2015 2016 2017 Public - BVP Cloud Index - NTM Mult Private - ARR Mult Private - ARRG Mult Revenue Multiples – Public vs Private ($1-20M ARR) Note: Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples. Private ARR Mult - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are included in 2011 (given limited data). 2018 transactions are included in 2017. Private ARRG Mult – Takes ARR multiple and divides by YoY growth rate. ... ARRG MULTIPLES HAVE STAYED FLAT 2.5x Private / Public 1.3x Private / Public 30

30. 4.4x 6.0x6.9x 15.9x 7.7x 7.6x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 2011 2012 2013 2014 2015 2016 2017 Public - BVP Cloud Index - NTM Mult Private - ARR Mult Private - ARRG Mult Revenue Multiples – Public vs Private ($1-20M ARR) Note: Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples. Private ARR Mult - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are included in 2011 (given limited data). 2018 transactions are included in 2017. Private ARRG Mult – Takes ARR multiple and divides by YoY growth rate. SOME BUMPS ALONG THE WAY... Public Markets Over-Valued 31

31. 4.4x 6.0x6.9x 15.9x 7.7x 7.6x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 2011 2012 2013 2014 2015 2016 2017 Public - BVP Cloud Index - NTM Mult Private - ARR Mult Private - ARRG Mult Revenue Multiples – Public vs Private ($1-20M ARR) Note: Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples. Private ARR Mult - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are included in 2011 (given limited data). 2018 transactions are included in 2017. Private ARRG Mult – Takes ARR multiple and divides by YoY growth rate. SOME BUMPS ALONG THE WAY... Public Markets Over-Valued Private Markets Over-Valued 32

32. 4.4x 6.0x6.9x 15.9x 7.7x 7.6x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 2011 2012 2013 2014 2015 2016 2017 Public - BVP Cloud Index - NTM Mult Private - ARR Mult Private - ARRG Mult Revenue Multiples – Public vs Private ($1-20M ARR) Note: Public - BVP Cloud Index includes 78 publically traded companies over time (includes acquired companies historically) and shows NTM revenue multiples. Private ARR Mult - Includes 74 private valuation transactions between 2010 and Jan’18 with ARR between $1M - $20M. Takes the average ARR multiple within each year. 2010 transactions are included in 2011 (given limited data). 2018 transactions are included in 2017. Private ARRG Mult – Takes ARR multiple and divides by YoY growth rate. DESPITE SEEMINGLY HIGH PRIVATE COMPANY VALUATIONS, MULTIPLES CAN BE JUSTIFIED! Growth adjusted, private valuations are more reasonable 6.7x Median ARRG 33

33. SERIES A/B VALUATION FRAMEWORK GOOD 50 -100% CARR %Growth BETTER BEST 100 -200% 200%+ 1 24 CACPAYBACK Mos 12 -24 <12 2 1-3% CHURN (Monthly) <1% Net negative 3 <1 CASHFLOW EFFICIENCY -1 >1 4 34

34. 2018 PREDICTIONS

35. 2013 CLOUD ROADMAPS Mobile Sales ForceAutomation1. Quantitative Marketing 2. IT/Data Management3. CFO Software 4. Regional SaaS5. HR 2.0 6. Consumerized SaaS for SMB7. PaaS/Business to Developer (B2D)/Developer Citizenry 8. 36

36. BVP ROADMAP INVESTMENTS IN THE LAST 5 YEARS MobileSales ForceAutomation1. Quantitative Marketing 2. IT/Data Management3. CFOSoftware 4. Regiona lSaaS5. HR2.0 6. Consumerized SaaSforSMB7. PaaS/Businessto Developer (B2D)/DeveloperCitizenry 8. 37

37. 2018 PREDICTIONS BY CLOUD LAYER IAAS PAAS FAAS SAAS

38. ...AND SOFTWARE IS GETTING HARDER. #1 RISE OF SERVERLESS COMPUTING Bare metal 1950s – 2000s Virtualization 2000s-2014 Containers 2014 - Present Serverless 2016 - Present Hardware Operating system Process Function Hardware Operating system Function Process Hardware FunctionFunction ProcessProcess Operating systemOperating system Hardware More agility, but also more complexity 39

39. ...AND SOFTWARE IS GETTING HARDER.WHY NOW? 40

40. DRIVEN BY 3 MACRO TRENDS Docker made containers more dev-friendly More, scalable APIs Open Source more available and accepted Source: Black Duck Software, 2015, Future of Open Source 41

41. FUTURE IS IN MANAGING CONTAINERS AT SCALE Increased container usage How do I use a cointainer? How can these containerswork together? How do I secure and monitormy containers? How do I manage containers at scale? • Operations management • DevSecOps • Visibility • Testing • Migration • New services 42

43. Mapping Payments Communication (Messaging/Voice) Email SSO Customer Engagement Storage Enterprise Search Media Background Check Collaboration IaaS User Management Identification Social AI Banking Location HealthcareSecurity/Fraud Test/Monitor API’S DRIVE INNOVATION #2 VideoShipping Logistics 44

44. BLOCKCHAIN FINDS A HOME IN THE ENTERPRISE #3 FOOD AVIATIONRETAIL 45

45. ...AND SOFTWARE IS GETTING HARDER.SOFTWARE AND PAYMENTS USED TO LIVE APART SOFTWARE VENDORS MERCHANT ACQUIRERS 46

46. ...AND SOFTWARE IS GETTING HARDER. #4 PAYMENTS-AS-A-SERVICE 47

48. THE MOVE FROM SYSTEM OF RECORD TO SYSTEM OF RESULTS#5 49

49. THE SCREENLESS SOFTWARE MOVEMENT #6 50

50. VOICE IS THE NEXT SOFTWARE BATTLEGROUND devices sold 20M* *Source: Estimates based on AMZN earnings call. Voicebot.ai, October 2017. devices sold 7M* devices sold ? 51

52. VALUES CREATE VALUE #7 53

53. START EARLYAND REITERATE OFTEN, VISION AND VALUES FROM DAY 1 It’s all about the culture Happy We are passionate and know how to have a good time. We cultivate happiness inside and outside the office. Hungry We are go-getters and innovators. We always look for ways to raise the bar. Humble We have a people and customer-first mindset. Arm-in-arm, we play to win as a team. Honest We are transparent and honest with ourselves. We act with integrity and actions that would make our loved ones proud. 4H’s 54

54. #8 THE CLOUD IS FLAT; INNOVATION OUTSIDE THE VALLEY 55

56. BVP’S 8 PREDICTIONS FOR 2018 API’s drive innovation 1. Payments-as-a- Service 2. Blockchain in the Enterprise3. Move from System of Record to System of Results 4. Screenless Software Movement 5. Rise of Serverless Computing 6. Values Create Value7. The Cloud is Flat 8. 57

State of the Cloud Report 2018

Bessemer Venture Partners

State of the Cloud Report 2018