Cloud computing SaaS

The Value Of Public Cloud Companies Plummeted 40% In 5 Months, But Bessemer Isn’t Scared Off By The ‘SaaSacre’

In five short months ending in April, the value of publicly traded cloud companies plummeted $1.1 trillion, losing just over 40 percent of their total value.

That’s according to the State of the Cloud 2022 report from Bessemer Venture Partners (BVP).

In November, the public cloud index was valued at $2.7 trillion; last month, it was $1.6 trillion. 

Bessemer has invested in private cloud companies for 20 years. In 2013, the firm started tracking the BVP public cloud index and then in 2018 partnered with Nasdaq on the emerging public cloud companies index, called EMCLOUD, to track the performance of this growing sector. 

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We spoke with Kent Bennett, a partner at the firm, about the latest report and what it means for both public and private cloud companies. 

Did the cloud break?

Kent Bennett, Bessemer Venture Partners
Kent Bennett, Bessemer Venture Partners

Bennett admits that this is a scary time for cloud CEOs. The world fell in love with this business model, he said. “Multiples expanded and valuations got high. They’ve now just radically crashed back down to earth.” 

The public market sell-off is likely to bleed into the private markets as well.

“The prices have changed,” Bennett said. “The cost of equity has leapt in a big way. And that will play out in the private markets, despite the fact that there is a lot of capital.” 

A year ago, public and private cloud companies averaged more than 20x forward run rate revenue, according to BVP’s 2021 report. As of May 2022, the average public cloud enterprise value has shrunk to 7.8x forward revenue.

Despite the crash in cloud stocks, BVP remains bullish on the business.

“When a SaaS business achieves best-in-class sales efficiency and net retention metrics, they can generate net new recurring revenue with unprecedented efficiency,” said BVP in the report. “As a result, we believe this business model may be the best on the planet.”

There is no evidence of cloud service adoption slowing down, Bennett said. By his count, “95 percent of cloud companies reported earnings ahead of estimates. These companies are continually beating estimates.”

The list of public companies has also expanded. In 2021, the report cited 58 public cloud companies; today, that number is 76. 

The SaaSacre Public Cloud Chart


The world has changed from a financing perspective. But the underlying cloud business model of recurring revenue has gotten stronger, according to the report.

Through its research, BVP counts 150 private companies with $100 million or more in annual recurring revenue (ARR), companies which it brands as “centaurs.” 

According to the report, 40 of these companies reached this revenue mark in 2020, and a further 60 in 2021, a demonstration of the growth in the viability of cloud-based businesses. The report projects 70 more private companies will reach $100 million ARR in 2022. 

In the 2000’s there were just a couple of private companies with revenue at that size. 

Evolution of SaaS

“It’s a business model where you can invest $1 in a year or less, and see that turn into a recurring dollar,” Bennett said of the SaaS model. 

The business model of recurring revenue software has just gotten stronger. “Fifteen years ago, a SaaS company was paid almost entirely in a software contract,” said Bennett. 

SaaS businesses today also make revenue through usage-based pricing in payments or lending as well as indirect monetization in card issuing, insurance, banking and more. 

Localized leaders

“While we might have thought there would be global cloud leaders in most categories, we’ve evolved our opinion to say that in many categories you’re going to see a multiple in market leaders,” Bennett said, adding that local knowledge, culture and product design impact success. 

Illustration: Li-Anne Dias

Chart: BVP’s State of the Cloud 2022.

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