Morning Markets: Bessemer, a venture firm, has updated its cloud-focused market index in concert with Nasdaq.
Earlier this week Bessemer, a well-known venture crew, announced several updates to its Cloud Index. The new tool has useful features like real-time updates, but it has shed some of its usefulness along the way.
The original index tracked a basket of public, cloud-centric software as a service (SaaS) companies. It provided quick updates on the market’s feelings towards a number of tech’s growing players.
At a glance, the index could tell you if investor sentiment was rising or falling for public cloud companies, many of which were still firmly in their growth era. Even more, the Index helped this publication keep tabs on startups that worked in SaaS or cloud areas.
If the index went up—stretching certain financial metrics that private and public investors track—we could infer that fundraising activity for analogous startups was likely to be warm. Also, higher valuations for public cloud and SaaS companies also trickle backwards into the private market. This impacted companies that later needed to go public, as sometimes their public valuation could leave reality, setting up later fundraising and pricing issues for the startup.
The index was a tool that helped Crunchbase News understand private companies, private companies on their way to going public, and public companies—all at the same time.
The new Cloud Index, properly known as the “BVP Nasdaq Emerging Cloud Index,” tracks a slightly amended set of companies.
Per Bessemer’s own words, here’s how it was changed:
“There are a number of companies in the BVP Nasdaq Emerging Cloud Index that were not part of the BVP Cloud Index due to the new index’s refined eligibility requirements. For example, Adobe is included in the initial index given that it has masterfully transitioned to a cloud company, and 2018 cloud IPOs DocuSign, Dropbox, Zuora, and Zscaler have been included as well. Additionally, given the partnership with Nasdaq, we believe the new benchmark will be even more reflective of the sector’s performance as the index will be calculated on an equal-weighted basis and employ Nasdaq’s index maintenance and rebalancing standards.”
Don’t worry about the phrase “equal-weighted.” It just means that each company’s stock in the index has the same impact on the basket as any other. As a result, larger, more valuable companies don’t carry more heft.
Now here is the good and the bad.
- The good: The new Cloud Index updates in real-time. This is useful for you and I as it means that we don’t have to wait for bi-monthly updates to the Bessemer-provided chart.
- The bad: Bessemer previously provided a set of useful metrics for the collected companies, such as cash flow and next year’s revenue divided by current enterprise value. Those figures were laid out with median, and mean numbers, and more. Now those features are gone. Now Bessemer nor the Nasdaq list the figures.
So now we have a far better cloud and SaaS public market pulse; however, the financial summations we will have to do ourselves. Nothing in life that is worth having is free. Or perhaps that’s not true, but it applies in this case.
We’ve cited the original index just a few times over the past few quarters and expect to keep it up. Happy charting, everyone!
Illustration: Li-Anne Diass
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