You’ve heard of a Unicorn SaaS company, but it’s time to introduce you to the Centaur.

It’s no secret that the global financial landscape has been shaken up in recent years. The unpredictable market has given rise to new trends and a new type of elite company, which Bessemer Venture Partners have dubbed the Centaur.

In this informative SaaStr Annual session, Bessemer Partners Sameer Dholakia, Mary D’Onofrio, and Elliott Robinson present the State of Cloud report, a look at the latest in SaaS trends, predictions, and cloud economics.

You can see all the slides here.

Cloud Stocks Impacted by Macro Environment

Cloud founders are feeling the pressure of the current climate, and it’s understandable why: They’re grappling with inflation, rising interest rates, and all of that against a backdrop of a compressing public market. 

To illustrate the turbulence, consider the following metrics:

  • The BVP NASDAQ Emerging Cloud Index (the public benchmark of software performance) has contracted by more than 40%.
  • VC funding has decreased 23% quarter-over-quarter in Q2 of this year.
  • Cloud 100 multiples have fallen in 2022 –– ARR multiples rose nearly fourfold from 9x in 2016 to 34x in 2021 and down to 8x in 2022.

This compression has led to a rise in hesitation in private funding markets. D’Onofrio says, “Combining this macro pullback with conservatism in the private finding markets has led to a pullback in private valuations as well.”

So in the current landscape, what the market values has shifted. Historically, cloud businesses were all about growth, but now the focus is on profitability and efficiency. 

Yet, despite the difficulties, there are still reasons for cloud companies to have hope. 

Reminder: Cloud Fundamentals Are Still Strong

Take all the macro insights within the context of the big picture: The recurring revenue SaaS model remains as strong as ever. As Dholakia emphasizes, “The thing I want to remind everyone of is just how incredible our SaaS model is. Fundamentally, the recurring revenue nature of the model, our ability to efficiently go and build software and have it delivered to customers, and create value is still an extraordinary business model.”

In fact, we live in a cloud-first world, which will transform the entire global economy in years to come. Currently, the cloud technology industry has reached about $495 billion. Soon, however, cloud will grow beyond the enterprise software market, penetrating the broader tech market and the world’s GDP.

Five Trends Driving Bessemer’s Love for the Cloud in 2022

  1. Indirect Monetization Becomes the First Act.
    The next generation of SaaS startups is switching things up by leaning into indirect monetization, powered by a wave of fintech building blocks.
  2. Cloud Goes to Market.
    Robinson explains, “We talked a lot about the power of the cloud marketplace. It’s actually becoming one of the most natural places for SaaS sellers and SaaS buyers to transact.”
  3. Cloud Will Help Close the Gap in Global Productivity.
    SaaS is already helping fill urgent global needs in areas like labor shortages, collaboration, the creator economy, automation, and the supply chain.
  4. Cloud Gets Local to Go Global.
    There has been a trend in cloud companies waiting longer to expand beyond their local country or area, and horizontal companies that do expand tend to operate with a heavy emphasis on locality.
  5. The Rise of Cloud is a Global Phenomenon
    Best-in-class cloud companies can be found just about anywhere on earth.

2022 – The Year of the Centaur

The unicorn herd has expanded over the years; frankly, it’s become quite crowded. Therefore, a new term was needed to describe companies with specific ties to outstanding business fundamentals.

Introducing the Centaur. Centaurs are an elite subset of growing unicorn companies with $100 million ARR. These cloud businesses have product-market fit, scalable GTM, and a growing customer base. 


Key Takeaway Strategies For Becoming a Centaur

  • Expand addressable markets in your “second act.”
  • Activate your product-led growth levers.
  • Prioritize customer retention and growth to accelerate revenue. 

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