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Venture Capital Experts Share What’s Next for Cloud Computing

Venture Capital Experts Share What’s Next for Cloud Computing

The cloud has been driving the discussion for nearly a decade, with enterprises getting on board in recent years now that the security, uptime, and reliability finally meeting the needs of even the largest organizations, nonprofits, and municipal entities. With organizations recognizing the value, Forbes has joined in on the cloud discussion, introducing its inaugural Cloud 100, a listing of the top non-public cloud companies in terms of size.

Four Takeaways from The State of the Cloud

This report, which adds even more credibility to the current and future state of cloud computing, took a look at the “who’s who” of cloud, with leaders including Slack, Drobox, and DocuSign topping the list and competitors from across industries (Intacct came in at #89) joining. Part of this listing was the first annual “State of the Cloud,” which included insights from the leading minds at Bessemer Venture Partners sharing trends to watch and a look ahead for the cloud computing industry.

Among the top four trends to watch include a lower rate of volatility in the cloud, a higher amount of M&A, a faster rate of growth for private companies, and the impact of business model efficiency as a primary driver.

  • Volatility slows: Bessemer’s Cloud Index (an index of 42 public cloud companies) hit its lowest market capitalization point in February 2016 at 3.1x revenue, after coming down from a high of 9.5x revenue in January 2014, and has since settled into levels slightly below historical averages at 4.9x revenue.
  • Legacy software vendors and send M&A levels to all-time highs: Cheap public cloud multiples resulted in $50.4 billion of public company mergers and acquisitions (M&A) in just twelve months, 60% above the prior annual record of $30 billion in 2014. While the latest 12-month period includes monster deals like Microsoft’s purchase of LinkedIn for $26.2B and Oracle’s purchase of NetSuite for $9.3B, the trend is clear, legacy organizations are taking steps to catch up, and are doing so through acquisition.
  • Private multiples still 2x their public comps but converging: Private cloud multiples for growth stage companies are currently trading at about 11.2x revenue, which is over a 2x premium to their public peers. However, this is down from over a 3x premium at the peak.
  • Business model efficiency is now the primary valuation driver: This marks a change in mentality from “Growth at All Costs” to “Efficient Growth,” reflecting a shift in investor preferences for more stability and innovation.

For more information, see the 2016 State of the Cloud article on Forbes.

Preparing for a Future in the Cloud

With the cloud in the mainstream, learn if it’s right for your business. Wipfli/Brittenford has been helping organizations to decide on the right solutions for businesses—whether cloud or on-premises—for decades, and has provided the advice organizations need to make an informed decision heading into the future. Learn more about the solutions we offer, see our events, and contact us to learn more.

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