How hot is cloud sector? Values soar 30% in 3 months
- Cromwell Schubarth
- Senior Technology Reporter- Silicon Valley Business Journal
- Email | Twitter | Google+
Byron Deeter thought the cloud
sector was hot in July when he launched Bessemer Venture Partners' Cloud Index, but it has
jumped by 31 percent since then.
"There are now between 32 and 34 pure play public cloud companies and their
value is up as a group more than 100 percent in the last year and a half," The
Bessemer VC told me this week. "We’ve got 20 pure play public cloud companies
that are trading above a billion-dollar market cap now."Part of the run-up has come from successful IPOs by cloud-based telecom provider RingCentral and employee benefit software provider Benefitfocus, which both hit billion-dollar market caps with offerings in September.
"Veeva Systems has an IPO teed up and there are several more that are on the confidential file that will reveal their prospectuses shortly," Deeter said. "The IPO and M&A activity in the cloud sector is really hitting a high point."
The biggest market caps on the Bessemer index are Salesforce ($31 billion), LinkedIn ( $27.6 billion) and Workday ($14.3 billion), all of which are trading near their 52-week highs.
"On average, these companies are growing at 30 percent on massive scale in revenue," Deeter said. "These are very large businesses already and they are experiencing hypergrowth even at that scale."
The inevitable question when there is such a dramatic jump in valuations is how far can the trend go.
"We get asked that a lot," Deeter said. "Which is next: $150 billion in valuation or $50 billion?"
"There is the risk that the
legacy business software vendors – the SAPs, Oracles, IBMs and Microsoft’s— figure out what to do," he
said. "They have credible assets and certainly could present significant
challenges over time."
Cromwell Schubarth is the Senior Technology Reporter at the Business Journal. His phone number is 408.299.1823.
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