Floating on a Cloud...

Bessemer Venture Partners Launches $100 Billion Cloud Index

All Things Digital by Arik Hesseldahl


Image copyright Maksym Darakchi

Still doubtful about the whole cloud computing thing? Here’s a new metric that should probably change your mind. The combined market capitalization of the Top 30 cloud computing companies is now north of $100 billion.

Who says so? Bessemer Venture Partners, that’s who. The venture capital firm known for backing cloud companies like Box and Eloqua has tallied up the valuations of 30 different cloud and software-as-a-service companies that have gone public. And here’s another interesting metric that should get your attention: If they were traded as an index, their shares are up by 168 percent since the start of 2012, beating both the Nasdaq and the Standard & Poor’s 500.

The numbers, Deeter argues, slam the door shut on the argument still made by some software companies that running software in the cloud is a fad. “With 30 large public companies collectively representing more than $100 billion in market capitalization and $12.5 billion in estimated 2013 revenue, the cloud computing industry has officially come of age,” he writes.

So, who’s on the list? Well-known cloud companies like Salesforce.com, LinkedIn, Workday and NetSuite form the index’s backbone, with a combined $67.4 billion, but it also includes other more recent entries, likeMarketo and Rally Software, both of which bowed in IPOs earlier this year.

There’s also a few you may not have heard of, or which you might not consider to be cloud software companies at first glance. One is AthenaHealth, a company that sells a cloud-based service aimed at managing medical records and running doctors’ offices. Another is LifeLock, the company that helps consumers protect their personal information from misuse.

Deeter says the plan is for BVP to update the index weekly.

How did it select the companies? BVP takes a pretty hard line. Those companies with the classic multi-tenant, subscription-based business model like Salesforce, Workday and Cornerstone OnDemand made it. Others with hybrid approaches, like Jive Software, which offers both a cloud and an on-premise version of its software, made it, too. A few didn’t make it: “Despite benefiting from some of the tailwinds of the cloud industry and enjoying tremendous success in their own markets, we did reluctantly exclude the likes of Splunk, Tableau and Qlik, because they are neither multi-tenant technologies, nor subscription-based models.” It also leaves out large software companies like Oracle and SAP that have lately been buying up cloud companies and converting their existing products to cloud offerings.

Here’s a screen grab of the index’s components companies:

And here’s a graphic showing its performance versus the Nasdaq and the S&P 500.