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State of the OpenCloud 2020

Battery's annual State of the OpenCloud report, which highlights mega-trends—including cloud computing and the rise of open-source technology—that are upending today’s enterprise-IT market.

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State of the OpenCloud 2020

  1. 1. State of the OpenCloud 2020 Dharmesh Thakker Chiraag Deora Danel Dayan Jason Mendel October 7, 2020 This presentation includes proprietary information of Battery Ventures
  2. 2. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken together with such verbal or written comments, is referred to herein as the “presentation.” This presentation is being provided for informational purposes only. Nothing herein is or should be construed as investment, legal or tax advice, a recommendation of any kind or an offer to sell or a solicitation of an offer to buy any security. This presentation does not purport to be complete on any topic addressed. The information in this presentation is provided to you as of October 7, 2020 unless otherwise noted and Battery Ventures does not intend to update the information after its distribution, even in the event the presentation becomes materially inaccurate. Certain information in this presentation has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. Certain logos, tradenames, trademarks and copyrights included in the presentation are strictly for identification and informational purposes only. Such logos, trade names, trademarks and copyrights may be owned by companies or persons not affiliated with Battery Ventures and no claim is made that any such company or person has sponsored or endorsed the use of such logos, trade names, trademarks and copyrights in this presentation. This presentation includes various examples of companies in which Battery Ventures has invested. These examples are included as illustrations of various investment strategies. For a complete list of all companies in which Battery Ventures has invested, please visit here. Past performance is not evidence of future results and there can be no assurance that a particular Battery portfolio company investment will achieve comparable results to any other investment. There can be no assurance that the investment objectives or the investment strategies described in this presentation will be successful. The information contained herein is based solely on the opinions of Dharmesh Thakker, Chiraag Deora, Danel Dayan, and Jason Mendel and nothing should be construed as investment advice. The anecdotal examples throughout are intended for an audience of entrepreneurs in their attempt to build cloud-focused businesses and not recommendations or endorsements of any particular business. 1 Disclaimers This presentation includes proprietary information of Battery Ventures
  3. 3. We’re Long Cloud Infrastructure & Open Source Software This presentation includes proprietary information of Battery Ventures
  4. 4. This presentation includes proprietary information of Battery Ventures3 We’re long cloud infrastructure & open source software Cloud-native infrastructure companies are creating value at an unprecedent pace Infrastructure markets are larger than we all expected, and penetration is still early Software performance is at historical highs, driven by increased cloud adoption Cloud providers are executing at a massive scale while continuing to drive innovation COVID-19 has accelerated two years’ worth of digital transformation in two months 2 1 3 4 5 With every new crisis, there is a new opportunity6
  5. 5. 12% 14% 15% 17% 9% 11% 14% 17% 20% 22% 2018 2019 2020 2021 2022 2023 % Cloud Penetration (Pre-COVID-19 Estimates) % Cloud Penetration (Post-COVID-19 Estimates) Source: Gartner Market Databook, Goldman Sachs Global Investment Research.This presentation includes proprietary information of Battery Ventures4 COVID-19 has accelerated cloud adoption while the pie continues to expand $13B $22B $39B $45B Disruption Potential COVID-19 has accelerated cloud adoption by 2% or $13B in 2020 alone with more than $600B worth of disruption potential still transitioning from on-prem. $623B $645B $592B $608B $630B $661B
  6. 6. $8 $9 $10 $12 $14 $16 $18 $20 $22 $25 $27 $31 $35 $39 $43 $48 $53 $58 $64 $71 $6 $7 $7 $8 $8 $9 $10 $11 $13 $14 $16 $17 $18 $19 $21 $23 $24 $25 $26 $27 $14 $16 $18 $20 $22 $25 $27 $31 $35 $39 $43 $48 $53 $58 $64 $71 $77 $84 $90 $97 73% 72% 70% 62% 58% 56% 54% 55% 57% 58% 57% 56% 53% 50% 48% 47% 45% 44% 41% 38% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 New Incremental Revenue vs. Prior Year Prior Year LTM Revenue Y/Y Growth 24 48 61 82 159 280 516 722 1,017 1,430 ~2,000 ~2,700 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Company Data, Goldman Sachs Global Investment Research. Cloud vendors include Google Cloud, Tencent, Alibaba AliCloud, Microsoft Azure, Amazon AWS, Oracle IaaS + PaaS, and Salesforce App Cloud.This presentation includes proprietary information of Battery Ventures5 Cloud providers are executing at a massive scale while continuing to drive innovation Public Cloud Revenue (US$B) AWS Annual Feature Releases Public cloud vendors will reach ~$100B in revenue in 2020 while continuing to grow both revenue and feature releases at ~40%. 2016 2017 2018 2019 2020
  7. 7. 1.0x 16.0x Oct ’18 Oct ’19 Oct ’20 Infrastructure Software Index S&P 500 Software Index $200 $550 Oct ’18 Oct ’19 Oct ’20 Source: CapIQ. Note: Market data as of 10/2/20. Infrastructure Software index comprised of 37 select names. Aggregate market cap only includes companies in the Infrastructure Software Index that have been public since 10/2/18; Software index represents 112 select publicly traded software companies with a market cap >$300M.This presentation includes proprietary information of Battery Ventures6 Software performance is near historical highs, driven by increased cloud adoption Infrastructure software has outperformed the broader market, despite the recent volatility, as more companies embrace the cloud to accelerate digital transformation. Infrastructure Software Index Aggregate Market Cap ($B) EV / NTM Revenue 13.2x 2.7x 10.4x COVID-19COVID-19
  8. 8. Company Customers @ IPO Customers @ Today Total Addressable Customers % Penetrated 51K 170K 1.5M 12% 28K 200K 1.0M 20% 4K 20K 300K 7% 4K 9K 100K 9% Source: Company filings. US Census data as of 2020. Note: Twilio and Atlassian Total Addressable Customers based on company filings commentary and capture the number of businesses with 10+ employees and companies with $10 million or more in revenue. Okta total addressable customers represent US companies 250+ employees. MongoDB total addressable customers represents 50+ employees.This presentation includes proprietary information of Battery Ventures7 Infrastructure markets are larger than we all expected, and we are still early While % penetration is still early, the customer base for cloud-native companies continues to expand. 3.4x 7.1x 4.7x 2.9x
  9. 9. Source: Capital IQ. Note: Market data as of 10/2/20 ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.This presentation includes proprietary information of Battery Ventures8 Cloud-native infrastructure companies are on an accelerated path to value creation Market Cap IPO Market Cap Today $543M 32 Yrs. $225M 31 Yrs. $265M 35 Yrs. $30M 32 Yrs. First-Generation $3B 8 Yrs. $10B 1 Yr. $1B 4 Yrs. $9B 1 Yr. $2B 3 Yrs. Cloud-Native Average Value Creation Per Year: $29B Average Value Creation Per Year: $4B $49M 63 Yrs. Infrastructure has strong enduring value, with the cloud creating new opportunities for value creation. $185B$162B $181B$51B$98B$143B $44B$34B $31B $12B 1
  10. 10. Post COVID-19 ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Google Trends.This presentation includes proprietary information of Battery Ventures9 Every new crisis brings a new opportunity for cloud-native companies Digital Transformation Productivity Tools Telehealth Remote Work Google Trends Popularity COVID-19 has forced a migration to digital, flexible, and remote work environments, ushering in a new future of work that will have lasting effects on society. Post COVID-19 Post COVID-19 Post COVID-19 1 1 1 1 1 1 1
  11. 11. Themes of Interest This presentation includes proprietary information of Battery Ventures
  12. 12. Design Develop Integrate Build Feedback Test Feedback Test Feedback Test Feedback Test This presentation includes proprietary information of Battery Ventures11 Prominent bottlenecks still remain in the software development lifecycle Waterfall (Pre 2000s) DevSecOps (2020 – onward) Dev Ops Automated Testing Continuous Security As teams move from waterfall to agile forms of development, testing becomes a bottleneck as practices shift left (like security) from QA to developers in order to release faster. Design Develop Test Build Release / Deploy Secure / Maintain Agile/DevOps (2000 – 2020) Dev Release Deploy Operate Monitor Feedback Test Feedback Test Feedback Test Feedback Test Ops 1 2 3 4 5 6
  13. 13. ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.This presentation includes proprietary information of Battery Ventures12 Testing and security require the most automation to improve time to launch Version control Code integration Continuous testing Package code Packaged deployment Execute code Continuous security Real-time feedback As more responsibilities move to the developer, testing and security, which were previously owned by ops teams, will need to be automated at every step of the process. 1 1 1 1 1 Feature Flagging SecurityRuntime Continuous Delivery Binary Management Test Automation Continuous Integration Source Code
  14. 14. Data Lake DatabaseData Warehouse Data Lake DatabaseData Warehouse Unification Layer Data Scientists Data Engineer Data Analyst Data Architect Business Analyst ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.This presentation includes proprietary information of Battery Ventures13 Unification opportunities remain across the fragmented data landscape Hyper fragmentation across cloud and on-prem data while data is increasingly used in production has driven the need for unification layers. Cloud On-Prem Data Sources Security / Privacy ETL ETL Data Management (Compliance, Cataloguing, Discovery) Real-Time Streaming BI / Data Science / Analytics Monitoring / QualityOrchestration 1 1 1 1 1 1 1 1 1 1
  15. 15. Software Engineer ML Engineer Native Coding Language IDE Version Control CI / CD ETL Monitoring Data Visualization ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.14 Developer platforms targeting AI/ML workflows This presentation includes proprietary information of Battery Ventures Machine learning is becoming more programmatic as ML engineers use best-of- breed offerings for their models. 1 1 1 1 1 1 1 1
  16. 16. 15 Next-generation identity solutions lead security in a zero trust world Deployment Modes Security Model Companies Network-based Security Identity-based Security Trusted Network Directory Services Zero Trust Access Authentication Policy Enforcement The proliferation of users, devices, data sources, and data-access controls has made identity management important to prevent attacks. Less reliance on the network means more reliance on identity to enforce security. This presentation includes proprietary information of Battery Ventures Factory Workforce Customers Data Center 3rd Party SaaS Apps Cloud Resources Factory Enterprise Workforce Customers Data Center 3rd Party SaaS Apps Cloud Resources Trusted Identity Enterprise
  17. 17. ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.16 Security automation solutions for developers push further into automation and remediation Issues & Alerts Issues & Alerts Continuous and Real-time Code Scanners Dependency Scanners Static Application Security Vulnerability Scanners Workload Scanners Infrastructure-as-Code Scanners Code Security Scanners Interactive Security Scanners Runtime Application Self Protection Shift-Left Waves Features Tools Companies to Emerge This presentation includes proprietary information of Battery Ventures The shift-left security movement is happening in waves starting with Application Security, Cloud Security, and Remediation. 1 1 1 Application Security Cloud Security Remediation
  18. 18. Operational Best Practices for OpenCloud Companies 17 This presentation includes proprietary information of Battery Ventures
  19. 19. 18 Top 10 operational best practices from 2019 This presentation includes proprietary information of Battery Ventures Focus on “Time to Value” to lock in users / buyers Build trust with users through clear and transparent pricing Know your open source software licensing model Align your org. around continuous learning & product improvement Product Playbook Focus on individual software buyers / influencers, in addition to traditional CIOs Leverage open source as an efficient customer-acquisition channel Tap freemium and cloud-based trials to acquire customers Leverage new cloud marketplaces to discover and reach customers Re-wire sales comp plans to accommodate bottoms-up, GTM motions Carefully monitor and understand pay-as-you-go transaction revenue streams GTM Playbook
  20. 20. This presentation includes proprietary information of Battery Ventures19 Don’t just focus on the top-down buyer, practitioners matter even more Tops-Down Sales Hierarchy Bottoms-Up Sales Hierarchy CTO CIO CISO CRO … VP IT VP Eng. VP Product VP Sales … DevOps Data Engineer Frontend Developer Cloud Architect Security Engineer SRE Backend Engineer UX Designer QA Engineer Platform Engineer Buyer / Budget Influencer User Purchasing is becoming federated as responsibilities shift to the influencer / user. Tops-down sales is a path to the user while bottoms-up sales is a path to the budget. Manage both but engage users / influencers early. 1 DevOps Data Engineer Frontend Developer Cloud Architect Security Engineer SRE Backend Engineer UX Designer QA Engineer Platform Engineer Influencer / User VP IT VP Eng. VP Product VP Sales … Buyer Budget CTO CIO CISO CRO …
  21. 21. $0 $1,000 Cloud Product T+ $100M: 3 Yrs. $0 $100 0 1 2 3 4 5 6 7 8 9 10 11 12 ARR(US$inM) Years from $1M to $100M ARR 2 ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Company filings. Capital IQ. Battery Ventures estimates. When ARR is not provided, implied ARR is annualized revenue run rate.This presentation includes proprietary information of Battery Ventures20 Build cloud first: cloud-native products will supercharge your sales velocity Time to Scale is Shorter With Cloud-native Products Cloud-native Companies Have Line of Sight to $1B ARR IPO Y+1 Y+2 Y+3 Y+4 Y+5Y-1Y-2 IPO There are multiple ways to succeed as a cloud-native business, but having a cloud product will supercharge your sales velocity – reaching $100M in ARR faster with line of sight to $1B ARR. Non-Cloud Product T+ $100M: 10 Yrs. 1 1 1
  22. 22. ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.21 Leverage different paths to efficient customer growth Open Source SaaS / Cloud-hosted OpenCloud Customer Acquisition Product Distribution Community Self-managed FreemiumSelf-serve Hosted Paid Features Support / Services Platform Customer Conversion Sales Community Freemium Hosted Platform UsersUsage / ResourcesPricing Usage / Resources This presentation includes proprietary information of Battery Ventures OpenCloud companies are combining the best features of open source and SaaS. Leverage these self-serve practices to enable a user journey that follows the path of least resistance. 3 1 1 1
  23. 23. Is your product consumable by usage? This presentation includes proprietary information of Battery Ventures22 Consider usage-based pricing / PAYG to drive faster sales cycles PAYG pricing enables an efficient GTM by selling the way customers want to buy, while ultimately arriving at the same large ACVs. Leverage consumption contracts with cloud providers. 4 Yes PAYG Short Sales Cycle (1-2 months) Small Land >$1M ACV No Annual Contracts Small Expansions >$1M ACV Large Expansions Long Sales Cycle (6-9 months) Large Land
  24. 24. This presentation includes proprietary information of Battery Ventures23 Customer success is paramount in a post-COVID world to manage churn Measure product usage, manage churn, and facilitate expansion to create a customer success funnel that supports sales. 5 Customer Success Best Practices • Customer success teams are sales reps too: ‒ Incentivize customer success teams to grow usage. • Measure customer onboarding and implementation within 90 days of a purchase. • Churned customers are lost revenue for multiple years. • Expansion and customer advocates lead to a customer success funnel that supports sales. SalesFunnel (NewCustomers) SuccessFunnel (ExistingCustomers) Leads Customers Qualified Prospects Retention Referral / Advocate Expansion Referral / customer feedback loop
  25. 25. 24 Retention is critical to compounding ARR growth $395 $275 $100 $182 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 95% Retention / 15% Growth 85% Retention / 15% Growth 70% Retention / 15% Growth This presentation includes proprietary information of Battery Ventures Churn impact is amplified in a recurring revenue model. 6
  26. 26. This presentation includes proprietary information of Battery Ventures25 Understand and nurture your community to build member loyalty and affinity Customer Ambassador Fan User Observer Buyer / Influencer Contributors / Committers Issue Comments Pull Requests Community Signups Community Engagement Downloads IP Addresses User Telemetry GitHub Stars / Watchers Metrics to Track Your community is a living organism that requires nurturing. Understand members in your community to increase reach and build loyalty. 7
  27. 27. This presentation includes proprietary information of Battery Ventures26 Leverage and work with foundations to turbo charge your community 350+ Apache projects and initiatives 7,700 core contributors 12,413 developers contributing Notable Commercialized Projects 1,200 projects 91,047 contributors 150,483 members Notable Commercialized Projects Developer foundations, such as the Apache Foundation and the CNCF, have become instrumental in the rise of OpenCloud Companies. Work with these foundations to turbo charge your community, build in community guidelines and governance, and battle test your product with practitioners. 8 1 ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. 1 1
  28. 28. Technical Debt • Slow release velocity • Inconsistent standards • Bespoke deployment methods • Lack of quality and testing • Poor security standards This presentation includes proprietary information of Battery Ventures27 Manage technical debt by codifying policies and standards early in development Software Users Deployments More code is being developed than ever before and technical debt will eventually catch up. Build cloud-natively to streamline efforts from day one. Managing Technical Debt • Technical debt is dynamic. Tie structural tech debt changes to behavioral or business needs • Leverage the best design practices to codify standards early in company formation • Introduce automated testing at every step of the process • Monitor quality and bugs as indicators of tech drift • Quantify as much of the system as possible (time to deployment, failed merges, etc.) Open Source Developers Cloud Hybrid Microservices & Containers IT Operators On Prem Multiple Technologies QA Devices Security Servers 9
  29. 29. 50M Developers WW Open Source Contributions by Country Source: GithubThis presentation includes proprietary information of Battery Ventures28 Build a distributed global developer workforce: Great developers are everywhere More and more code is being written outside the US. Target these developer hot beds to build technical teams. China India Germany United Kingdom Japan Canada France Russia Brazil 10 26.7% .1% 29.3% 1.1% 36.2% 2.0% 1.9% 0.3% 1.58% .002% 4.3% 0.4% Active Users  % change from 2019
  30. 30. Focus on “time to value” to lock in users / buyers Build trust with users through clear and transparent pricing Know your open source software licensing model Align your org. around continuous learning & product improvement Leverage self-serve practices to enable a user journey that follows the path of least resistance Customer retention is critical to compounding ARR growth Leverage and work with foundations to turbo charge your community Product Playbook Focus on individual software buyers / influencers, in addition to traditional CIOs Leverage open source as an efficient customer-acquisition channel Tap freemium and cloud-based trials to acquire customers Leverage new cloud marketplaces to discover and reach customers Re-wire sales comp plans to accommodate bottoms-up, GTM motions Carefully monitor and understand pay-as-you-go transaction revenue streams Tops down sales is a path to the user while bottoms-up sales is a path to the budget Consider usage-based pricing / PAYG to drive faster sales cycles Customer success is paramount in a post COVID world to manage churn GTM Playbook 29 Battery Ventures operational best practices playbook for OpenCloud companies This presentation includes proprietary information of Battery Ventures Build cloud first: cloud-native products will supercharge your sales velocity Manage technical debt by codifying policies and standards early in development Build a distributed global developer workforce: great developers are everywhere Understand and nurture your community to build member loyalty and affinity Development Playbook
  31. 31. Building a Lasting Public Company Focus On KPIs that Matter This presentation includes proprietary information of Battery Ventures
  32. 32. 0.0% 150.0% SNOW CRWD OKTA TWLO DDOG ESTC MULE AYX CLDR FROG ZS MDB TENB PD SUMO DOMO NET FSLY TLND SWI PVTL APTI PING APPN DT ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Company filings. Excludes ForeScout, SailPoint, Carbon Black, and Nutanix¹ due to lack of disclosed metrics. Talend financials based on constant currency.31 Last twelve months revenue growth at IPO Best >70% Better 70-45% Good <45% 201920192019 201920192019 2019 2018 20182018 2018 20182018 20172017 2017 201720172017 2016 2016 20162020 20202020 This presentation includes proprietary information of Battery Ventures Cloud infrastructure markets are large and growing; companies attached to these mega-trends are experiencing the benefits of these tailwinds. 1 11 Median: 48% Denotes 2020 cohort of Open Source and Cloud-native IPOs Date of IPO 1
  33. 33. 0.0x 2.5x TWLO DDOG ESTC CRWD FROG FSLY SNOW NET OKTA MULE PD DT AYX ZS TENB PING MDB PVTL CLDR SWI TLND APPN SUMO APTI DOMO ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Note: Magic number calculated as ((Q(t) – Q(t-1)) subscription revenue *4)/S&M(t-1). ARR used instead of subscription revenue if disclosed. Source: Company filings. Excludes ForeScout, SailPoint, Carbon Black, and Nutanix¹ due to lack of disclosed metrics. Ping Identity, Dynatrace, and SolarWinds exclude amortization/depreciation of acquired assets and restructuring costs. Talend financials based on constant currency.32 Average magic number over last twelve months at IPO Best >1.0x Better 1.0x-0.7x Good <0.7x 20192019 2019 201920192019 20192018 20182018 20182018 20172017 201720172017 2017 2016 20162020 20202020 This presentation includes proprietary information of Battery Ventures Product-led growth and bottoms-up are enabling companies to be more efficient in customer acquisition. 2016 2018 1 1 1 Denotes 2020 cohort of Open Source and Cloud-native IPOs Date of IPO Median: 0.7x 1
  34. 34. 0.0% 180.0% TWLO SNOW PVTL CRWD DDOG ESTC CLDR PD DT FROG AYX FSLY MDB SUMO TENB OKTA TLND ZS MULE APPN PING NET SWI DOMO APTI ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Company filings. Excludes ForeScout, SailPoint, Carbon Black, and Nutanix¹ due to lack of disclosed metrics. Ping Identity, Dynatrace, and SolarWinds exclude amortization/depreciation of acquired assets and restructuring costs. Talend financials based on constant currency.33 Dollar-based net retention at IPO Best >140% Better 140-120% Good <120% 2016 2016201920192019 2019 201920192019 2018 2018 2018 20182018 2018201720172017 2017 2017 20172020 2020 2020 This presentation includes proprietary information of Battery Ventures Bottoms-up and transaction-based revenue streams have far more consistency and expansion potential than we all anticipated. 2016 1 1 1 Denotes 2020 cohort of Open Source and Cloud-native IPOs Date of IPO Median: 128% 1
  35. 35. 0.0x 7.0x TWLO FROG DDOG ESTC CRWD PD PING NET DT SNOW AYX OKTA MULE ZS FSLY TENB PVTL MDB SWI TLND SUMO APTI CLDR APPN DOMO ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Company filings. Excludes ForeScout, SailPoint, Carbon Black, and Nutanix¹ due to lack of disclosed metrics. Ping Identity, Dynatrace, and SolarWinds exclude amortization/depreciation of acquired assets and restructuring costs. Talend financials based on constant currency. LTV calculated as GAAP subscription gross margin / (gross churn (est.) + 11% discount rate). CAC calculated as LTM GAAP S&M exp. / (Qo subscription revenue)*4 – (Q-4 subscription revenue)*4). ARR used instead of subscription revenue if disclosed.34 LTV:CAC at IPO Best >3.0x Better 3.0-2.5x Good <2.5x 2019 20192019 201920192019 20192018 20182018 20182018 20172017 201720172017 2017 2016 20162020 20202020 This presentation includes proprietary information of Battery Ventures Efficient customer acquisition while focusing on enterprise-grade customers results in higher expansion potential. 2016 2018 1 1 1 Denotes 2020 cohort of Open Source and Cloud-native IPOs Date of IPO Median: 2.5x 1
  36. 36. 0.0% 80.0% DOMO MDB CLDR SUMO ESTC CRWD PD PVTL SNOW TENB DDOG NET FROG OKTA FSLY APTI TWLO ZS AYX PING TLND APPN MULE DT SWI 0.0% 140.0% TWLO SWI PING FSLY DT FROG PVTL APPN DDOG NET APTI ESTC PD TENB SUMO ZS TLND MULE AYX CRWD MDB OKTA CLDR SNOW DOMO ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Company filings. Excludes ForeScout, SailPoint, Carbon Black, and Nutanix¹ due to lack of disclosed metrics. Ping Identity, Dynatrace, and SolarWinds exclude amortization/depreciation of acquired assets and restructuring costs. Talend financials based on constant currency.35 Last twelve months R&D and S&M as percentage of revenue at IPO S&M R&D Best 25-45% Better 45-65% Good 65-120% Best 70-30% Better 30-20% Good 20-10% 2019 2019 20192019 20192019 20192018 2018 20182018 2018 20182017 2017 20172017 201720172016 20162016 2016 201820192019 20192018 20172019 2019 20162018 2019 2018 2018 2016 2017201720192017 201720172018 2020 2020 2020 2020 2020 This presentation includes proprietary information of Battery Ventures Bottoms-up companies have flexibility to invest in research & development given efficient GTM engine.Denotes 2020 cohort of Open Source and Cloud-native IPOs Median: 54% 11 1 1 11 Date of IPO 2020 Median: 28% 1 1
  37. 37. y = 34.964x + 9.8332 R² = 0.255 0.0x 10.0x 20.0x 30.0x 40.0x 50.0x 60.0x (10%) 0% 10% 20% 30% 40% 50% 60% y = 81.259x + 1.6377 R² = 0.7071 0.0x 10.0x 20.0x 30.0x 40.0x 50.0x 60.0x 0% 10% 20% 30% 40% 50% 60% ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Company filings and CapIQ. Note: Market data as of 10/2/20. Excludes ForeScout, SailPoint, Carbon Black, Nutanix1 and recent 2020 IPOs (Snowflake, JFrog and Sumo Logic) due to lack of disclosed metrics.36 Index to the cloud and know your cloud metrics fundamentals EV/NTM Sales vs. NTM Sales Growth EV/NTMSalesMultiple NTM Sales Growth % EV/NTM Sales vs. Rule of 40 Rule of 40EV/NTMSalesMultiple This presentation includes proprietary information of Battery Ventures Software valuations are driven by growth, with investors rewarding high-growth companies that are indexed to the cloud 1 1 1 1
  38. 38. ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Company filings. Note: Representative companies include cloud infrastructure and software companies.37 Key metrics to focus on as a public company # of Customers New Customers Net $-Based Retention / Expansion Rate Subscription Contract Lengths Billing Frequency % Recurring / Subscription Revenue ARR Non-GAAP Gross Margin Non-GAAP Op. Margin                                                                                                                                                             This presentation includes proprietary information of Battery Ventures 1 1 1 1
  39. 39. Future of OpenCloud This presentation includes proprietary information of Battery Ventures
  40. 40. $9.2 $9.2 $11.5 $15.0 $16.8 2015 2016 2017 2018 2019 $10.2B $9.0B $6.8B $6.2B $5.3B $4.5B $2.8B $2.8B $2.6B $2.5B $2.4B $2.0B $2.0B $1.9B $1.7B $1.5B $1.2B $1.1B $1.0B ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Pitchbook data as of 10/2/2020. Select Private Unicorns based on private companies that are enterprise infrastructure-focused with valuations of $1.0B or greater as of October 2020.This presentation includes proprietary information of Battery Ventures39 The emerging set of open source and cloud-native companies are promising Select Private Unicorns Last Disclosed Valuation Financing Deal Value $ in Billions$ Financing Deal Volume Volume in Thousands Open Source and cloud financings have continued to accelerate, and there is a healthy backlog of private company unicorns gearing up for IPO. 1 1 1 1 1 1 $ 2.2 2.3 2.5 2.9 3.3 2015 2016 2017 2018 2019
  41. 41. ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: CapIQ, Pitchbook, company filings. Note: Representative companies include cloud infrastructure and software companies that have gone public since 2016. Market data as of 10/2/20.This presentation includes proprietary information of Battery Ventures40 Going public is just the beginning for open source and cloud-native companies Value Creation ($B) Company Pre-IPO IPO IPO T+1 Current $1.0 $1.4 $2.7 $44.2 1.6 1.4 1.9 15.3 1.2 2.0 2.7 30.5 0.7 3.2 6.2 10.8 1.1 2.1 4.2 19.6 4.0 7.7 13.1 32.0 0.6 8.7 12.1 34.5 1.2 2.8 3.4 2.9 0.4 4.6 6.7 7.9 12.4 42.5 89.9 80.8 Aggregate Value $24.2 $76.2 $142.9 $278.5 2019 2016 2017 2018 2017 2020 2018 2019 2020 2020 3.1x 5.9x 11.5x The last few years have created multiple cloud-native companies that have generated $10B+ of value, with much of the value being created once public. 1 1 3.1x 5.9x 11.5x Date of IPO 1
  42. 42. 36% 30% 24% 44% 36% 37% 31% 30% 34% 36% 45% 39% 41% 29% 64% 53% 27% 81% 49% 59% 37% 34% 51% 62% 90% 59% 53% 39% 0% 100% Expected CAGR @ IPO CAGR @ Current ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: CapIQ and company filings. Note: Represents relevant EIT IPOs between 2016 and current. Excludes PVTL, APTI and MULE due to acquisition and recent 2020 IPOs SNOW, SUMO and FROG due to lack of historical performance data post IPO.This presentation includes proprietary information of Battery Ventures41 The cloud continues to be bigger than we all expected, and growth is accelerating Revenue Growth Growth projections continue to discount the value of the cloud and the opportunity for cloud-native companies. 1 1
  43. 43. $0 $7T 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Battery Ventures; Forrester; Gartner; the Yankee Group; BEA.gov; Input Research.This presentation includes proprietary information of Battery Ventures42 We’re still in the early innings for OpenCloud TODAY Assumed 2017-2050 CAGR Global Software Revenue ~5% $1 Trillion ~5 * * * * * * * * * * * * * * * Global Software Spend (US$) * * * * * * * *
  44. 44. This presentation includes proprietary information of Battery Ventures43 The Battery team Download slides here: https://www.battery.com/powered/ Dharmesh Thakker dharmesh@battery.com Chiraag Deora chiraag@battery.com Danel Dayan ddayan@battery.com Jason Mendel jmendel@battery.com

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