In public and private markets, cloud earnings and valuations heat up

Published December 11, 2020

This quarter, strong earnings results from public cloud companies were overshadowed by a seemingly endless IPO cycle. Another moment we somewhat missed over the last few weeks was the stock market pushing the value of public cloud companies to all-time highs.

These events are connected. And they bode well for startups working on SaaS and API-delivered software, which are keeping the climate for cloud venture investment warm and valuations stretched by historical norms.

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The earnings results that have made Wall Street content include a growing number of cloud companies that are seeing revenue growth accelerate from Q2 2020 to Q3 2020, according to a recent analysis by Redpoint’s Jamin Ball.

Astute readers will recall that The Exchange chatted with Ball after the Q2 earnings cycle, a conversation that included puzzling over how to square a nearly uniform deceleration in revenue growth from Q1 to Q2 in the software sector, which, at the very same time, was supposedly undergoing a boom in demand thanks to the pandemic and a suddenly remote workforce.

One hypothesis Ball offered was that deals signed in Q2 by SaaS companies would not show up much until Q3 if they were signed in the back-half of the quarter. Regardless of the reason, Q3 featured a far-stronger crop of cloud results that imply a strengthening sector.

For us startup watchers on the hunt for a hint of what is going on in opaque private markets, this is a useful data point. If you’ve been slightly befuddled as to why the venture capital space has seen deals accelerate with time-to-conviction falling from weeks to minutes — and pre-emption the new normal — this is part of the why.

As the future has been pulled forward when it comes to digitizing the American and global economies, it’s a good time to be a software company. This was visible in SaaS company Smartsheet’s earnings this quarter. The Exchange chatted with CEO Mark Mader about his company’s recent earnings results that beat expectations and led to the company’s shares rising. Analyst upgrades have followed.

This morning, let’s examine the data regarding how many cloud companies are seeing revenue growth accelerate, dig into Smartsheet’s results to see what we can learn (hint: SMBs matter), and then apply all our findings to the startup market itself so that we can go into the weekend as informed as possible.

Public acceleration

At the risk of being cheeky, I’ve embedded Ball’s chart concerning Q3 revenue acceleration from cloud companies below. (If you are into similar data sets, he’s worth following on Twitter.) Here’s the data:

Image: Jamin Ball

This chart shows Q2’s cloud year-over-year growth rates subtracted from Q3’s own; a result greater than one shows that a company’s year-over-year growth accelerated from the second quarter to the third. The higher the number of cloud companies that wind up with a result of 1% or greater in the above chart, the faster the cloud market as a whole is accelerating.

Software stocks set new records despite earnings, pandemic

Published August 4, 2020

You might have missed it, but amidst the current political-M&A-pandemic-election-disinformation news cycle we find ourselves in this week, SaaS and cloud companies reached new public market records.

Yesterday, the Bessemer-Nasdaq cloud index closed at 2,035.54, a new record finish for the basket of software companies. And, today, the index broached the 2,040 mark before ceding some ground.

The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.

What matters for our purposes is that with a good chunk of the Q2 earnings cycle behind us, software companies are not only holding onto their gains from earlier in the year, they are managing to add to them, albeit modestly. Of course, valuation expansion during earnings season could still lead to gently falling multiples; as companies grow, if their shares gain value at a slower pace, their price/sales ratio can lose ground.

Regardless, for our purposes it’s notable that recent public market gains are not dissipating. Tech valuation boosts have helped major American indices regain ground lost early in the year, and Q2 earnings were a possible threat to prior progress. So far earnings-related dents are thin on the ground.

So, what’s going on? Why are SaaS and cloud stocks doing so well? Leaning on notes from two VCs — Jamin Ball from Redpoint and Mary D’Onofrio from Bessemer — we can unspool recent valuation highs.

Anvyl, looking to help D2C brands manage their supply chain, raises $9.3M

Published July 10, 2019

Growing D2C brands face an interesting challenge. While they’ve eliminated much of the hassle of a physical storefront, they must still deal with all the complications involved in managing inventory and manufacturing and shipping a physical product to suppliers.

Anvyl, with a fresh $9.3 million in Series A funding, is looking to jump in and make a difference for those brands. The company, co-founded by chief executive Rodney Manzo, is today announcing the raise, led by Redpoint Ventures, with participation from existing investors First Round Capital and Company Ventures. Angel investors Kevin Ryan (MongoDB and DoubleClick), Ben Kaufman (Quirky and Camp) and Dan Rose (Facebook) also participated in the round.

Manzo hails from Apple, where with $300 million in spend to manage logistics and supply chain he was still operating in an Excel spreadsheet. He then went to Harry’s, where he shaved $10 million in cash burn in his first month. He says himself that sourcing, procurement and logistics are in his DNA.

Which brings us to Anvyl. Anvyl looks at every step in the logistics process, from manufacture to arrival at the supplier, and visualizes that migration in an easy-to-understand UI.

The difference between Anvyl and other supply chain logistics companies, such as Flexport, is that Anvyl goes all the way to the very beginning of the supply chain: the factories. The company partners with factories to set up cameras and sensors that let brands see their product actually being built.

“When I was at Apple, I traveled for two years at least once a month to China and Japan just to oversee production,” said Manzo. “To oversee production, you essentially have to be boots on the ground and eyes in the factory. None of our brands have traveled to a factory.”

On the other end of the supply chain, Anvyl lets brands manage suppliers, find new suppliers, submit RFQs, see cost breakdowns and accept quotes.

The company also looks at each step in between, including trucks, trains, boats and planes so that brands can see, in real time, their products go from being manufactured to delivery.

Anvyl charges brands a monthly fee using a typical SaaS model. On the other end, Anvyl takes a “tiny percentage” of goods being produced within the Anvyl marketplace. The company declined to share actual numbers around pricing.

This latest round brings Anvyl’s total funding to $11.8 million. The company plans to use the funding toward hiring in engineering and marketing, and grow its consumer goods customer base.