October 7, 2020

State of the OpenCloud 2020

Dharmesh Thakker
Chiraag Deora
Danel Dayan
Jason Mendel

This presentation includes proprietary information of Battery Ventures

Disclaimers
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 This presentation includes proprietary information of Battery Ventures

We’re Long Cloud
Infrastructure
& Open Source
Software

This presentation includes proprietary information of Battery Ventures

We’re long cloud infrastructure & open source software

1 COVID-19 has accelerated two years’ worth of digital transformation in two months

2 Cloud providers are executing at a massive scale while continuing to drive innovation

3 Software performance is at historical highs, driven by increased cloud adoption

4 Infrastructure markets are larger than we all expected, and penetration is still early

5 Cloud-native infrastructure companies are creating value at an unprecedent pace

6 With every new crisis, there is a new opportunity

3 This presentation includes proprietary information of Battery Ventures

COVID-19 has accelerated cloud adoption while the
pie continues to expand
Disruption Potential

$623B $645B $592B $608B $630B $661B

% Cloud Penetration (Pre-COVID-19 Estimates) 22%

% Cloud Penetration (Post-COVID-19 Estimates)
20%
$45B
17%
$39B

$22B 17%
14%
15%
$13B 14%
11%
12%
9%

2018 2019 2020 2021 2022 2023

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.

4 This presentation includes proprietary information of Battery Ventures Source: Gartner Market Databook, Goldman Sachs Global Investment Research.
Cloud providers are executing at a massive scale while continuing to
drive innovation
Public Cloud Revenue (US$B) AWS Annual Feature Releases
New Incremental Revenue vs. Prior Year $97 ~2,700
Prior Year LTM Revenue $90
Y/Y Growth $84
$27
$77
$26 ~2,000
73% 72% 70% $71
$25
62% $64
58% 56% 58% 57% 56% $24
54% 55% 57% 53% $58
$21 $23
$53 1,430
$48 50% 48% 47%
45% 44%
$43 $19 41% 38%
$39 $18
$35 $17 1,017
$31 $16 $71
$27 $14 $64 722
$25 $13 $58
$22 $11 $53
$20 $10 $48 516
$16 $18 $9 $43
$14 $8 $39
$8 $35
$31 280
$7 $27
$6 $7 $22 $25
$18 $20 159
$12 $14 $16 48 61 82
$8 $9 $10 24

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2016 2017 2018 2019 2020

Public cloud vendors will reach ~$100B in revenue in 2020 while continuing to grow
both revenue and feature releases at ~40%.

Source: Company Data, Goldman Sachs Global Investment Research. Cloud vendors include Google Cloud, Tencent, Alibaba AliCloud, Microsoft Azure,
5 This presentation includes proprietary information of Battery Ventures Amazon AWS, Oracle IaaS + PaaS, and Salesforce App Cloud.
Software performance is near historical highs, driven by
increased cloud adoption
Infrastructure Software Index Aggregate Market Cap ($B) EV / NTM Revenue

$550 16.0x
COVID-19 Infrastructure Software Index COVID-19
S&P 500
13.2x
Software Index

10.4x

2.7x

$200 1.0x
Oct ’18 Oct ’19 Oct ’20 Oct ’18 Oct ’19 Oct ’20

Infrastructure software has outperformed the broader market, despite the recent
volatility, as more companies embrace the cloud to accelerate digital transformation.

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
6 This presentation includes proprietary information of Battery Ventures companies with a market cap >$300M.
Infrastructure markets are larger than we all expected, and
we are still early

Customers @ Total Addressable

Company Customers @ IPO Today Customers % Penetrated

3.4x 170K 1.5M 12%

51K

7.1x 200K 1.0M 20%

28K

4.7x 20K 300K 7%

4K

2.9x 9K 100K 9%
4K

While % penetration is still early, the customer base for cloud-native companies
continues to expand.

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
7 This presentation includes proprietary information of Battery Ventures companies 250+ employees. MongoDB total addressable customers represents 50+ employees.
Cloud-native infrastructure companies are on an
accelerated path to value creation
Cloud-Native First-Generation

Market
Cap $9B $10B $2B $1B $3B $225M $543M $30M $265M $49M
IPO

1 1 3 4 8 31 32 32 35 63
Yr. Yr. Yrs. Yrs. Yrs. Yrs. Yrs. Yrs. Yrs. Yrs.

Average Value Creation Per Year: $29B Average Value Creation Per Year: $4B

Market
Cap $34B $143B $31B $44B $98B $162B $185B $51B $181B $12B
Today

Infrastructure has strong enduring value, with the cloud creating new opportunities
for value creation.

8 This presentation includes proprietary information of Battery Ventures 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.
Every new crisis brings a new opportunity for cloud-native companies
Digital Transformation Productivity Tools Telehealth Remote Work

Post COVID-19 Post COVID-19 Post COVID-19 Post COVID-19

Google
Trends
Popularity

1
1
1 1
1

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.

9 This presentation includes proprietary information of Battery Ventures ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Google Trends.
Themes of Interest

This presentation includes proprietary information of Battery Ventures

Prominent bottlenecks still remain in the software development lifecycle

Waterfall (Pre 2000s) Agile/DevOps (2000 – 2020) DevSecOps (2020 – onward)

1 Design Dev
Continuous Security
Design Develop Integrate Build
Develop Automated Testing
2

3 Test Feedback Test Feedback Test Feedback Test Feedback Test

4 Build Dev Ops

Ops
5 Release / Deploy
Release Deploy Operate Monitor

6 Secure / Maintain
Feedback Test Feedback Test Feedback Test Feedback Test

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.

11 This presentation includes proprietary information of Battery Ventures

Testing and security require the most automation to improve
time to launch

1 1

Source Continuous Test Binary Continuous Feature

Runtime Security
Code Integration Automation Management Delivery Flagging

Version Code Continuous Package Packaged Execute Continuous Real-time

control integration testing code deployment code security 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.

12 This presentation includes proprietary information of Battery Ventures ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.
Unification opportunities remain across the fragmented data landscape
Data Scientists Data Engineer Data Analyst Data Architect Business Analyst

Unification Layer
Real-Time Streaming Security / Privacy Data Management Orchestration BI / Data Science / Analytics Monitoring / Quality
(Compliance, Cataloguing, Discovery) 1
1
1 1
1

Data Warehouse Data Lake Database Data Warehouse Data Lake Database

1
1

1
1
ETL ETL

Cloud On-Prem

Data Sources

Hyper fragmentation across cloud and on-prem data while data is increasingly used
in production has driven the need for unification layers.

13 This presentation includes proprietary information of Battery Ventures ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.
Developer platforms targeting AI/ML workflows
Software Engineer ML Engineer

Native Coding Language

IDE

Version Control

1
1
CI / CD

1
1
ETL

1 1 1
Monitoring

1
Data Visualization

Machine learning is becoming more programmatic as ML engineers use best-of-

breed offerings for their models.

14 This presentation includes proprietary information of Battery Ventures ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.
Next-generation identity solutions lead security in a zero trust world
Network-based Security Identity-based Security
Deployment
Modes

Trusted Network
Enterprise Factory Workforce

Factory Workforce Customers

Security Model Enterprise
Customers Data Center

Data Center 3rd Party Cloud

SaaS Apps Resources 3rd Party Cloud
SaaS Apps Resources Trusted
Identity

Companies

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.

15 This presentation includes proprietary information of Battery Ventures

Security automation solutions for developers push further into
automation and remediation

Shift-Left
Waves
Application Security Cloud Security Remediation

Features Issues & Alerts Issues & Alerts Continuous and Real-time

Code Scanners Vulnerability Scanners Code Security Scanners

Tools Dependency Scanners Workload Scanners Interactive Security Scanners
Static Application Security Infrastructure-as-Code Scanners Runtime Application Self Protection

1
Companies to 1
Emerge 1

The shift-left security movement is happening in waves starting with Application

Security, Cloud Security, and Remediation.

16 This presentation includes proprietary information of Battery Ventures ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.
 Operational Best Practices
for OpenCloud Companies

17 This presentation includes proprietary information of Battery Ventures

Top 10 operational best practices from 2019
Product Playbook
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
Carefully monitor and understand pay-as-you-go
18 This presentation includes proprietary information of Battery Ventures
GTM 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
transaction revenue streams
1 Don’t just focus on the top-down buyer, practitioners matter
even more

Tops-Down Sales Hierarchy Bottoms-Up Sales Hierarchy

Buyer / Budget Influencer / User

CTO CIO CISO CRO … Data Frontend Cloud Security

DevOps
Engineer Developer Architect Engineer

Backend UX QA Platform
SRE
Influencer Engineer Designer Engineer Engineer

VP IT VP Eng. VP Product VP Sales …

Buyer
User VP IT VP Eng. VP Product VP Sales …
Data Frontend Cloud Security
DevOps
Engineer Developer Architect Engineer
Budget
Backend UX QA Platform
SRE
Engineer Designer Engineer Engineer CTO CIO CISO CRO …

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.

19 This presentation includes proprietary information of Battery Ventures

2 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
Cloud Product Non-Cloud Product
T+ $100M: 3 Yrs. T+ $100M: 10 Yrs.
IPO
1
$100 1 1 $1,000
ARR (US$ in M)

$0 $0
0 1 2 3 4 5 6 7 8 9 10 11 12 Y-2 Y-1 IPO Y+1 Y+2 Y+3 Y+4 Y+5

Years from $1M to $100M ARR

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.

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
20 This presentation includes proprietary information of Battery Ventures Ventures estimates. When ARR is not provided, implied ARR is annualized revenue run rate.
3 Leverage different paths to efficient customer growth

Open Source SaaS / Cloud-hosted OpenCloud

Customer Acquisition Community Sales Community

Customer Conversion Self-serve Freemium Freemium

Pricing Usage / Resources Users Usage / Resources

Product Distribution Self-managed Hosted Hosted

Paid Features Support / Services Platform Platform

1 1

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.

21 This presentation includes proprietary information of Battery Ventures ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.
4 Consider usage-based pricing / PAYG to drive faster sales cycles

Short Sales
Yes PAYG Cycle Small Land Large Expansions >$1M ACV
(1-2 months)

Is your product
consumable by
usage?

No
Annual
Contracts
Long Sales Cycle
(6-9 months)
Large Land
Small
Expansions >$1M ACV

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.

22 This presentation includes proprietary information of Battery Ventures

5 Customer success is paramount in a post-COVID world to manage churn

Leads

(New Customers)
Sales Funnel
Customer Success Best Practices
Qualified Prospects
• Customer success teams are sales reps too:
‒ Incentivize customer success teams to
grow usage. Customers
• Measure customer onboarding and Referral / customer
implementation within 90 days of a purchase. feedback loop

(Existing Customers)
• Churned customers are lost revenue for multiple Retention

Success Funnel
years.
• Expansion and customer advocates lead to a Expansion
customer success funnel that supports sales.

Referral / Advocate

Measure product usage, manage churn, and facilitate expansion to create a

customer success funnel that supports sales.

23 This presentation includes proprietary information of Battery Ventures

6 Retention is critical to compounding ARR growth
95% Retention / 15% Growth
$395
85% Retention / 15% Growth
70% Retention / 15% Growth

$275

$182

$100

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Churn impact is amplified in a recurring revenue model.

24 This presentation includes proprietary information of Battery Ventures

7 Understand and nurture your community to build
member loyalty and affinity
Metrics to Track

GitHub Stars /
Observer Watchers

Downloads
User IP Addresses
User Telemetry

Community Signups
Fan Community Engagement

Contributors / Committers
Ambassador Issue Comments
Pull Requests

Customer Buyer / Influencer

Your community is a living organism that requires nurturing. Understand members

in your community to increase reach and build loyalty.

25 This presentation includes proprietary information of Battery Ventures

8 Leverage and work with foundations to turbo charge your community

350+ Apache projects and initiatives 1,200 projects

7,700 core contributors 91,047 contributors
12,413 developers contributing 150,483 members
Notable Commercialized Projects Notable Commercialized Projects
1 1 1

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.
26 This presentation includes proprietary information of Battery Ventures ¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here.
9 Manage technical debt by codifying policies and standards
early in development

Software Users Deployments

Managing Technical Debt
• Technical debt is dynamic. Tie
Open Source Developers Cloud Hybrid structural tech debt changes to
behavioral or business needs
Technical Debt
• Leverage the best design practices
• Slow release velocity to codify standards early in company
IT Operators On Prem • Inconsistent standards formation
Microservices • Bespoke deployment methods • Introduce automated testing at every
& Containers step of the process
• Lack of quality and testing
QA Devices • Poor security standards • Monitor quality and bugs as
indicators of tech drift
• Quantify as much of the system as
Multiple possible (time to deployment, failed
Technologies Security Servers merges, etc.)

More code is being developed than ever before and technical debt will eventually
catch up. Build cloud-natively to streamline efforts from day one.

27 This presentation includes proprietary information of Battery Ventures

10 Build a distributed global developer workforce: Great developers are
everywhere
50M
Developers
WW

26.7% Open Source Contributions by Country

.1%
29.3% 36.2% China

India
1.1% 2.0%
Germany

United Kingdom
1.9%
0.3% Japan
4.3%
0.4% Canada
1.58% Active Users
.002% France
 % change
from 2019 Russia

Brazil

More and more code is being written outside the US. Target these developer hot
beds to build technical teams.

28 This presentation includes proprietary information of Battery Ventures Source: Github

Battery Ventures operational best practices playbook for OpenCloud
companies

Product Playbook GTM Playbook Development Playbook

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
Focus on individual software buyers / Build cloud first: cloud-native products will
influencers, in addition to traditional CIOs supercharge your sales velocity
Leverage open source as an efficient Manage technical debt by codifying policies and
customer-acquisition channel standards early in development
Tap freemium and cloud-based trials to Build a distributed global developer workforce:
acquire customers great developers are everywhere
Leverage new cloud marketplaces to discover Understand and nurture your community to build
and reach customers member loyalty and affinity
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

29 This presentation includes proprietary information of Battery Ventures

Building a Lasting
Public Company
Focus On KPIs
that Matter

This presentation includes proprietary information of Battery Ventures

Last twelve months revenue growth at IPO

150.0%

Best
>70%

Better
70-45%
Good
<45%

Median: 48%

0.0% 1
SNOW CRWD OKTA TWLO DDOG 1 ESTC MULE AYX CLDR FROG ZS MDB TENB PD SUMO1 DOMO NET FSLY1 TLND SWI PVTL APTI PING APPN DT

2020 2019 2017 2016 2019 2018 2017 2017 2017 2020 2018 2017 2018 2019 2020 2018 2019 2019 2016 2018 2018 2016 2019 2017 2019

Cloud infrastructure markets are large and growing; companies attached

Denotes 2020 cohort of Open Source and Cloud-native IPOs to these mega-trends are experiencing the benefits of these tailwinds.
Date of IPO

¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: Company filings. Excludes ForeScout,
31 This presentation includes proprietary information of Battery Ventures SailPoint, Carbon Black, and Nutanix¹ due to lack of disclosed metrics. Talend financials based on constant currency.
Average magic number over last twelve months at IPO

2.5x

Best
>1.0x

Better
1.0x-0.7x
Good
<0.7x

Median: 0.7x

0.0x
TWLO DDOG1 ESTC CRWD FROG
1 FSLY1 SNOW NET OKTA MULE PD DT AYX ZS TENB PING MDB PVTL CLDR SWI TLND APPN SUMO1 APTI DOMO

2016 2019 2018 2019 2020 2019 2020 2019 2017 2017 2019 2019 2017 2018 2018 2019 2017 2018 2017 2018 2016 2017 2020 2016 2018

Product-led growth and bottoms-up are enabling companies

Denotes 2020 cohort of Open Source and Cloud-native IPOs to be more efficient in customer acquisition.
Date of IPO
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
32 This presentation includes proprietary information of Battery Ventures restructuring costs. Talend financials based on constant currency.
Dollar-based net retention at IPO

180.0% Best Good

>140% Better <120%
140-120%

Median: 128%

0.0% 1 1
TWLO SNOW PVTL CRWD DDOG ESTC CLDR PD DT FROG AYX FSLY1 MDB SUMO1 TENB OKTA TLND ZS MULE APPN PING NET SWI DOMO APTI

2016 2020 2018 2019 2019 2018 2017 2019 2019 2020 2017 2019 2017 2020 2018 2017 2016 2018 2017 2017 2019 2019 2018 2018 2016

Bottoms-up and transaction-based revenue streams have far more

Denotes 2020 cohort of Open Source and Cloud-native IPOs consistency and expansion potential than we all anticipated.
Date of IPO

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
33 This presentation includes proprietary information of Battery Ventures acquired assets and restructuring costs. Talend financials based on constant currency.
LTV:CAC at IPO

7.0x

Best
>3.0x

Better
3.0-2.5x
Good
<2.5x

Median: 2.5x

0.0x 1 1
TWLO FROG DDOG ESTC CRWD PD PING NET DT SNOW AYX OKTA MULE ZS FSLY1 TENB PVTL MDB SWI TLND SUMO1 APTI CLDR APPN DOMO

2016 2020 2019 2018 2019 2019 2019 2019 2019 2020 2017 2017 2017 2018 2019 2018 2018 2017 2018 2016 2020 2016 2017 2017 2018

Efficient customer acquisition while focusing on enterprise-grade

Denotes 2020 cohort of Open Source and Cloud-native IPOs customers results in higher expansion potential.
Date of IPO
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).
34 This presentation includes proprietary information of Battery Ventures 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.
Last twelve months R&D and S&M as percentage of revenue at IPO

140.0% Good
Best Better 65-120%
45-65%
25-45%

S&M Median: 54%

0.0% 1 1
TWLO SWI PING FSLY1 DT FROG PVTL APPN DDOG NET APTI ESTC PD TENB SUMO1 ZS TLND MULE AYX CRWD MDB OKTA CLDR SNOW DOMO

2016 2018 2019 2019 2019 2020 2018 2017 2019 2019 2016 2018 2019 2018 2020 2018 2016 2017 2017 2019 2017 2017 2017 2020 2018

80.0%
Best
70-30% Better Good
30-20% 20-10%
R&D Median: 28%

0.0% 1 1 1 1
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

2018 2017 2017 2020 2018 2019 2019 2018 2020 2018 2019 2019 2020 2017 2019 2016 2016 2018 2017 2019 2016 2017 2017 2019 2018

Bottoms-up companies have flexibility to invest in

Denotes 2020 cohort of Open Source and Cloud-native IPOs research & development given efficient GTM engine.
Date of IPO

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
35 This presentation includes proprietary information of Battery Ventures acquired assets and restructuring costs. Talend financials based on constant currency.
Index to the cloud and know your cloud metrics fundamentals

EV/NTM Sales vs. NTM Sales Growth EV/NTM Sales vs. Rule of 40
60.0x 60.0x
y = 81.259x + 1.6377 y = 34.964x + 9.8332
R² = 0.7071 R² = 0.255
1 1
50.0x 50.0x
EV/NTM Sales Multiple

EV/NTM Sales Multiple

40.0x 40.0x

1
30.0x 30.0x 1

20.0x 20.0x

10.0x 10.0x

0.0x 0.0x
0% 10% 20% 30% 40% 50% 60% (10%) 0% 10% 20% 30% 40% 50% 60%

NTM Sales Growth % Rule of 40

Software valuations are driven by growth, with investors rewarding high-growth

companies that are indexed to the cloud

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
36 This presentation includes proprietary information of Battery Ventures 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.
Key metrics to focus on as a public company
# of Customers New Customers
 
 
 
 
1
 
1
 
 
 
 
 
 
 
 
 
 
 
1
 
1
 
37 This presentation includes proprietary information of Battery Ventures
Net $-Based
Retention / Subscription
Expansion Rate Contract Lengths
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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.
% Recurring /
Subscription Non-GAAP Gross Non-GAAP Op.
Billing Frequency Revenue ARR Margin Margin
    
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Future of
OpenCloud

This presentation includes proprietary information of Battery Ventures

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
$10.2B
$9.0B
2019 $16.8 2019 3.3
$6.8B
1 $6.2B
$5.3B
2018 $15.0 2018 2.9
1
$4.5B
$2.8B
$2.8B
2017 $11.5 2017 2.5
$2.6B
1
$2.5B
1
$2.4B 2016 $9.2 2016 2.3
$2.0B
$2.0B
$1.9B 2015 $9.2 2015 2.2
$1.7B
1
$1.5B
$1.2B Open Source and cloud financings have continued to accelerate, and there is a
healthy backlog of private company unicorns gearing up for IPO.
$1.1B
1
$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
39 This presentation includes proprietary information of Battery Ventures Private Unicorns based on private companies that are enterprise infrastructure-focused with valuations of $1.0B or greater as of October 2020.
Going public is just the beginning for open source and
cloud-native companies
Value Creation ($B)
Company Pre-IPO IPO IPO T+1 Current
2016 $1.0 $1.4 $2.7 $44.2
2017 1.6 1.4 1.9 15.3
2017 1.2 2.0 2.7 30.5
2018 0.7 3.2 6.2 10.8
2018 1.1 2.1 4.2 19.6
2019 4.0 7.7 13.1 32.0
1
2019 0.6 8.7 12.1 34.5
1
2020 1.2 2.8 3.4 2.9
1
2020 0.4 4.6 6.7 7.9
2020 12.4 42.5 89.9 80.8

Aggregate Value $24.2 3.1x $76.2 5.9x $142.9 11.5x $278.5

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.
Date of IPO

¹ Denotes a past or current Battery company. For a full list of all Battery investments, please click here. Source: CapIQ, Pitchbook, company filings.
40 This presentation includes proprietary information of Battery Ventures Note: Representative companies include cloud infrastructure and software companies that have gone public since 2016. Market data as of 10/2/20.
The cloud continues to be bigger than we all expected, and
growth is accelerating
100%
90% Expected CAGR @ IPO
CAGR @ Current
81%

64% 62%
59% 59%
53% 53%
51%
Revenue 49%
Growth
39%
37%
44% 34% 45%
1 39% 41%
36% 27% 36% 37% 36%
34%
30% 31% 30% 29%
1 24%

0%

Growth projections continue to discount the value of the cloud and the opportunity
for cloud-native companies.

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
41 This presentation includes proprietary information of Battery Ventures FROG due to lack of historical performance data post IPO.
We’re still in the early innings for OpenCloud

$7T
* *
*

*
* *

* * *
*

~5 *
Global
Software
* *
*
~5%
Spend
(US$) * * Assumed 2017-2050 CAGR
*
Global Software Revenue
*
*

*
$1 Trillion
*
* TODAY

$0
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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
42 This presentation includes proprietary information of Battery Ventures Yankee Group; BEA.gov; Input Research.
The Battery team

Jason Mendel
Dharmesh Thakker Chiraag Deora Danel Dayan
jmendel@battery.com
dharmesh@battery.com chiraag@battery.com ddayan@battery.com

Download slides here: https://www.battery.com/powered/

43 This presentation includes proprietary information of Battery Ventures