THE STATE OF ENTERPRISE SOFTWARE

J E R R Y C H E N

Valuations took a hit in Q1 but are coming back. Be

ssem

er C

loud

Inde

x

Source: Bessemer

2016

We are seeing a “new normal” in valuations.

Source: Morgan Stanley, Capital IQ, Thomson

Avg. Aggregate Value / Next 12 Month Revenue

15.5x 2013-2014

7.4x 2/12/2016

Recent Enterprise IPOs: 1 Year Performance

Source: Google Finance

2015 VC investments reached dotcom levels

Source: Greylock, PwC/NVCA Data: Thomson Reuters

U.S. Early Stage VC: Q4 2015 - Q1 2016

Decrease in # Deals Increase in Round Sizes

Source: Pitchbook

U.S. Late Stage VC: Q1 2016

Decrease in # Deals y/y Smaller Deal Sizes y/y

Source: Pitchbook

Expect M&A to return to historic levels.

Source: Morgan Stanley, Capital IQ, Dealogic

Market Summary

Public Markets Valuations are down. We’re stabilizing at a new normal.

VC Deal volume is decreasing, but still an appetite for great companies.

M&A Expect strategic M&A to pick up over the next four quarters.

Startup Climate for 2016

Focus on cash positions

Build for the long haul

Pick a wave bigger than you

You.

MARKET SPOTLIGHT Areas of Interest

INFRASTRUCTURE “Caught between OSS and a Cloud Place”

How do you get out between OSS and a Cloud Place?

Infrastructure Amazon is the biggest threat to infrastructure companies. Azure and Google will make progress in 2016 with enterprise buyers. Incumbent and private cloud vendors will act irrationally. You need a large footprint and direct connection to developers (DDI).

SECURITY “Separating signal from the noise”

Security

Thousands of companies all sound the same. (And many are the same.) Customers don’t want to buy snake oil. Your job is to help them be smart buyers. Security is an evergreen market. There will always be bad guys, so build a business model that “works for you.”

APPS “Not your father’s Oldsmobile”

Evolution of Apps

Cloud/SaaS Cloud/Mobile Client/Server What’s Next?

?

The basic building blocks of apps are changing.

Bots and conversational UIs

IoT extends reach of apps everywhere

Big Data/AI will power apps

Cloud-enabled car recognizes when you’re in an accident.

Sends data to your insurance company and sends quote to your phone.

Calls Uber to pick you up.

Not your father’s Oldsmobile.

DATA & IoT “Machine intelligence and other oxymorons”

Iron Man Terminator

vs.

Data and IoT

Vision, speech, and text are real and ready for apps today. Find the data. Accumulate more data and proprietary data. More data trumps better math.