Jamin Ball Profile picture
Oct 1, 2020 5 tweets 2 min read
Great report from Morgan Stanley today on the Identity Access Management market.

They claim an increasingly cloud-based and distributed workforce shifts security control towards Identity & Access Management, driving a considerably larger >$30B TAM vs. industry estimates 👇
IAM is the top CSO priority: Image
Their bottoms up TAM is MUCH LARGER than IDC. They believe the shift to cloud greatly expands the IAM market Image
Overall, this market has ONLY seen ~20% cloud penetration. Still so much room to grow (same dynamic exists in so many other software markets) Image
Okta looking like a clear winner in the market Image

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More from @jaminball

Mar 22
There's broadly two opinions out there on inflation:

1) Inflation is "transient-ish" and will wane the back half of this year and be back to 2% target early next year

2) De-globalization will drive sustained high inflation over the coming 3-5+ years

What do I think?
As a growth investor it's imperative to have a point of view. Inflation impacts rates, and rates impact software multiples. Ive largely been on the transient-ish side, but it's important to see the other point of view

And by transient-ish I mean inflation lasting ~12 more months
The transient-ish argument - we had a one time massive shock to the financial system with stimulus & fed pumping money into the economy. Consumer savings went way up, as did their purchasing of goods and services (first goods, and now services)
Read 20 tweets
Mar 21
Post GFC Venture Capital as an industry has massively "over earned." The data below shows pooled IRRs by vintage from Hamilton Lane. And this performance is despite the fact that private multiples have historically always been higher than public multiples
As a venture capitalist we take bets that companies will be worth more in the future, despite a "premium" multiple paid in the early days.

So yes, many private companies are "worth less" right after an investment if you applied a public multiple. But this phenomenon isn't new
What is new is the magnitude of that premium. Private companies now are worth significantly more than if they were given a public multiple. But should this really be a surprise given the IRRs of venture capital over the last decade?
Read 8 tweets
Mar 7
What should a public software company growing 100%+ at $250M+ ARR be worth (multiple)? There are very few companies to hit this. Im excluding companies that hit that growth only bc of covid. I believe that list includes Snowflake, SentinelOne, Zoom, Crowdstrike, Shopify, Workday
Expanding to 80%+ and I get a few more co's like Datadog, Monday, Elastic, UiPath, ZoomInfo, ServiceNow, Okta, Zendesk (not an exhaustive list but representative).

The big question - theres high growth software and then there's hypergrowth. What multiple should hypergrowth get?
This is especially relevant in a world where as software TAMs expand we're seeing more and more of these "hyper growers." Historically (pre 2015) there haven't been many, so how should we think about valuing them?

I expect many more companies to go public growing >80% at scale
Read 14 tweets
Feb 22
Reflecting on digital transformations vs pull forward for cloud software over the long weekend - I think we've largely seen 3 different ways cloud software was affected by Covid:

1) Fake TAM creation
2) One time pull forward
3) Durable pull forward
I don't think any business was truly unaffected. Therefore, it's important to have a perspective on which bucket each company falls into when predicting what future growth will look like. This applies to both public and private businesses
Bucket 1: Fake Tam Creation:

This describes companies who acquired users / buyers of their software who never would have otherwise been users outside of Covid. The hard part about this bucket - post Covid churn is very high. Who might stick with new behavior vs revert?
Read 24 tweets
Jan 13
Bifurcation of software multiples as seen on a scatter plot (multiple vs growth). Historically all software has traded within red circle. Now a separate group has broken out. Is it warranted? After Q4 earnings, I believe we'll see more separation of contenders from pretenders
Here's the scatter plot without the circles
Here's the same scatter plot from late October, right around the peak for the ETF WCLD (this ETF is a good proxy for cloud software). As you can see, there wasn't nearly the same amount of separation. More of a continuum. This was less than 3 months ago, before this correction
Read 4 tweets
Jan 12
Some takeaways from Morgan Stanley's Q4 CIO survey

- Software has the highest growth expectations in IT
- Strong demand in software persisting (not simply pull forward in 2021)
- Cloud computing remains CIO's top priorities
- Security software most defensible

More graphs below
"Survey data suggests 25% of application workloads are running in the public cloud today, up from 23%... in 2Q21. The multi-year trend in the migration of applications to the cloud remains intact, with CIOs expecting 44% of workloads to reside in public cloud by 2024"
Similar data but presented differently. We're in the early innings of the cloud
Read 8 tweets

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