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
And to make an earlier tweet more clear - my views are any companies currently in the blue circle (contenders) that don't deliver near perfect Q4 results will get knocked down to the red circle (pretenders)

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More from @jaminball

12 Jan
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
26 Oct 21
Trend in cloud software: Growth Durability 📈📈

Historically, many people have overestimated how quickly software companies would decelerate growth. below chart shows rough Datadog quarterly growth expectations at IPO (orange) and actual (blue)
Datadog has grown much faster (by a wide margin) than they were expected to at IPO

The biggest effect of this? Compounding $$ growth

At IPO (Sept '19) Datadog was projected to do ~$610M of revenue in 2021. Current projections? $1.3B!

In just 2 years expectations have doubled🤯
For best in class cloud software businesses we're seeing growth rates prove extremely durable. Markets are much larger than expected, and high net retention rates (growth from existing customer base) is propping up overall growth rates
Read 10 tweets
26 Aug 21
Some confusion after hours in Snowflake. For some extra commentary on the Snowflake RPO figure (lots of talk about it this quarter), I'd point people to the pre-earnings research note Karl Keirstead at UBS published a few days ago. Screenshot below: $SNOW
To try and explain this further - RPO measures the aggregate total unrecognized contract value from all customers. Let's say a company had one customer that signed a $100k one year deal. After 6 months, the RPO would be $50k. this represents the remainder of the deal, or 6 months
Let's say instead that the same customer signed a $1M ten year TCV deal. The ACV is the same ($100k / year). However, after 6 months, this one customer would have a RPO of $950k (95% left on the 10 year deal, or 114 months of a 120 month deal)
Read 13 tweets
19 Aug 21
Asana and Monday are two fascinating businesses. I remember looking at private rounds many years ago and thinking "this is a commodity space, there won't be any big outcomes with a long tail of small / medium outcomes."

Both are ~$15B companies today. Software markets are huge!
Both have executed extremely well and this shouldn't be understated. What's been incredibly impressive is the growth in the enterprise segments. Both define enterprise as customers with >$50k ACV. Asana grew that segment 92%. Monday grew it 226%. Way more than just a SMB business
Both businesses have net dollar retention >110%. This might not sound good in a vacuum, but it's incredibly impressive for businesses with a large base of SMB customers. Asana ACVs are ~$3k. Monday ACVs are ~$2k.

>110% NDR is best in class for the SMB segment
Read 9 tweets
17 Aug 21
The acceleration across cloud software companies so far in Q2 has been very impressive. As of now, most companies with a June quarter end have reported Q2. Most accelerated. Graph below shows (Q2 YoY growth - Q1 YoY growth). Positive numbers represent acceleration (faster growth) Image
I removed 3 companies - Shopify, Olo and BigCommerce. All were major Covid beneficiaries. Q1 this year lapped a 2020 Q1 that did not see much Covid benefit, while Q2 lapped a 2020 Q2 which did see a Covid benefit. So the YoY compare between Q2'21 to Q2'21 isn't as relevant
If your curious where each would show up on the graph:

Shopify: (43%): 110% growth in Q1, 67% growth in Q2
Olo: (96%): 144% growth in Q1, 48% growth in Q2
BigCommerce: (6%): 41% growth in Q1, 35% growth in Q2
Read 5 tweets
12 Apr 21
Some great slides from the Crowdstrike investor briefing last week. A few call outs on what makes them such a great business, that others should aspire to:

1. TAM Expansion: The best businesses increase the size of the pie, not just their piece
2. Product Expansion Velocity: At IPO (in 2019) Crowdstrike had 10 modules. They now have 19. Amazing product development velocity
3. Upsell / Cross-Sell: Customers are using more and more Crowdstrike products. Very powerful platform flywheel
Read 5 tweets

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