Bessemer's Cloud Index at 10 Years: What It Still Tells Founders

Bessemer's Cloud Index at 10 Years: What It Still Tells Founders

In 2013, Bessemer Venture Partners launched the Cloud Index to track something nobody had a clean way to measure: the performance of emerging public cloud software companies. A decade later, the Cloud 100 Benchmarks Report 2025 from Bessemer Venture Partners marks this milestone with hard data that should shape how you think about fundraising, valuation, and the category you're building in.

The index started with 30 companies. Today it tracks 46 public cloud software firms with a combined market capitalization exceeding $690 billion. That's not just growth-it's a fundamental shift in how the market values software infrastructure, business applications, and the cloud economy itself.

If you're raising capital right now, whether at pre-seed, Series A, or beyond, the Bessemer Cloud Index is more than a historical curiosity. It's a mirror held up to the market's actual expectations for growth, profitability, and unit economics. This article breaks down what the index reveals, how to interpret the patterns it has captured, and what those patterns mean for your fundraising narrative and valuation expectations in 2025.

What the Bessemer Cloud Index Actually Measures

Let's start with the basics, because the index is more specific than many founders realize. The BVP Nasdaq Emerging Cloud Index (EMCLOUD) is not a broad measure of all cloud companies. It's a curated basket of 46 public software companies that meet three core criteria: they deliver software exclusively via the cloud (SaaS model), they have a minimum market cap of $200 million, and they generate the majority of revenue from recurring subscriptions.

That last point matters. The index excludes companies that sell perpetual licenses, professional services, or one-time implementations. It's pure recurring revenue. In the language of cloud computing and business software, this is the gold standard the market rewards.

The index is also rebalanced quarterly and weighted by market capitalization. That means larger companies (Salesforce, ServiceNow, Datadog) carry more weight than smaller ones. It's not a pure equal-weight view of the cloud market; it's a market-cap-weighted view, which reflects where institutional capital has actually flowed.

Bessemer partners with Nasdaq to publish the index under the ticker EMCLOUD. You can track real-time performance on the official Nasdaq page for EMCLOUD, and historical data is available through the Federal Reserve's FRED database, which has tracked the index since 2018.

Why does this matter for founders? Because the index is the closest thing the market has to a canonical benchmark for what "successful cloud software" looks like when it goes public and scales. Every investor who pitches you has looked at this index. Many have it on their desk.

The 10-Year Performance Story: Growth, Consolidation, Volatility

Let's talk numbers. The Bessemer Cloud Index has delivered roughly 15% annualized returns over its first decade-a figure that includes the 2022 downturn when cloud stocks fell 50% or more. That's meaningful outperformance versus the broader Nasdaq, especially when you account for the fact that cloud companies were considered "growth at any cost" plays that got hammered when interest rates rose.

But the aggregate number hides the real story. The index has experienced three distinct phases:

Phase 1: The Expansion (2013-2018). Cloud software was still proving itself as a category. SaaS was growing 30-50% year-over-year, and the market rewarded growth above all else. Companies like Salesforce (still in the index), Slack, and Twilio went public and commanded premium multiples. Investors were buying the thesis that cloud would replace on-premises software.

Phase 2: The Maturation (2019-2021). The category matured. Companies still grew fast, but the market began to care about profitability, unit economics, and free cash flow. The index continued to rise, but the composition shifted. Newer entrants (Datadog, Zoom, Okta) proved they could scale to massive revenue while managing growth more efficiently. This is when the cloud index started to look less like a venture bet and more like a core tech holding.

Phase 3: The Correction and Reset (2022-2024). Rising interest rates made growth-at-any-cost untenable. Cloud stocks fell sharply, and the market repriced. But here's the crucial insight: the companies that survived and recovered were those with strong unit economics, expanding margins, and clear paths to profitability. The index recovered faster than expected, signaling that the market hadn't lost faith in cloud software-it had simply reset expectations.

For founders, this history teaches a hard lesson: the market doesn't reward growth alone. It rewards growth paired with unit economics and a credible path to profitability. That's the through-line from 2013 to 2025.

Valuation Multiples: Then and Now

One of the most useful aspects of the Bessemer Cloud Index is that it provides a public market reference point for valuation multiples. The index tracks companies on multiple dimensions: revenue growth rates, gross margins, net retention rates, and valuation multiples (both EV/Revenue and EV/EBITDA).

In the early years of the index (2013-2016), the market paid an average of 8-12x revenue for cloud software companies. That was considered expensive. The broader software market was trading at 3-5x revenue. But investors were willing to pay the premium because cloud companies had higher gross margins (often 70-80%) and stronger unit economics.

By 2020, at the peak of the cloud boom, multiples had expanded to 15-20x revenue for the fastest-growing companies. Zoom, during its IPO window, commanded even higher multiples. The market was paying for growth, period.

Then 2022 happened. Multiples compressed to 5-8x revenue for many companies. That was a shock to the system. But here's what's important: the companies with 50%+ gross margins, positive free cash flow, and net retention rates above 120% held up better than the rest. The market was telling founders something clear: growth without unit economics is a liability, not an asset.

Today, in 2025, the index shows multiples settling in the 8-12x range for high-growth companies (40%+ YoY growth) and 3-6x for slower-growth, profitable companies. That's closer to where they were a decade ago, but with one crucial difference: the market is now pricing in both growth and profitability simultaneously. It's not an either/or anymore.

For your fundraising strategy, this means: if you're raising at a pre-seed or seed stage, don't obsess over the public market multiples. But if you're raising Series B and beyond, you need to have a credible story about how your unit economics improve as you scale. Investors will compare you to the Bessemer index. They'll ask: "At what revenue run rate do you hit 70% gross margins? When does your CAC payback period drop below 12 months?" These aren't hypothetical questions. They're based on the index's data.

What the Index Reveals About Category Winners

The Bessemer Cloud Index has consolidated around a few dominant categories: infrastructure (Datadog, Cloudflare), business applications (Salesforce, ServiceNow), communications (Twilio, Okta), and data/analytics (Snowflake, Elastic). These categories have proven they can scale to multi-billion-dollar valuations while maintaining strong unit economics.

But there's a pattern worth noting: the index has been relatively static in terms of new entrants. Since 2018, very few new companies have been added. Most of the growth in the index comes from companies that were already in it, scaling up. This tells you something important about the venture market: it's harder than ever to build a cloud software company that reaches public market scale. The bar for entry is higher. The competition is fiercer. The unit economics need to be tighter.

For founders, this is both a warning and an opportunity. The warning: if you're building a cloud software company in 2025, you're competing against companies with 10+ years of product development, brand recognition, and installed bases. Your product needs to be materially better, or you need to serve a genuinely underserved market segment.

The opportunity: the companies that have succeeded in the index often started in narrow niches and expanded from there. Datadog started as a monitoring tool for developers. Slack started as an internal communication tool at a gaming company. Figma started as a design tool. These weren't broad platforms from day one. They were focused solutions that expanded into platforms.

When you're pitching investors, especially those who track the Bessemer index, this matters. They want to see a clear initial wedge and a credible expansion story. They want to understand why you can own a category, not just build a feature.

AI, SaaS, and the Next Decade of the Index

Here's where it gets interesting. The Bessemer Cloud Index was created in 2013, before the AI boom. Today, AI is reshaping the cloud software landscape. Companies like OpenAI, Anthropic, and Hugging Face are building foundational models. Companies like Databricks, Hugging Face, and Scale AI are building the infrastructure layer. And hundreds of startups are building AI-powered applications on top of these layers.

The index hasn't yet fully incorporated this shift. Most of the companies in the index are traditional SaaS: they use AI as a feature, not as their core business. But as AI companies mature and go public, the index composition will change. The question is: what does this mean for founders?

First, it means the bar for unit economics is even higher. AI companies have massive compute costs that traditional SaaS companies don't. If you're building an AI-powered product, you need to have a story about how you reduce those costs as you scale, or how you pass them on to customers in a way that still delivers strong margins. This is harder than it sounds. AI startup valuations require a reality check that many founders aren't prepared for.

Second, it means the market is looking for AI companies with strong product-market fit and clear paths to profitability. The days of raising $100 million to "figure it out" are over. Investors want to see traction, unit economics, and a defensible moat. The Bessemer index, even as it evolves, will continue to reward these qualities.

Third, it means the next generation of cloud companies will likely be hybrid: they'll use AI to improve their core product, but they won't necessarily be AI-first. Think of it this way: the index companies of 2035 might all have AI-powered features, just like they all have mobile apps today. The differentiation will be in the application layer, not the AI layer.

For your fundraising strategy, this means: if you're building an AI company, you need to demonstrate that you have a path to the unit economics that the Bessemer index companies have achieved. If you're building a traditional SaaS company, you need to show how you're using AI to improve your product and defensibility. Either way, the index is your benchmark.

Gross Margins and Net Retention: The Real Metrics

If you dig into the Bessemer Cloud Index data, you'll find that two metrics matter more than any other: gross margin and net retention rate.

Gross margin is straightforward: it's revenue minus the cost of goods sold (servers, payment processing, customer support, etc.), divided by revenue. For cloud software companies in the index, the median gross margin is around 70-75%. That's remarkably consistent. Companies like Salesforce, ServiceNow, and Datadog all operate in this range. Why? Because cloud software has low marginal costs. Once you've built the product, serving an additional customer costs very little. This allows you to reinvest heavily in sales, marketing, and R&D while still maintaining strong profitability.

Net retention rate is more subtle. It measures how much revenue you retain and expand from your existing customer base, expressed as a percentage. A 100% net retention rate means you're not losing customers. A 120% net retention rate means your existing customers are spending 20% more each year (through upsells, cross-sells, and expansion). The best companies in the Bessemer index have net retention rates of 120-140%. That's the holy grail.

Why? Because it means your product is sticky. Customers aren't just renewing; they're expanding. They're finding more uses for your product. They're integrating you deeper into their workflows. This is the compounding engine that drives long-term value creation.

For founders, these two metrics should be central to your fundraising narrative. When you're pitching, investors will ask: "What's your gross margin today, and where do you expect it to be at scale?" and "What's your net retention rate, and what drives it?" If you don't have clear answers, you're behind.

Here's a worked example. Let's say you're building a B2B SaaS company in the data infrastructure space (similar to Datadog or Snowflake). Your target metrics might look like this:

• Year 1 (Pre-launch): Gross margin 60%, net retention 100% (you're just getting started)
• Year 3 (Series A): Gross margin 70%, net retention 110% (you've optimized your infrastructure costs, and customers are expanding)
• Year 5 (Series B/C): Gross margin 75%, net retention 125% (you've achieved scale efficiencies, and your product is deeply embedded)
• Year 7+ (Growth stage): Gross margin 78-80%, net retention 130%+ (you're approaching public company metrics)

These aren't arbitrary numbers. They're based on the patterns in the Bessemer Cloud Index. When you pitch investors, you need to show a credible path from where you are today to these benchmarks. That's what separates a fundable company from one that struggles to raise.

The Bessemer Index and Your Fundraising Playbook

So how do you use the Bessemer Cloud Index in your actual fundraising process? Here are the concrete applications:

1. Benchmark Your Metrics. Pull your gross margin, net retention rate, CAC payback period, and revenue growth rate. Compare them to the companies in the index at similar stages. Are you ahead or behind? If you're behind, you need a credible story about why and how you'll catch up.

2. Validate Your Category. Look at the categories represented in the index. Are you building in a category that has proven it can scale to $1 billion+ in revenue? Or are you in a new category that hasn't yet been proven? This affects your valuation and your ability to raise. If you're in a proven category, you can command higher multiples. If you're in a new category, you need to show why it will eventually be as big as the proven ones.

3. Understand Investor Expectations. When you're pitching, investors will have the Bessemer index in the back of their minds. They'll be asking: "Is this company on a path to be a Bessemer index company someday?" If your answer is "no, we're a niche player," that's fine-but you need to be clear about it. If your answer is "yes, we're building a platform," you need to show evidence.

4. Plan Your Expansion Story. The companies in the Bessemer index didn't start as broad platforms. They started as focused solutions and expanded. When you're pitching, you should have a clear expansion story. Show how you'll move from your initial wedge (e.g., "monitoring for Kubernetes") to a broader platform (e.g., "observability for the entire cloud stack"). This is the Bessemer playbook.

5. Prepare for Due Diligence. When you're in due diligence with investors, especially institutional ones, they'll ask detailed questions about your unit economics. They'll want to understand your CAC, LTV, payback period, and expansion revenue. The Bessemer index gives you a framework for answering these questions credibly.

For more concrete guidance on fundraising strategy, check out Capitaly's 11 Capital Raising Playbooks for Startup Founders, which breaks down the actual mechanics of how successful companies have raised capital.

Reading the Index: A Practical Guide

If you want to dig into the Bessemer Cloud Index yourself, here's how to do it effectively:

Start with the official reports. Bessemer publishes annual benchmarking reports that break down the index by category, growth rate, and profitability. These are free and publicly available on their website. They include detailed metrics and commentary.

Track the index in real time. You can watch the BVP Nasdaq Emerging Cloud Index (EMCLOUD) on Nasdaq's website to see how cloud stocks are performing. This gives you a sense of market sentiment and how investors are feeling about the category.

Study the companies in the index. Go through the list of 46 companies. For each one, pull their most recent earnings report (they're all public, so the data is available). Look at their revenue growth rate, gross margin, net retention rate, and profitability. Start to see the patterns. Which companies are growing fastest? Which are most profitable? Which have the highest net retention rates? This is where the real insight lives.

Compare to your own metrics. Once you understand the patterns, compare your company's metrics to the index companies at a similar stage. If you're a Series B company, compare yourself to index companies that were Series B five years ago. Are you ahead or behind? This tells you a lot about your competitive position.

Use it as a conversation starter. When you're pitching investors, reference the index. Say something like: "We're tracking toward the unit economics of Datadog at our stage, which is a company in the Bessemer Cloud Index." This shows you understand the market and you're benchmarking yourself seriously.

Common Mistakes Founders Make When Interpreting the Index

Before we wrap up, let's talk about the mistakes founders commonly make when thinking about the Bessemer Cloud Index:

Mistake 1: Assuming all cloud companies should look like index companies. The index is biased toward specific types of companies: those with strong unit economics, high gross margins, and clear paths to profitability. But not all successful cloud companies fit this mold. Some are more services-heavy. Some have lower gross margins but higher growth. Some focus on profitability from day one, while others prioritize growth. The index is a benchmark, not a straitjacket.

Mistake 2: Thinking the index is predictive of your company's success. The companies in the index are survivors. They're the ones that made it to public scale. But there were thousands of other cloud companies that didn't make it. The index doesn't tell you what percentage of cloud companies succeed; it only tells you what the successful ones look like. Don't assume that because you're building in a category represented in the index, you'll automatically succeed.

Mistake 3: Ignoring the index because you're early-stage. Some founders say, "We're just pre-seed; the index doesn't apply to us yet." But it does. Even at pre-seed, you should be thinking about the unit economics and metrics that will eventually matter. The time to build good habits around metrics is now, not when you're raising Series B.

Mistake 4: Using the index to justify unrealistic valuations. Some founders look at the Bessemer index and say, "Datadog was valued at $X at this revenue level, so we should be valued at $X too." But Datadog had unique advantages: incredible product-market fit, strong retention, and early traction. You probably don't have all of those yet. Use the index as a reference point, not as a valuation formula.

Mistake 5: Focusing only on growth rate. The index rewards growth, but it also rewards profitability and unit economics. Some founders optimize purely for growth and end up with terrible margins and high CAC. That's not what the index teaches. The index teaches that growth with strong unit economics is the winning formula.

What's Next: The Index in 2025 and Beyond

As we look ahead, the Bessemer Cloud Index will continue to evolve. New categories will emerge. AI will become more integrated. The definition of "cloud software" might expand. But the core principles that the index has validated over the past decade will likely remain:

• Unit economics matter. Companies with strong gross margins, low CAC payback periods, and high net retention rates outperform.
• Growth needs to be profitable. The market no longer rewards growth-at-any-cost. It rewards growth paired with a clear path to profitability.
• Expansion revenue is king. The best companies expand their customer base through upsells and cross-sells, not just through new customer acquisition.
• Category matters. Some categories (infrastructure, business applications, communications) have proven they can scale to billions. Others are still being proven.

For founders in 2025, the Bessemer Cloud Index is more relevant than ever. It's a decade of data about what works and what doesn't. It's a benchmark you can use to understand your competitive position. It's a conversation starter with investors. And it's a reminder that the best companies aren't just fast; they're efficient.

If you're raising capital right now, take the time to study the index. Understand what the companies in it are doing. Compare your metrics to theirs. And use that analysis to make your fundraising story sharper and more credible. That's the real value of a decade of data.

For deeper insights into how successful founders and investors approach valuation and fundraising, explore Capitaly's guide to AI startup valuations and David Sacks' founder valuation advice for 2025. These resources complement the Bessemer index by showing you how top investors actually think about pricing rounds and structuring deals.

Final Thoughts: The Index as a Mirror

The Bessemer Cloud Index at 10 years is not just a historical artifact. It's a mirror held up to the market's actual values and expectations. It shows what investors have rewarded, what they've punished, and what they've learned over a decade of cloud computing growth.

For founders, that's invaluable. It means you don't have to guess about what matters. You can see it in the data. You can study the companies that have succeeded. You can understand the metrics that matter. And you can use that understanding to build a more fundable company.

The cloud computing revolution isn't over. In many ways, it's just beginning. But the companies that will win in the next decade will be the ones that understand what the Bessemer index has already taught us: that growth without unit economics is a liability, that expansion revenue compounds, and that the best founders are the ones who can deliver both growth and profitability simultaneously.

If you're building a cloud software company in 2025, the Bessemer Cloud Index should be on your desk. Study it. Learn from it. Use it to sharpen your fundraising strategy. And remember: the companies in that index didn't get there by accident. They got there by building products that customers wanted to expand, by maintaining strong unit economics, and by growing sustainably. That's the playbook. The index proves it works.

For more guidance on structuring your fundraising process and avoiding common pitfalls, review Capitaly's breakdown of 10 fundraising myths that founders still believe, and explore 6 pitch deck red flags to avoid. These resources will help you present your metrics and story in a way that resonates with investors who track the Bessemer index and understand what it means.