State of the Cloud 2023
Summary
But amidst the anxiety and turmoil, the tech ecosystem has witnessed something potentially as world-changing as electricity: a string of AI advancements that may prove to define technology and society for generations to come. The record high multiples of prior years inflated by hyper low interest rates and stimulatory environment have not just regressed to the mean—they are currently reset below normalized, historical long-term averages. Additionally, this macro instability had a double squeeze on cloud companies since recession fears led to headwinds such as lengthening sales cycles and tighter customer budgets, which impacted core business fundamentals such as growth. SaaS M&A activity also slowed but remained slightly more robust and was notable for several reasons: • It was a record year for private equity backed deals, especially “take-privates”, as financial sponsors sought to capitalize on the lowered multiple setting. Unit economics are finally more in vogue, while the compelling fundamentals of SaaS businesses, namely the net expansion dynamics and potential for significant opex leverage, remain more critical than ever.
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