This article was co-authored with my colleagues Richard Kotite and Will Sheldon. The Accel 2022 Euroscape was unveiled on 15 October, 2022 at SaaStock EMEA and you can view the full presentation set on top of a stylized topographical map of Europe" width="auto" height="auto" loading="auto" id="">Cloud migration is not losing its momentum; only 40% of workloads have moved to the cloud.With hybrid work, distributed cloud environments, increasing geopolitical instability, cybersecurity remains at the top of CIO agenda.On the public side, $1.6T of market capitalization has been lost in the global here.That said, cloud providers have raised an unprecedented amount of capital over the past couple of years - around $230B across Europe, Israel and the US. A good part of this capital is still sitting on company balance sheets today. In addition, the secular trends which have fueled the emergence and growth of the cloud ecosystem remain very strong:Are public markets overcorrected? with the average forward revenue multiples plunging from 17x in 2021, to 6x in 2022. On the private side, cloud funding in Europe, Israel and the US is down 42% in Q3 2022. From data analytics to security and collaboration, no sector has been immune.As inflation drove interest rates up at the end of last year, public cloud valuations started to correct sharply, driving the value of global Euroscape Index down from $2.8T at its peak down to $1.2T today. The value of the Index is back to where it was pre-covid, but at the time, the index included only 69 companies instead of today’s 122. This translates into a decline of the average forward revenue multiple from 9.0x to 5.7x today. How are the public market dynamics impacting venture funding? To shed some light on these questions, let’s take a closer look at what happened in the global software and cloud market over the last year.The need for automation and digital transformation is stronger than ever, with companies pressured to increase efficiency. Spending is expected to increase from $1.8T in 2022 to $2.8T by 2025.Which top 100 companies have been selected for the Accel 2022 Euroscape? Are we overcorrected? If you look at the historical growth from the index in the past six years prior to COVID, it was very linear with a c.30% CAGR. If you dismiss 2020 and 2021, and extrapolate this line, the value of the index should be around 500 instead of 300, implying 9x revenue multiple and a gap in value of $800B. If you think about it, a secular 30% CAGR is not unreasonable given that we’re not seeing any slowdown in the migration of workloads to the cloud. AWS and GCP growth rates are in the mid 30s and Azure is closer to 40%+. Will we see a flurry of down rounds for the 120+ cloud unicorns created in Europe and Israel over the past few years?***************************Euroscape Cloud IndexSo what does this mean for the cloud ecosystem globally and, at a regional level, for Europe and Israel? Crypto ecosystem continues to progress, with BTC up 100% and USDC market cap reaching $50B, up 100x since Dec 2019.The world has reset.What happened on the public market sides: are we over-corrected?
