Our practice is diverse and focuses on critical enabling technologies for research, quality control, automation and scientific workflows, spanning instrumentation and sensor technologies, consumables (the picks and shovels enabling life-science research, analytical testing workflows and R&D) — even training and service providers.

Much like our software-investing colleagues, we prioritize what we call high-quality revenue: predictable and recurring revenue from consumables and services, over one-time product sales.

For our companies, which often have a number of revenue streams, from product sales and service contracts to consumable sales and software/data subscriptions, it can be more challenging to define value, especially on a comparative basis as the revenue mix varies across companies. But we are seeing more and more technology companies implement software-enabled products and services, as artificial intelligence becomes more accessible and as investors and management teams place a greater emphasis on revenue stability, especially in the wake of the pandemic.

Within our portfolio, we’ve always prioritized improving revenue mix as a key value creation lever, in addition to other key factors such as scale, organic growth rate, profitability and customer/market diversification to name a few.

So, we sought to quantify what we knew intuitively: that for non-software technology businesses, revenue quality mix is a meaningful indicator of value, and moreover, should serve as a key lever to help companies increase in value over time.

Based on a quantitative analysis of publicly-traded ITLST companies and our own portfolio, we created a new framework — the Revenue-Quality Podium — to help management teams, investors and industry stakeholders track value creation as companies transition to a higher share of high-quality revenue.

Download the Revenue-Quality Podium Whitepaper here to see our full analysis. 

The post Introducing the Revenue-Quality Podium: How Revenue Mix Drives Value for Industrial Tech and Life-Science Tools Companies appeared first on Battery Ventures.

Proposal and business-development teams are key to discovering and unlocking revenue opportunities for government contractors. Bid discovery alone proves cumbersome, as finding qualified opportunities across a myriad of government data sources is not enough; teams need to prioritize bids with the greatest chance of winning (pWin), while also optimizing for the largest revenue opportunities.

From there, teams spend weeks or months parsing request for proposal (RFP) requirements, piecing together past proposal content, conducting fresh market research, manually writing long proposals and meticulously checking compliance boxes to avoid self-disqualification. This convoluted process puts small businesses at a significant disadvantage and hampers efficiency and growth for even the largest contractors.

Procurement Sciences is changing the paradigm. By combining deep workflow expertise with the power of large language models (LLMs), Christian and his team have built an end-to-end platform that is revolutionizing the multi-trillion-dollar government contracting industry. The company’s AI-powered suite of tools automates the entire government-contracting lifecycle, enabling businesses to discover relevant opportunities, generate tailored proposal content, analyze the competitive landscape, manage their pipeline and verify compliance – up to 10x faster than was possible through legacy, manual methods.

The value is clear. In just over a year since launching, Procurement Sciences has empowered over 80 customers, from Fortune 500 aerospace and defense companies to small businesses across sectors, to work smarter and win more.

And from customers’ perspectives, the results speak for themselves:

“We doubled proposal volume while keeping the team size the same. 70-80% of words were generated by AI in those submissions.”

“A task that normally takes two weeks is now taking just four hours.”

“Our pWin historically has been 35%. With PSci, it’s 50%.”

“This is equally valuable for everyone. State, federal, local. FARs, DFARs. Everyone.”

We could not be more excited to partner with Christian and the Procurement Sciences team on their journey to bring the power of AI to the world of government contracting. Through their work, they are not only boosting efficiency and growth for the largest U.S. government contractors but also helping to level the playing field for small businesses seeking to serve our government and communities across the country. We are honored to be a part of that journey.

The post Procurement Sciences Makes Government RFPs a “Really Fast Process” appeared first on Battery Ventures.

But what if the new, more-challenging macroeconomic environment, coupled with powerful new technologies like AI, means we should rethink the metrics we’ve all gotten used to – and encourage companies to reevaluate the right set of benchmarks to survive and thrive?

That’s one of the core takeaways from our 2023 OpenCloud report, which we’re releasing today as the enterprise-tech industry continues its journey out of the woods and, hopefully, spawns stronger, fitter, leaner companies.

Indeed, in the technology markets, the dust is finally beginning to settle. Growth rates for the big cloud providers are not what they were two years ago, and the IPO market has not yet rebounded. But we see the technology landscape quietly pivoting toward a horizon brimming with promise as more enterprise-tech companies revert to fundamentals, seeking to balance growth and profitability and capture new efficiencies with AI.

In many ways, this is a watershed moment for the industry, one that will change how software and technology companies are created. The implementation of AI, both in terms of companies being able to offer more AI products and leverage the technology to drive more-efficient internal operations, will allow cloud companies to generate new sources of revenue while meaningfully reducing internal costs.

As we wrote in this year’s report, “as growth returns, highly profitable, high-growth companies will return,” ushering in an era of mega-B2B software companies that will gear up for IPOs when they hit $1 billion in revenue, not just $100 million (the old standard). And as these companies evolve and scale over time, the very definition of a healthy software company will change.

Our full 2023 State of the OpenCloud report is available for download here and at the bottom of this post, where we’ll break down some of our key takeaways.

Cloud Providers Invest Ahead of the AI Curve

Pain in the market has affected every software company, public and private. The world’s largest cloud providers — AWS, Microsoft Azure and Google Cloud, which generate a collective $200B in annual revenue — are no different. These companies have seen growth slow down significantly in the past year and have been forced to cut headcount and other costs.

Importantly, however, these companies are leaning heavily into capital expenditures related to new businesses: major, long-term investments into the future of software, particularly in AI. We interpret this as a leading indicator for building customer demand, conveying a sense of optimism for the market recovery and a high-growth, high-profitability future enabled and necessitated by automation.

Redefining Healthy Software Company Metrics

As research-driven, enterprise-technology investors, we have a deep appreciation for metrics and ratios but the assumptions that guided us in years past may not hold for the next cloud generation. While valuations have come back closer to long-term historical averages, the profile of public companies today is far from average – in many ways, they are stronger than ever.

It’s also important to distinguish valuations from business fundamentals. A company generating $1 billion in revenue today might not be valued as highly as it once was, but reaching such a revenue milestone is still a monumental achievement. And we think these companies will be well positioned as we enter an era of more profitability, more efficiency, and ultimately, higher valuations over the long term.

Starting from the top line, we recommend that early-stage and growth-stage software companies focus closely on logo velocity. We know that as companies mature, they rely on expansion revenue to drive growth. However, logo velocity helps to ensure that there is a large enough customer base to fuel future growth, but also aligns sales to balance new ARR and expansion ARR from day one.

The Path Ahead for Private Unicorns

Navigating the public markets is always challenging, but the current climate is particularly unforgiving. In our 2022 State of the OpenCloud report, we predicted there was pain ahead for private companies who faced a very high bar to IPO. Cut to today, we have seen only one software IPO in the past year — Klaviyo.

While we’re not out of the woods yet, the software ecosystem at large can support a path to IPO for many private software unicorns. And, paradoxically, the tougher macro environment has created a new class of pre-IPO companies that are stronger and more resilient than those in the past.

Conclusion

While we are still in the early innings for OpenCloud, our team is more optimistic than ever about the potential for cloud and open-source companies, with AI as a new growth lever. There is a significant opportunity at hand for software leaders to recalibrate and improve their companies’ operational efficiency through automation. The implementation of AI across customer offerings and internal processes promises not only cost savings but also enhanced capabilities, paving the way for resilient and future-proofed enterprises.

For more insights, please see our full 2023 State of the OpenCloud report below.

The post OpenCloud 2023: Software’s AI-Driven Watershed Moment appeared first on Battery Ventures.

Even in the best of times, ensuring employee satisfaction while continuing to scale, innovate and support new and existing customers is a challenge that tests the hardiest technology leaders. But when a cloud company rises to that challenge, it pays off in dividends: Research has suggested happy employees can lead to happier customers, as well as higher team productivity and firm performance.

To that end, we are thrilled to unveil our sixth Highest-Rated Cloud-Computing Companies to Work For list today, assembled with data provided by Glassdoor* to recognize, very deservedly, the cloud companies that have built stellar and resilient company culture in a very tumultuous time.

Key Findings

Our biggest takeaway is that cloud companies across industries can all be great companies to work for. This year’s winning companies span industries including security, cloud storage, financial software, customer experience, data governance, marketing and advertising technology and more. Even in challenging economic times, where you may expect certain industries to be hit harder than others, companies across the cloud can be fantastic work environments.

A Battery survey of the top 10 private companies revealed that many have invested in fostering inclusive corporate culture by maintaining transparent and consistent communication with employees, through employee engagement surveys, town hall meetings and even monthly “Ask Me Anything” (AMA) sessions with the executive team.

Our survey also found that these companies offer highly competitive benefits packages, including education and professional-development stipends, mental health and wellness/perk stipends, generous paid time off, fertility assistance — even on-site childcare.

Silicon Valley 2.0

As we’ve seen in previous years, California remains a hotspot for both technology company HQs and employee satisfaction — even increasingly so this year. Compared to the last list we issued in December 2021, we saw an eight percentage-point increase in the number of public companies based in California and a 16 percentage-point increase in the number of private companies.

The top 25 public companies have 25.9% of their employees based in the same state as their respective headquarters, a number that jumps to 31.3% for the top five public companies. By comparison, 18.3% of employees at the top 25 private companies are based in the same state as their respective HQs, versus 23.7% of employees at the top five private companies. One of the hardest challenges of managing a scaling cloud company is expanding operations into new regions, and the companies on this list have clearly managed that transition successfully.

2023 Company Lists

Without further ado, here are the 25 highest-rated public and private cloud-computing companies to work for in 2023:

The post Not Just Weathering the Storm: How Today’s Cloud Companies are Cultivating Happy Employees and Brighter Workplaces appeared first on Battery Ventures.