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Bessemer Venture Partners, a high-flying VC firm based in Silicon Valley, has long been a significant player in the tech investment world, particularly because they had the foresight to invest in cloud and SaaS technologies early on. Their expertise has translated into annual reports that people in the industry pay a lot of attention to, with the State of the Cloud being a notable example. In 2023, as ChatGPT made waves, Bessemer was quick to recognize that AI, driven by sophisticated language models, wasn’t just a passing phase – it was a game-changer that had firmly taken root.
The latest edition of their State of the Cloud report takes it a step further. Bessemer is doubling down on the claim that Cloud AI isn’t just following in the footsteps of its predecessor – it’s leapfrogging over it. The buzz surrounding this technology isn’t just talk; it’s a reflection of an industry shifting gears faster than ever.
Kent Bennett, a partner at Bessemer and a leading voice on the 2024 State of the Cloud report, expressed that we’re at a pivotal moment where the tech industry is under the spotlight. He elaborates that the adoption speed is extraordinary, highlighting that companies, new and established alike, are growing, earning revenues, and becoming more efficient due to this AI-driven shift. It’s unlike anything we’ve seen before.
The comprehensive research behind the report involved the collective brainpower of all full-time investors at Bessemer. While Kent acknowledged that their group of 62 global investors might not be indicative of global trends, he pointed out that their focused insights could offer more depth on cloud technology’s future than a broader but shallower survey might.
Kent and his colleagues are sending a clear message to their peers: if you’re developing cloud software and you’re not exploring how to weave AI into your offerings, then you’re at risk of falling behind. Companies that have embraced AI have shaped themselves into what are now known as AI-native – fully versed in the capabilities of language models and using them to push their products to new heights. Those who neglect to do the same are sitting ducks for their competition who, rest assured, is already on the move.
Bessemer outlines five key trends that they believe will shape the Cloud AI landscape. Let’s dive into that.
The one grabbing headlines is the scramble among tech giants to dominate AI foundational models – think of these as key ingredients powering numerous AI applications. Investment is pouring in, and companies like OpenAI and several others have raised mountains of cash, hitting a collective market cap that boggles the mind. As the big boys like Microsoft and Google stake their claims on these model providers, we’re witnessing the groundwork being laid for a clash of titans.
But Bessemer is suggesting a twist: instead of a few tech behemoths monopolizing the territory, they foresee a mix of established giants and standout newcomers capturing the lion’s share of value in this space. Geopolitics might also play a role, as many countries might want to ensure they have a stake in their AI capabilities rather than relying on U.S. companies.
Transitioning to another revelation, AI is redefining what it means to be a developer. Thanks to tools like GitHub Copilot and various coding assistants, programming is becoming more accessible, opening up the field to a broader audience. Bessemer sees a future where nearly anyone with a computer or phone could possess a significant level of developing chops, which might lead to a surge in young tech entrepreneurs and a paradigm shift in the role of software developers in corporations.
Next up, Bessemer is all-in on multimodal models and AI agents, which are set to change our interaction with software entirely. The static, text-only bots we knew are yesterday’s news. AI’s new wave brings vision, speech, and hearing capabilities into play, and this transformation is happening fast.
Then there’s the impact of vertical AI on industry-specific applications, which Bessemer argues could dwarf the value of traditional SaaS businesses. They’re suggesting AI solutions won’t just target software budgets but will also aim for a big chunk of returns that come from revenue generation or cost savings. According to Bessemer, the potential here is enormous.
Lastly, they’re hinting at a renaissance in the consumer cloud market, thanks to AI. While it’s been a while since the market has seen a major consumer cloud exit, AI’s capabilities in engaging consumers could revers this trend, and the report hints at several promising IPOs in the pipeline over the next five years.
Closing their discussion, Bessemer’s team emphasizes that AI isn’t just buzz—it’s a solid, tangible shift in the tech landscape