Can Efficiently Growing Companies Also Have Happy Employees? We Think So!

Reflections on the 2023 Battery Ventures Highest-Rated Cloud-Computing Companies to Work For lists.

Over a year ago, we introduced the concept of APE, or ARR per employee, as a north-star efficiency metric for B2B cloud companies as the broader market shifted to valuing companies’ profitability, even at the expense of growth.

A year later, we’re thinking about APE again as we release our 25 Highest-Rated Public Cloud-Computing Companies To Work For list alongside our related rankings of the 25 Highest-Rated Private Cloud-Computing Companies To Work For.

The companies on both lists represent those where employees report the highest levels of satisfaction at work, according to employee feedback shared on Glassdoor*, a provider of insights on jobs and companies. And as it turns out, at least according to the data we’ve run, there’s a link between APE and loving where you work.

Our latest public cloud-computing list includes fast-growing (per CapIQ), newly public businesses like SentinelOne, cloud stalwarts like Intuit, industry-focused businesses like Procore (which serves the construction industry) and horizontal businesses like Dropbox (which sells technology to companies across industries). The diverse makeup of the list demonstrates how companies across the cloud spectrum—big or small, horizontal or vertical—can exhibit exemplary company cultures.

This year, SentinelOne, a cloud-based security company specializing in endpoint protection, ranked #1 on the public-company list and notably, was also projected to grow revenue the fastest out of all the public winners over the next twelve months according to CapIQ. But interestingly, Dropbox, a high-profile provider of cloud-storage and content-collaboration tools specializing in selling to individuals and SMBs, ranked #2 and was the slowest projected grower on the list according to CapIQ.

Overall, though, the APE metrics for the 25 winning cloud companies seem to indicate that high employee satisfaction can go hand-in-hand with more productivity, better performance and greater efficiency. The 25 Highest-Rated Public Cloud-Computing Companies To Work For have a median APE of roughly $350K, according to our analysis, based on revenue and employee data provided by CapIQ. That figure represents a 10% premium to the APE median of a larger, proprietary data set of cloud companies Battery maintains of $318K.

Similarly, the broader Battery dataset generated a median, unlevered free cash flow margin of 13.4% in the last-twelve-months period, according to CapIQ, while the top 25 highest-rated cloud companies group generated a median 19.1% margin, representing a 43% premium. The top 25 were rewarded handsomely in the public market for this performance, trading at an 8.1x NTM revenue multiple, a 52% premium to the median multiple of the broader group according to CapIQ.

Said a different way: The 25 Highest-Rated Public Cloud-Computing Companies To Work For list could indicate that a free-spending, “growth-centric” culture doesn’t necessarily drive a better employee experience than a culture that is centered on efficiency.

Companies across the private and public markets are currently navigating the current market transition and figuring out how to do more with less. The companies on this year’s list stand out as examples of companies that are navigating this transition well, and we are glad to recognize them.

The information in this blog is based solely on the opinions of Neeraj Agrawal, Brandon Gleklen and Jack Mattei and nothing should be construed as investment advice. This material is provided for informational purposes, and it is not, and may not be relied on in any manner as, legal, tax or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any fund or investment vehicle managed by Battery Ventures or any other Battery entity.

This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and is for educational purposes. The anecdotal examples throughout are intended for an audience of entrepreneurs in their attempt to build their businesses and not recommendations or endorsements of any particular business.

Content obtained from third-party sources, although believed to be reliable, has not been independently verified as to its accuracy or completeness and cannot be guaranteed. Battery Ventures has no obligation to update, modify or amend the content of this post nor notify its readers in the event that any information, opinion, projection, forecast or estimate included, changes or subsequently becomes inaccurate.

*Denotes a Battery portfolio company. For a full list of all Battery investments, please click here.