“Monday’s Secrets to Growth in Uncertain Times” with co-CEO Eran Zinman

We created a new category of software. We wanted to build something that is radically different, a work OS. Ray and I like to think about it as Lego bricks. The idea was to democratize and allow people to build their own software. People build unbelievable stuff on Monday. We have customers from over 200 industries. NGOs, we can make them 200%, 300% more efficient. It just blew our mind. Our Culture is why we win. Everybody in the company knows everything. Constantly changing. What are we not doing? What are we not building? What's the next step? Been quite a journey so far, but we still have the same inspiration since we started. I feel we're 0.0001% complete. We have more to prove, more to grow. Monday really has the opportunity to become the backbone of the future of work. For us, it feels just the beginning. Please welcome to the stage Aron Zinnman, co-founder and co-CEO at monday.com, and Jason M. Lemkin, founder and CEO at Saastr.

All right, how's everybody doing? Good. All right, well, we are in for a treat today. We have one of my favorite founders and I think one of the SaaS leaders that I think is one of the most interesting, luckily, to study in 2023. Now, Eran is a SaaStr annual veteran. You were here in 2017.

Yeah.

Yes. You weren't even called Monday back then, were you?

Yeah, we were. Let me tell you a story about that.

Okay.

Yeah. Yeah. So I went to my first SaaStr in 2017. I think it was February. 2017.

Dead of winter.

Yeah.

Yeah.

It was in the city. And when you registered, you had like a pin or a badge that says how much ARR do you have?

Oh yeah, we do have those.

So there was like a $5 million ARR, $1 million, $10 million. And I remember I think we had $7 million back then. Yeah, it was 6 years ago. We had $7 million. And I thought, should I take the $5 million or the $10 million? What's— so I don't remember what I took. But I just want to say thank you, Jason M. Lemkin, because it's been such an amazing conference back then, and the community has grown so much. And, you know, I'm sitting here today, for me it's a kind of a closure as a founder, because I was in the audience like all of you right now, and I remember that we have 7 million, and, you know, it was very hard to imagine the future. I'm here now, which is amazing. Maybe some of you will be in the next Saastr speakers in a few years.

Some will be. Well, hold on, can we put these slides up for a second? So $7 million in 2017. Let's look here. Yeah, could you hit 2011 during the year?

Yeah.

So I want to talk about this slide in a second, but let's just think about the sheer power of compounding revenue for a minute. I mean, Monday is an outlier. I mean, it's one of the best, but $7 million when you came in 2017. And today you're coming up on 700, right? Yeah, 640 last quarter, over 700. So that's 100— let's just slow this down. Let's enjoy the moment. A little bit of respect here. I mean, it didn't— did it feel like in 2017 you could be 100x bigger? I mean, even though you were growing like a weed, did you really feel you could be 100x bigger in that amount of time? It's 6 years, right? Is that 6 years? It's crazy.

Well, I remember you had a phrase that says 1 to 10 is improbable.

Yeah.

So 10 to 100 is inevitable.

Inevitable. You're inevitable.

How much is it from 100 to a billion? Like, it's—

I don't know that we didn't— we— I don't think there was a SaaS company that a billion at that time. So we have to— yeah, I think it's more than inevitable. I don't know. You got to— I think you got to— I think the— I think it gets less pithy because it's like you got to go multi-product. Inevitable, super inevitable if you go multi-product, if not, so 100, yeah, force of nature. And what we'll get into on Monday's NRR today is roughly what even from SMBs, it's almost 120, 115 something?

Yeah, 115, yeah.

And what, just think about this craziness of the 100x, right? Do you remember what it was back in 2017 selling to SMBs?

What, the NRR?

Yeah, no, the NRR. How much of a boost did we get of this? NRR, do you know what it was? It over 100 back then?

How much our NRR was in 2017?

Yeah.

Much less. I don't remember exactly how much it was, but maybe around the 90s.

90s. Yeah, that'd be my guess. Yeah. So, okay, there's a bunch of stuff I want to talk about of Monday. It's so interesting. And the title of this presentation, which I unskillfully fast-forwarded, but I think it was steering, not turbulent times because that's not the Monday story, unpredictable times. Is that what it is that we're going to get into? Monday has— you've had your challenges the last few years, but we really, as we'll talk about, we haven't really missed a beat. The growth is epic. So, but before we get there, I was thinking about this. Monday's got to be the SaaS company that more people think they know about that don't. Between YouTube and the Super Bowl, everyone thinks they know what Monday does, but they actually probably only understand part of the suite. And so give us just in a couple of minutes, give us a sense of where it started and everything that Monday does today, just so we can triangulate on where you're at coming up on $1 billion in revenue.

Yeah, so as you can see, ever since we've been in SaaS, we had hypergrowth since 2017. And I think your statement is pretty much correct. I think a lot of people probably saw an ad about Monday or read about it, but I feel a lot of people don't understand the full depth of what the platform is. If I ask like a random person, even here in the audience, What is Monday? You're probably gonna get a variety of answers, anywhere from project management, work management, maybe some will say CRM. But in essence, if you can see the graph and all the features that we added from day one, we built a platform. And a platform in the deep meaning of that, which is a software that's very flexible, not rigid, allows everybody to build kind of their own solution. And the first use case that we kind of focused on was project management, and that's what you saw most of the ads. The reason behind it was that nobody went on Google and searched for a flexible software to manage my business, right? Like, nobody does that. People search for project management, they search for CRM. So we had to change from our— like, there's the company vision on one hand, but there's the go-to-market on the other hand, and you need to balance the two. You need to understand what people are searching for, what their intent is, and what is the product you're building on the other hand. So Monday has always been a platform, and now we, as you mentioned, we transition into multi-products. So we launched Monday CRM, we launched Monday Dev, but that's an evolution of our platform. It's all built on one platform.

And how— thinking through that now, I hear you say it again, you know, questions when you have something this rich to especially to SMBs, how do you communicate that? Now the Google search is an interesting example, because how do you communicate this depth? It's so much functionality. How do you do that without overwhelming, or how do you expose a small business to it?

Yeah, so I think the main point that we've done, which I think is important, you don't need to tell the whole story from the beginning, especially when you sell to SMBs. I think that we focused on giving them value as soon as possible. So if you were searching for a project management or CRM, we wanted to serve them a CRM or a project management. Don't need to explain the whole depth of the platform. And then as they scale the product and use it more and more, they're exposed to all the features. So we call it like gradual discovery. Don't overwhelm them, don't tell them the whole story because it's confusing, especially when you're an SMB. You want to understand what you're buying. So that was our focus from day one.

Is there some sort of metric you guys use in terms of like how much of the product portfolio folks use over time? Do you track like percent of features or functionality? Do you think about that?

Yeah. So one thing we've done since the beginning of the company, we actually built a BI tool called BigBrain.

First year. First year.

First year. I'll tell you a story. We were 7 people in the office. Literally 7 people, including Ray, myself, my partner. So I think like 3 developers, and that was back in 2014. And we built a BI tool called BigBrain back then. It was a major investment for that size of a company. But from day one, we said we can't fly blind, like we have to know what's going on in the product. So we built this tool, like internal tool that helped us track revenue, marketing expense, and also usage of the product. So from day one, we focused on, uh, engagement and usage, because otherwise people will churn, people won't recommend, uh, to the product. So that was a big focus for us. And until today, BigBrain is a major part of the company.

Yeah. Uh, and even like you— I think you said even in year one, selling to SMBs, even the customer lifetime value was highly instrumented, right? And I think you had like an 8-month CAC you and Roy targeted, and you had it sort of targeted down to the last decimal point or something like that.

Yeah, so when we started a company, you know, back then in 2014, you know, there wasn't a lot of money that you could raise as a startup. Maybe similar to today, I think. Our first round, just so you all know, we raised $1.4 million and $2 million pre. Okay, so that was—

let's not think about the math of dilution. Yeah, let's not even think about that math.

For about 30% of the company. Yeah, $1.4 million for 30% of the company. Yeah, that was our seed round. So money wasn't in abundance. Like, we had to measure everything. We had to track everything we've been doing. And I think it stuck with us, this efficiency. We always think about expenses and we think about how do we measure things. And I think it's very healthy for companies to do that.

Yeah. So I want to dig in more to some of the interesting things about Monday, but just on this history, the one thing that I don't know is as you guys started to take off at that 7 to 70, what was the 10x feature? Like, what was the magic thing at the software level that Monday did that others didn't do? If there was a 10x feature, what was that? What was that aha thing?

Yeah. So initially it was the boards, which is kind of our Monday database, if you like.

Yeah.

But I think every time we made a leap in terms of product features, it wasn't because of feedback we got from customers. I always like to talk with customers, but actually the major leaps was things they didn't expect. So for example, automations was a huge driver of growth. We added automations even though not a lot of customers asked for it. Yeah, but just automate manual work. That was a huge game changer.

That's everything today, but that was way ahead of its time, right?

Yeah. Yeah.

Yeah.

Now it's very common, but back in the day and how we built it was very unique.

And did they— but so they're doing the Google search for project management software, which isn't even all of Monday. You're getting them into a trial. What got them to convert in the early— like, what was there? It wasn't just that the— maybe it was the automation, but what would get them to convert when there are more vendors out there?

Yeah. So I think Rory and myself, my partner, are kind of unique because we're both engineers. Okay? So none of them is like the business person. And to be honest, since day one, I didn't like selling to customers. Like it's something I'm not good at. You know? Like I always felt it's not my skill. I'd rather write like 100,000 lines of code than to pick up the phone and call somebody. You know?

It's just— There's probably a few in the room that have felt that way.

Yeah. So maybe, you know, it was a coincidence, but it just forced us to build a product that kind of automatically converts because we're product people and we wanted the customers to become paying customers without talking to anybody. You know, just use the product and pay for it. That's the best way. So we put so much focus on user experience. We A/B tested everything and we made the product very simple to start with. Again, going back to that principle of gradual discovery and then you discover the depth of the the product. But I think that's a great way to build a company if you want to focus on product-led growth. Because thinking in retrospect, let's say we had an amazing salesperson in the company. Even though we had in the beginning a shitty product, that person might be able to sell. And then you get a wrong signal. Absolutely. You get a wrong signal. And because we didn't have a salesperson and people have to convert and sell the product by themselves, I think just create a very healthy product-market fit. Not all product-market fits are equal. So that's, I think, one benefit that happened because of that.

Yeah, I mean, there's— and we'll talk a little bit about— I mean, Monday has gone upmarket. 50K customers are your biggest growth area. But if you can start with a true self-service motion, your product can be magically better, right? Versus having humans bridge the gap. You know, that's the nature of bigger customers, enterprise humans. Humans become the gap fillers. It's not all bad, but you can never go back, I think, is the thing.

Yeah.

All right. So let's— that's a good background. Let's talk about this for a minute. Obvious to you, and then it'll— but it'll set the tone for the next pieces. I just pulled that 70% of our customers are in non-tech: real estate, banking, journalism, construction. Two engineers that didn't want to talk to customers. How did you get into non-tech? How did you make this? How did you get out of tech?

By the way, don't get me wrong, I love our customers.

No, I know you do love— you don't like selling. I misspoke. That you don't want to sell.

I love talking and getting feedback, not—

I get it. Yeah.

Yeah. Okay. So I think that that's an important point. When we started the company, we said that we want to sell the product not just for tech companies, right? I think a lot of startups focus on tech and it makes sense. You come for that industry. But I think if you can, again, maybe some tech products can, but if you can, expand to like non-tech industries, that's a major benefit, major benefit. From day one, 70% of our customers were non-tech. And non-tech, I mean, you can see here like real estate, banking, construction, even churches were using us back in the days and now. And for me, that's like the real world. That's like real businesses. And we're probably gonna touch it in a few slides, but I think that's one of the things that made us very resilient as a company, even, you know, in what we see now, because I think a lot of companies are overly exposed to tech companies, took a big hit compared to others. So that— and by the way, this was always also a coincidence because, you know, the fact that Monday is so flexible, it allowed us to enter into other verticals that we didn't have experience in, like have no experience in banking or real estate or construction. But our customers do. And because the platform is very flexible, they could use it to their own needs.

And was this— I mean, you said this was from year one or day one, but was this strategic? Did you say it's less competitive in these spaces, or was it your own DNA, or how did you make these decisions?

So it was a little bit random in the beginning. So when we started, we ran a bunch of Facebook ads.

Yeah.

And I remember the original banner, it was manage your startup or something like that. And we had churches signing up and we have construction companies signing up. I see. It's not a startup, but they've been using it and they love it and we can serve those customers. So let's strategically choose that path. So it was kind of random, but just seeing what they're doing with the platform was mind-blowing back in the days.

So you use— I mean, Facebook ads are an effective way to reach those industries as we know. So you hacked it. You ran a bunch of Facebook ads and the ones into more traditional industries were easy to convert and you ran with it.

Yeah, we had also a lot of tech companies, but we also had a variety of other industries as well.

Yeah, yeah, that makes sense. It's interesting. Okay, so let's, for folks, let's slow down this slide. And I'm not saying everything for the last 2 years for Monday has been easy, right? There have been some macro impacts overall. If we squinted, we could see one quarter was better than the other, but let's just step back for a minute. And this is just out of their actually very, very good public analyst stuff. Go to, just do a Google search for Monday analyst. A lot of public companies start shrinking the amount of data they share, not Monday yet. So it's a gift. That's why I write it up on SaaStr. But look, whatever has happened in parts of tech, parts of sales and marketing, whatever other speakers here will tell you the world ended, last year and we're in the worst downturn since the 14th century, right? Since the bubonic this or whatever. Maybe, but maybe not if you sell to real normal businesses, right? Because there is a little bit of impact here, right? But overall, this is a pretty consistent— actually, that's the term, consistent, right? So what did you learn through this macro last 24 months? Summarize it for all of us. What have you guys learned?

Yeah, so definitely, I guess all of you have felt it, you know, what happened in the last year and a half. We also felt it, but you're right, to a lesser extent. Yeah, I think there's a few reasons for that. There's things you can control and things you can't control. But as I mentioned, the fact that we're not 100% tech-focused was a big, big thing because like I've said, a lot of non-tech companies were not affected by the economy. So that's a benefit. If you can sell into non-tech companies, that's a great way to expand the company. It was very, you know, it was great to sell to tech companies back in '21 because they were growing like crazy and it created like great growth. But I think that real businesses, if they can, should sell to, you know, multiple verticals. So that's one. Number 2, which I think we've done right, and if you have a startup right now, I think that's something you can do, is performance marketing. What I saw when the economy changed was that a lot of companies cut performance marketing entirely. It's the easiest thing to reduce because let's say that you want to reduce the burn, what's the first thing you're doing? Not let people go or reduce expenses, you stop doing performance marketing.

Yeah, just cut it all, right?

Cut it all.

It's a variable cost.

But in my opinion, it's a big mistake because right now, not only we kept doing it, but we actually scaled it. And right now we have the lowest bids that we ever saw as a company because everybody pulled back. A lot of companies reduced spend and we're more aggressive than ever. But I think in retrospect, why they've done it is that we had big brains. So we had the confidence that every campaign we're spending on was bringing the results. I think a lot of companies, you know, back in '21, '22, just spent money in performance marketing. They saw the ARR grow, so they said, okay, it makes sense. You know, it's a good ratio, but they didn't know how to attribute the campaign to the result. And we knew. So my tip to you is two things. One, if you can, try and do performance marketing again because it's very cheap right now. You should do it. You should get new customers on board. So that's one. And number two, if you can, try to measure how each individual campaign affects ARR. It's not that complicated to do it. It's very easy to attribute that and it just gives you so much confidence and ability to scale.

Yeah, I think when times were really good, marketing budgets inflated and just certain amounts were just thrown at performance marketing and too much was thrown and just cut to the bone, just literally cut to the bone. Okay, one more question on this, looking at this fresh and then we'll move on, but I have studied Monday a lot and I'm a super fan. What I don't— I think I understand why Monday has grown so quickly, but it's really grown quickly. And we can look at other companies that are, you know, top, top, top best of all time. Maybe a handful like Microsoft have grown faster. But for B2B where it's subscription revenue and you do need to do— I'm missing a little bit of the story about why Monday grew quite as fast as it did. Not why it's getting to a billion, but what am I— what was the thing that really blew Monday up?

So I think it's a combination of a few things. It's not like one thing that I can put my hands on, but a combination of performance marketing, which is very efficient. You probably saw our ads on YouTube.

I think we all saw them.

Yeah, we— well, hopefully.

But they worked.

They work.

But they work.

They work. And that's the point. They work and we know they work. Okay, so that's one thing. Second thing is, is again, a lot of verticals. So that really helps you because one thing that helped us reduce the marketing spend was, let's say you focus just on one vertical, let's say project management, at some point you exhaust the inventory and then the incremental dollar you put is not as efficient as the first one. So the fact you can go multi-vertical is a hack in a way because you can bid in each industry and and be very efficient in that. So that was one engine that really helped us. Second one is the product, okay? We allow our customers to use it, so they don't have a lot of feature requests. We almost didn't get a lot of customer feedback or anything like that because we gave them the ability to customize their own product. So it's not like a million feature requests that we had every day because we gave them that freedom in a way. So I think it's not just one thing, but a combination of a few things that truly helped us grow the company that quickly.

On this multi-vertical thing, that is a, I think, a bigger insight than I realized or folks realized. Do you staff it? Do you have like a mini GM of different verticals? Thinking about how many of these, how many of these verticals have like a PM or a GM?

Yeah, so right now we really scaled that. So we have Monday Sales CRM and Monday Dev, which is a complete organization within our company. But back in the day, we had a team working on each one of those verticals. And, and again, uh, Each one of those verticals was born because we saw our customers using them. So they've used it for a bunch of things, we learned from them, and then we packaged that into a product.

And I tend to think of, when you're trying to look at the data, I tend to typically think of 10% as material. Like if 10% of your customers in an area lean in on it. Because you're doing verticals, was it smaller if you saw 5% of your customers from churches or banking? Was there a number that was material to lean in and invest in more in a vertical?

So the way we verticalize it wasn't the customer but the usage. So you have churches doing fundraising and you have churches managing, I don't know what, but there's a lot of use cases each company uses. And we actually saw what they're using it for. And this is how we package the product for different use cases.

Got it. Okay. Super, super interesting. Okay, this— let's slow this down. I have written a lot of this on SaaStr. Boy, this is the story of the year. Monday's not the only one, but maybe one of the most visceral. For folks that don't have to worry about things like operating margins or free cash flow because they're just running their businesses, this is like night and day. Walk me through this, Aron. In Q2 of '22, Monday was hyper-fast growing, right? You were burning some cash. It's okay, right? That's what scale-ups and startups and You know, rate— how much would you raise in your IPO? A couple hundred million. You can spend a little bit of it, right? And it was great, and the growth was incredible. In 4 or 5 quarters, you go from not that unprofitable, but unprofitable, to wildly profit— I mean, I guess this is free cash flow, but plus 26%. In 5 quarters, you were burning 16 cents for each dollar that came in. That's not bad. That's a pretty low burn multiple. Now $0.26 of every dollar is going to cash flow. So we're gonna talk about this a little bit, but this is, this is night and day, isn't it?

Yeah, so a few interesting points about this. One, like, now the company has over $1 billion in cash. Yeah, and I think the important part is we actually celebrated a few, a few months ago.

Billion in cash.

Well, not just billion in cash, but something happened that we had more cash in the bank than we ever raised from VCs. And the public market. So in the board meeting, we asked them, Freedom Day, if we can give them the money back and get the shares.

But there's a moment in time when you really want to do that, right?

They didn't agree. They didn't agree. Yeah, I think what happened was that, look, we focused on cash flow from day one. Day one. And I want to tell all of you something. I think there's something a bit misleading in how we measure SaaS companies. And if you take one thing from this session, this will be it. All the metrics that you're using, LTV to CAC, CAC return rate, all of them don't take cash into account. It's not cash. It's not cash. ARR is not cash. CAC is not cash. LTV, well, I don't know what it is, but yeah. It's a bogus metric, but that's definitely not cash. That's not anything. So the point is nobody measures cash. What is measuring cash? I want to explain. When we started the company, what we were religious about was to see the cash return. So we would spend money, as I mentioned, on Facebook and YouTube and Google. So we would measure when the the cash left the bank, literally left the bank, okay, and that's when we marked it, and then we measured when the cash came back into the bank, okay, from those customers. So we would buy a cohort of customers and we see when the money goes back into the company. Now imagine that you have $5 million in the bank, $7 million in the bank. One way to think about it is I can spend $5 million on performance marketing. This is not what we've done. When we had $5 million in a bank, we spent $25 million in performance marketing. Now, how do you do that? Because we recycled the money super quickly. We would spend, let's say, $300K on performance marketing, and then after 1 month, we saw 50% back from that campaign. So $150K back, okay? And then we saw 70% after 3 months and 5 months. We tracked every penny. How much, when it goes out, when it comes in, and this is how we optimize the product, the pricing, everything. Okay, so you can think about it like you raise money from our customers' usage. Okay, VCs are not the only resource. If you, if you think about, if you don't think about it, then you can say I'm gonna raise more money. But if you focus on cash efficiency, you can make your business super efficient and just scale much faster as it as a team.

Yeah, and just to— and we'll dig in a little bit on this in a second, but just to take another pause on this, I think, you know, until fairly recently, we really weren't sure if B2B companies could be efficient, right? We had kind of bought into this Amazon-like model when Salesforce went IPO that, yeah, we could spend a ton on sales and marketing, but our customer lifetime value is 70 years. So at Terminus, it all works out. And we all— and then I remember at the first SaaStr Annual, Aaron Levy came one week after Box IPO'd, and I asked him, how did Wall Street buy into this model? He's like, well, not really. I mean, it's tough. And then everyone— and then SaaS, the multiples got big, and people bought into this, right? But what we've proven, and Monday's a great case study, is that look, even if maybe you give up a little bit of growth, and it's not clear that we do, You can be— you can have it all. It's not easy, but you can actually have a very efficient model. It's software, right? Write once, ship a million times. And you can do it. And you can do it spending a lot of marketing, right?

The only thing that happened here during those 4 quarters was that we slowed down hiring. That's the only thing.

Yeah, we'll hit that one on the next slide.

Slow down hiring. But you have to be efficient from day 1. 'Cause if you're not efficient from day one, you don't measure that, even if you stop hiring, that's not gonna happen. So we slowed down hiring. That part of what drove the free cash flow, we became more efficient. But a big part of it was that we were efficient from day one. We measured everything and we stayed efficient. It's part of the company DNA. Now you have to do it from day one. Change it once you scale, it's really hard to change.

Really hard, right?

Really hard, yeah.

Yeah. So I think we'll touch on the headcount on the next one 'cause it's interesting, but just, I think the one thing is for founders, I want to stay focused on Monday, but a lot of folks have grabbed me here already on day one and said, "My investors, my board told me I need to get profitable." Okay? And that's— and Aron, feel free to editorialize this. That's the wrong lesson. You do need to get efficient. Getting profitable will get you nowhere though, right? Getting profitable and growing 0% or 3% does not build a Monday. You've got to do what's even harder. You've got to find a way to grow more efficiently, but still grow, right? I think there's a lot of bad advice out there.

Yeah, overall VCs give bad advice. That's a lot, a lot of, uh, yeah, some of them, some of them, some of them.

Yeah, a little bit of whiplash on this.

Uh, but, uh, I agree. I think, uh, you know, P&L, profitable, is not a way to optimize your company. Uh, and free cash flow, it's much better because this is something that you can do things with it. And I, I think a lot of investors— and I talk, you talk a lot about this, about being efficient, meaning, you know, managing your cash and burn multiple that you mentioned a lot of, a lot of time. You know, P&L-wise, I wouldn't focus too much about it, especially when you're a young company.

Yeah. Okay, so this one— oh, we might have the employees the next one. I do want to hit it. Um, this one's super— there's a lot of interesting going on here, but, um, I want to talk about this one: high NRR from SMBs, right? And, um, I almost know the secrets from Monday, but I actually don't know. I think this is One of the most important things to talk about for anyone that's conquered SMBs. And we can see on this first chart, actually, there has been some NR impact from macro, right? No doubt about it. If you look at 125 to 110, that's macro. That's getting harder. Folks hiring fewer people, scrutinizing more. Still epic though for SMB. What, what's the secret? How do you get over 100 for SMBs? Because I think organic's like 90, like you talked about at 70, right? If you don't do something, I don't think you crack 100.

Yeah, so like Jason M. Lemkin mentioned, part of the macro we saw was that our pricing is based on seats, meaning how many people you have in your organization. So what happened was that some companies reduced hiring, and that was the impact that we saw. And I think a lot of SaaS companies saw that. I think in some respect it shows the disadvantages of having a seats model.

Yeah, it has a downside too. It has a downside too, right?

When everybody's hiring and growing, that's a great great thing, but it has downside. And we saw some companies which are most— more consumption-based that weren't as affected. So one thing we think about is maybe we should have like a mixed model, you know, both seats and consumption to an extent. So that's another thing that we're thinking about. But I think first of all, for us, we always try to optimize NRR and gross retention. So both gross retention and net retention. Again, we measure it from day one. We have gross retention around mid-80s, something like that, on all customers, but obviously it's much greater on enterprise. Something that really drove NRR was definitely going upmarket. That's something we've done late in the game, only around 2018. Yeah, so going back to me telling that I'm an engineer, my partner is an engineer, I think we at some point we said we're never going to have a sales team. Well, we were wrong. We have a huge sales team right now, but that was a good lesson because what I found— I always said I want to build the most amazing product. What I found is that the most amazing product for enterprise companies is to have a person talking with them. You know, it's like they want to talk with somebody. They have security issues, they have governance, they need help, and this is just a better product. So that's how I think about it. So building a sales team was a great growth driver in terms of NRR and bringing more accounts. So the more customers you have, the more NRR is important. That's one of the things. What happens, like, when you're a young company, you focus a lot on acquisition. That kind of drives the ARR. You always acquire more companies than you have. But think about Monday right now. 90%, 85-90% of the revenue is from existing customers. That customer that—

I didn't know it was that high, 85-90%. Yeah.

That's customers that have been with the company for more than a year. Now think about it. You have that many customers and as you scale, even though you do performance marketing, you do the Super Bowl, you do whatever you want, that increment is gonna be insignificant compared to the subscription revenue you already have. So let's say you wanna grow 30%, 40%, how do you do it? Only with NRR. That's eventually the company growth will become its NRR. Because that's the majority of the customers that you carry with you. That's the majority of the revenue. So that's why it's so important to focus on that. My tips for increasing NRR was first, measure it. Maybe it sounds intuitive, but a lot of companies don't do it. We built a customer success team. We measure everything. We have people in charge of making this number grow. So that's tip number 1. And tip number 2 is, you know, instead of— my intuition was always, oh, we need a higher NRR, we need to improve the product. Now nobody knew what to do with this information. Okay, we're improving the product all the time. Like, what specifically do we need to do? So over time we added more things we can sell, you know, because eventually if you create more value and you create more sales opportunities, that helps drive the NRR go up. So multi-product add-ons, enterprise features, anything that can give customers more value while giving you more revenue as a company, it's a great way to increase the NDR.

And I should know this, but today, do you know what percent of your revenue is sales-driven or sales-assisted, sort of sales-led versus pure product premium?

We have the 50K segment.

Yeah.

So that was almost nothing like 3 or 4 years ago. Now it's almost 30%.

30%. Yeah. All right. So the majority is still mostly self-service, but from nothing to 30 in the last—

That's the main growth engine for us. Yeah.

And so I think it doesn't seem like you went upmarket too late because the growth was pretty linear. But should you have done it a little bit earlier? Did you sequence it right? What's the learning looking back on it?

Yeah, definitely. You know, always great to start earlier. You know, like 2017, 2016. I guess that our investors were right. Like they always said, like at some point you didn't have a sales team, but they were patient with us.

Well, you did just fine.

Yeah. Yeah. But definitely was a game changer. We actually, the first sale that we ever done was a guy from our customer success team. He said, trust me, let me sell to a customer. I can do it. So he just did it. We got like the first $50K deal and I was like, whoa, like you've done it in a few days. That's amazing. We need to build a team. So a lot of credit to him.

There's more of those on the self-serve folks. There's more of those stories where someone said, let me just go sell it. It's a pretty common story, actually. Okay, I think we hit this one. You're right, we did hit this one. Well, finished Q2 with 63% year-over-year increase. So it's good you went upmarket.

Yeah, yeah, it's, uh, look, there's, uh, it's amazing to see the growth of that segment and the enterprise customers.

Yeah, um, oh, sorry, we did hit this one, 29%. Let me talk about Oh, maybe we didn't have the headcount one. I thought we had it. There is a slide that maybe isn't in here, but let me imagine it for the audience so I don't skip too many. I think for about 4 quarters, roughly, you kept headcount about flat, right? So that's how you went from negative cash flow to epic in 4 quarters. And then I think it grew a little bit last quarter, right? I think you're hiring again. So, Did we get too efficient? So this is the meta question for 2024, 2025. Can we stay as efficient as we are today? Are we too efficient? Are we mortgaging a little bit of our futures because our sales teams are too lean or everything? Or can we sustain this level of efficiency?

Yeah. So it depends. So yeah, first of all, we're back to hiring. We're going to add another 500 people next year. So that's the plan.

So how many employees today?

Now we have about 1,800. So we're going to be 2,300 next year. Okay. So hold on. Let me just—

I wish I had I don't have that slide, but you're 1,800.

Yeah.

So basically you kept it roughly 1,800 for 5 quarters. Okay.

It was, I think, 1,600 in the beginning of the year. So we increased like 200.

But now, sometimes my math gets worse in the afternoon. Help me because you're the real engineer.

I know the numbers.

You're going to add 25% to the headcount next year.

Yeah.

So that's reaccelerating, right? Less than, but less than revenue, right? Yeah.

But the free cash flow is going to remain the same percentage.

So you're going to talk, so, okay. So if they're roughly equal, you'll maintain the free cash flow and you'll stay stable by putting that money back into hiring.

Yeah, so basically what happened was that we reduced hiring because the demand was not growing as we expected.

Yes.

Even though I've mentioned that we kept performance marketing, but the demand went a little bit lower than what it was, so we just adjusted the sales team. We measure everything, the sales team as well. So now we see a trend where we see more demand, more customers, so we have the confidence that we can continue and hire you know, more salespeople, more R&D people. So we're gonna reaccelerate hiring. We already been doing that. But I think what happened was very healthy for the companies. We got rid of a lot of fat that we had. Not a lot because we were very efficient, but every company has fat. So we took the fat out and also improved a lot of things. So we're committed to stay free cash flow positive for often the same percentage while continue to grow the headcount. Next year.

Yeah, I think we all had some fat, right? If you did well. What are the things— are there some things you're not going back to? Are there some practices that change so you can stay fitter or less fat or more efficient? Have things changed?

Look, I think what happened in 2021 and 2022 was very deceiving because if the economy is growing like crazy, you don't know what is it that you're doing that makes you successful. Okay?

Yeah.

It's like everything works. Everything we've done works.

Everything works, right?

But not— it wasn't like really the case. Okay? Like when everything is growing up and to the right, everything looks good. You feel like everything you're doing is like, wow, amazing. Like such an amazing idea. But when the economy changed, suddenly not everything looks as shiny. So, you know, we had so many initiatives, so many things we wanted to build like 5, 6 years from now. At some point when the economy changed, we said, "Okay, we need to focus. We need to do what's working. We need to reduce what's not working." I feel that's very healthy for our company. I think we got confused that we attributed the success to ourselves as opposed to understand that there are micro trends for better and worse that we ride it on in order to be successful.

Yeah, the more you go through hypergrowth, actually sometimes the less you're sure why, right?

That's the problem.

One thing that I know a lot of people are thinking about and struggling with about When you got fitter, how did you help the sales team adjust, right? Because a lot of fat gets into the sales team too, right? And how did you— did you think about metrics differently, attainment differently? Did it change the type of rep you were looking for? Because that's something a lot of folks are struggling with.

Yeah, we kind of re-optimized the quota for salespeople.

Lower, higher, or just different?

Higher.

Higher.

Again, you set a quota, you have expectations from salespeople, and you know, like, you can control how many leads they're getting, what your expectations for them. So we increase the quota, make them more efficient, reduce some of the, you know, helping teams that help them sell but wasn't as efficient, you know, SDRs, optimize some of those teams, CSMs, account managers. It's just when you grow and everything up to the right, like, you keep hiring and you say, oh, I'm not sure it's working, but let's hire more people and scale that. And we went back to the drawing board and optimized some teams and started to measure things we haven't done before. And you know, once you've been proactive about it, it's really— you can optimize a lot of things in the company. I think, you know, with the sole economy change, instead of thinking, okay, we're stuck in this situation, we're gonna have a shitty quarter, we're gonna have a shitty year, just like COVID in a way, we said, let's do something about it, let's change, you know, let's Let's try to be proactive. Let's take control. Something I heard from one of the founders, which I admire, was that in downturn, the greatest companies are forged. And I understand it now because if you're resilient through a downturn and are able to change your company and pivot quickly instead of just tapping yourself on the back and saying, "Oh, we're going to pass through that," I think it shows resilience and it kind of gives birth to the best companies going forward.

All right, one last one on this efficiency one. I know I've got a lot, but it's just, it's so good to have you on because I do think this is the theme of the next couple years, right? Samsara, just in their last quarter, they had a great quarter and they said we didn't have enough sales capacity. Samsara actually had some big macro impacts, but it was earlier than others. I think it was 3 or 4 quarters ago they had a hit one and then boom, and they were just like, well, we just don't have enough. We literally don't have enough. We're hiring like mad, right? Did you learn anything about Sales capacity is complicated. Did you learn about anything from going from fat to skinny to higher quotas? Do you have enough capacity now or any evolution of that learning?

First of all, things happen, you know, just organically. Like, it's not always the salesperson that closes the deal. Some things happen just because they happen, you know. Customers want to upgrade, they want more seats, they want more use cases. So you discover throughout the process that you can do more with less people. So I think that's one discovery we had and we started to measure that more and to make sure that we never go back. You know, always try to go back, never go back, always try to optimize more because the less people you have, the more quickly you can move and react and change as a company. I think having a lot of people has a huge downside to it, especially when you're a young company. So I think that was a good learning for us and we're committed to continue with that going forward.

Okay, that's good then. Alright, last one, we'll be out of time, but can we put this slide back up? I think we lost them. Just for fun, I know we hit this already, but if we can. Okay, I know we already hit this and you already answered this question, but just for fun. So a lot, the Super Bowl, I don't even know if that's performance marketing. Maybe that's brand marketing. And literally it seemed like Monday everywhere on YouTube, but I think you're gonna tell me the learnings on the left is it all worked, right? These endless YouTube ads worked. Any quick summary there and then tell us about the Super Bowl and then we'll break.

Yeah, so we had our first, maybe last, I'm not sure, Super Bowl ad.

Maybe last, is that what you said?

I don't know, we'll see. Look, it was great. Like, it was a great experiment and we've done it at like the peak of the bubble, I would say. Yeah, beginning of 2021. And I think for me it was an experience. Look, we had billboards before, even here on the 101, and we had subway ads, but we could always measure them to some extent because we saw the uplift in traffic. Again, we try to measure everything. With Super Bowl was more tricky because it's like one day, one event, one commercial. The uplift wasn't worth it. I'll tell you what did happen, something that in almost every sales call, one of the One of the customers mentioned that they saw us during a Super Bowl ad. Now how do you measure that? What's the value of that? I'm not sure.

You sure it didn't work then?

Well, I don't know.

I mean, multi-touch, I mean, I don't know how multi-touch you go given your efficiency, but it doesn't sound like it hurt the deal.

Yeah, it didn't hurt the deal. Was it worth $8 million? I'm not sure.

It's an interesting one, right? Okay, but so you think it was ROI negative, but it came up in a lot of deals, so hard to say, right? All right, but the YouTube's ROI positive from day one, right? Anyone that thinks it didn't work doesn't know performance marketing, right?

Yeah, we measure not just clicks but actual views that people view the ad, and we can see a funnel where people saw an ad and then go on Google and search for money.com, and we see the whole journey of a customer through BigBrain, and we know how much to attribute to each channel. So again, make it very efficient.

And it's very targetable. So if you saw it, it's not like every single person in the United States saw that ad. You are, you are being targeted.

Definitely everybody here.

Everybody here. For a while. All right.

That's all right.

This was great. Thank you so much for the time. Thank you.