Monday.com Is At $240,000,000 in ARR! Here’s How They Did It.

Hey Saster, let's talk for a minute about Monday.com they have filed to IPO at 240 million in AR, growing a breathtaking 85% year over year at 240 million in AR, a product that just went into market in 2014. So Monday.com was founded in 2012 but the current product launched in 2014 after a tilt after they changed their direction. Actually after reading Sasser. The founders told that story at a recent event. 2014 the product we know as Monday launched seven years later. It's just seven years later. It's at 240 million in ARR, growing 85% year over year. Not only that, it's in at least superficially, one of the most competitive spaces in SaaS. Competitors include Asana, which is growing at epic rates as well Atlassian and Trello. Click up one of the fastest unicorn growing unicorns. Reich, which was bought for billions by Citrix, Smartsheet and other players like niche product and management is a crowded space. Now Monday has carved out a lot of interesting niches. It's very international and it serves very much a non tech audience. So they've been clever about their feature set. But it's very interesting that another entrant in the space, in a very competitive space could grow 85% a year at 240 million in ARR. And we're going to go through five interesting learnings and five bonus learnings. But before we get there, a lot of folks look at Monday and they note that the cash burn is significant, that they're depending on how you look at it, it may take them 18 to 24 months in some cases to go positive on a customer. There's different ways to slice the number. Personally I don't think a relatively high burn given this incredible growth rate is abnormal in SaaS and cloud. It makes sense to fuel the engine. But I will acknowledge some folks see the burn as relatively high, but I still think it fits most of the magic number calculations we have. So let's talk about some really interesting things about Monday that we can learn now. The first thing we can learn, and we talk about this a lot, is NRR Network earning revenue. And I really like how Monday breaks it out so that those of you who are selling to different types of SMBs, very small SMEs, mid market and more and enterprise. It's very helpful to see folks segment it because what Monday reminds us of is very small businesses. Single seat owners behave very differently than even 10 seat owners and Monday draws a line at 10 seats. At 10 seats they call that their bigger customers. And for a Palantir or others or a workday that would be a rounding error. But for Monday, 10 is when sales gets involved. It's something similar that I saw back in the day with Adobe Sign and echo sign where 10 seats was mostly our line and Monday's there as well. And what's super interesting is their NRR overall is 107% pretty good for SMBs. A bit better than HubSpot, not quite as good as Bill.com, on par with Shopify, a hundred percent overall. But they segment it. So for 10 seats and up it's 121% error. That's pretty darn good for SMBs, that's best of breed. So that means folks that buy at least 10 seats of Monday really love it and use more and more features, more and more products and buy more even at 10 seats. Even at 10 seats. Even from a customer paying just a few thousand dollars a year. And if we do the math, they're tiny customers. The 1, 2, 3 seat customers have about 85% revenue retention. Those ones don't go through sales, they don't have customer success. They are self service. And that 85% is interesting because it's just about the same as we've seen in Squarespace's IPO information. So it's interesting. 85% for both Monday and Squarespace revenue retentions. What happened if you have a good product and you do no human interaction, no sales, no post sales, no anything. And what Monday saw is they actually waited. They waited until about 30 to 40 million ARR until they added a real sales team and magic happened. There was sales costs associated with that. The sales and success team today is about is several hundred employees. But what they saw was a dramatic increase in NRR and cohort retention. A dramatic increase. And that's what's fueled the growth to 120% NRR on those 10 plus seat deals. So it's a reminder that sales done right can really fuel net revenue retention even in smaller deals. In any event, that segmenting super interesting. So 10 seats and up 120% NRR. The smallest deal is 85 and on average 107. It's great to see someone transparently share that that has customers of all those different sizes and a mix of self service and sales driven sales. Second point, just as note, they have 128,000 customers. The average is 2k ACV. But their fastest growing one which is really 0.3 is 50k and up. We'll get to that in a minute. But it's a reminder that just as we've seen with Asana and others, you can serve customers of all different sizes. You can do freemium and sales driven together at one time. Monday.com has done that quite well. Yes, they have bigger customers, yes, 50k and up, which we'll talk about in a second is their fastest growing segment. But they're able to make customers on either side of 2k ACV happy. So don't let folks tell you can't be done. Don't let folks tell you to drop those customers unless you're sure it makes sense. They can fuel your brand and fuel your engine. So point number three, we just touched on this one though. Yes, already. Already at 240 million ARR. Not to say it too many times, but Monday is growing at a breathtaking 85%. But part of that key is going up market. Those 50k and up ACV customers, those ones are growing the fastest. They're growing 219% now. We've talked about this a lot of time in this series. Not everyone's followed that pattern. Shopify has gone up market, but its SMBs grew even faster. We saw the same thing with Zoom. As Zoom exploded, it went more enterprise customers joined, but even more SMBs joined. So Zoom, Shopify and others say you don't always have to increase the share of enterprise customers, but it's a different space. Asana seen its share of revenue from enterprise customers grow the fastest. Monday's seen it. Smartsheets seen it. So pager duty, as we've seen, went much more upmarket post ipo. So we're seeing this classic march of products that can be adopted self serve like the Mondays, the asanas, the pager duties, they will stick to their knitting. Then they add a sales team as they learn that, and then maybe after 100 million they get more enterprise. We saw that with pager duty, Asana and now Monday. And people wait. People wait to build a sales team and often they wait to go enterprise until they're ready, until they learn they need it. Slack had no salespeople at first and at IPO was 50% enterprise. But another case study of those 50k and up deals fueling the growth. And it's interesting that the ratios are almost the same as asana. Point number four, 52% of the revenues are outside the U.S. now, this shouldn't be a surprise, perhaps, because Monday started in Israel. And what we've also seen with wix another cloud leader at over a billion AR that started in Israel for whatever reason and I'm not sure actually, I know starting in Israel and other countries often concentrates the revenue outside of it. Maybe you just try harder, maybe you have more relationships. I mean, Israel is a phenomenal mentor of incredible tech companies, but it's a pretty small country. I don't know that that can explain it on its own. There aren't enough buyers in Israel, clearly. But be that as it may, it's a reminder in a sense that if you are born outside of the us, even if even if you're very US centric as you grow them, you wouldn't even know that Monday and Wicks weren't born in San Francisco. It's hard to tell. It doesn't really matter. But a learning from them is. It can be a secret power. You can outperform outside of the US and maybe what happens is the square spaces and the stripes get so focused on the US they miss the adyen and the wixes that piece of the market. That's likely the most biggest explanation. But any of that the meta learning is lean in when you're strong. This revenue outside of the US has fueled Monday from what would be already a great success story to an epic one with 52% of its revenue outside the US.5 and then we'll do a few bonus points. 0.5 is just a challenge. It's interesting. Monday is doing something that I have not seen before. A lot of folks are doing this some version of the 1% pledge originally inspired by Salesforce where they'll take 1% of their equity at or before IPO and put it into a foundation. Marc Benioff did this early set up this 1% pledge group which is now independent. Jeff Lawson from Tulum have done it. Monday's doing 10%. They are putting 10% of this company into their foundation, the Equal Impact Initiative Foundation. It's going to be not done overnight. It'll be done 2% going into the IPO and then another 1% over the following years. But it's a lot. Now, having said that, I don't know everything about it. Some of it certainly is focused on impact. Some of it also fuels the brand because a lot of it's going to be used for matching. So for they'll offer matching for nonprofit teams. This is perhaps not as innovative as it sounds. A lot of SaaS companies have discounts or even free editions for nonprofit organizations. But wherever this leads, putting 10% of your company into a foundation before IPO is pretty impressive. Getting the investors to agree is pretty impressive because in a sense it's dilution to the investors. Right? At some level. So kudos to Monday. We'll see how this foundation goes. But that's an epic amount of money to contribute back, so pretty impressive. Okay, a few bonus points. Point number six. This is super interesting. If you haven't used Monday, you might assume it has a free edition. No, no, it really doesn't. It hasn't. Like Atlassian and others, Monday has had a free trial. It focused on a 14 day trial for many years, but it was culturally, it did not offer a free version. In fact, it's new. It's quite new. They added a free edition for one to two seats and we can learn and talk about why, but it's a reminder that, you know, free is great. Obviously it propelled Slack and Zoom to incredible heights. Those are the best, two best free products I've ever used in my lifetime. But different cultures, different products. Monday didn't want to have a free edition. They're like pay us after 14 days. And a lot of folks are getting back to free. Atlassian recently launched a free program. New relic did it and now Monday's doing it. And perhaps it's competition. Perhaps Monday is seeing that other folks in the space do offer free editions. You can use notion for free for sure. You can use many other products. Maybe it's that, maybe it's that the numbers finally support it. Who knows? Maybe it's just time to run an experiment at 250 million in ARR. But it is a reminder that SMBs and VS and BS, they generally do need a freemium, a free trial of some sort. They're not going to put in their credit card or write you a big check without trying the product. But it doesn't. But you don't have to have a free edition. A free trial got Monday up to 240 million in ARR. 0.7. A niche point. But for international folks, it is interesting. They did not flip the company. And now what is a flip? A flip is when a company that starts outside of the US but is going to become more US centric flips and becomes a US corporation, at least legally becomes a C Corp, usually a Delaware Corp. If you go through Y Combinator internationally, for example, most companies, they almost insist that you flip because it's much less risky for investors. There's tax issues, there's complications. People just want to invest in the same old U.S. delaware Corporate Corporation with the same structure, the same way it's built that they've been doing for decades. But Monday didn't do it. They didn't do it. They have stayed an Israeli company. And it is still true today that at least in the early days for angel investing, Series A, it's easier if you're a US company, even if most of your operations are not here, even if you just have a nominal headquarters here. It is easier to get US investors, US VCs, the typical South Park Sandhill VCs involved if you are a traditional C corp for a whole bunch of reasons. And personally I still recommend it. And the earlier you do it, the cheaper and simpler it is. But. But Monday shows not everyone does it. Okay, point eight and then we'll just do a couple more quick points and wrap this up. But so many interesting things to learn from Monday. Point eight is how it accelerated Monday. The first two years actually were slow because Monday dropped their initial product. So 2012 to 2014 not much happened. As we talked about earlier, it was funny. They were inspired by an early Saster post of how to go big, dropped what they were doing initially and created the product that's today Monday. And then they had product market fit. It grew pretty quickly. Now it went from three years from 2014 to 2017, it went from launch to 11 million in AR. That's pretty good. Now there are certainly companies these days that get to 10 million faster than three years. But for your typical SMB focused SaaS company, that's pretty good. It takes a while to get the engine going. These initial checks are tiny 10, 20, $30 a month checks. You need your brand to build up. You need the word of mouth and the viral to build up. So 11 million in three years is pretty good. Five years is sort of what was average a generation ago. So three years is pretty good. But then boom, right then they went from 11 million in about three years to 32 million 18 months later and to and within. Let's now add it up four years. So four years, that's an incredible 11 million to 200 and some odd million ARR. From 11 million to 200 and some Odd million in a little bit more than four years. That's breathtaking. And you can go to sastra.com and we have a post outlining this. You can see the chart and the years. But it's a reminder of couple things. One, it's a reminder that it often, and this is a very early Sastra theme, it often just gets good at 10 million ARR. It's so hard in the early days, in the very beginning, of course, it's hard to even get any customers who needs another project management soft piece of cloth. There's so many good ones out there already. So it seems like the early days are the hardest. And they are, because no one needs another SaaS product. But the truth is, when you look back, it's often that 1 to 10 million ar phase that is mentally the toughest. As founders, we just don't have enough people. We have 20 people, 30 people. We can't find a good VP of sales. We don't have enough money, we have no redundancy, we have no extra designer. You're never growing as fast as you want and it often is a slog from 1 to 10 million. And when we started Saster, you know, we went back to this expression, you know, 0 to 1 million ARR, it's impossible. Who needs a new product? 1 to 10 is unlikely and 10 to 100 is inevitable. Our first Saster annual was impossible, inevitable. And Monday is a perfect example. It took them three years to get to 10 million and then breathtaking after that. So a reminder of a couple of things. One, if you're coming up on 8 million, 7 million, 9 million, 10 million, if you even cross five, it gets easier, folks. Not literally. You still have to find the VPs. You still have to hit the number. The dials and dashboards and sales facts. Salesforce go up back to zero each quarter. You've got to put on the gear and fight every day and every week in SaaS. But you get extra help, you get leverage, you get a brand boost, you get fat in the system. You have VPs and directors, you have redundancy. It really does get easier after 10 million. If your customers are happy, it builds on itself. The NRR builds. Your existing customers fuel more and more of your revenue, and it really does. And don't give up at 5 to 10 million in revenue. Don't sell your company. Don't throw in the towel. If things are going reasonably well, you'll see all the growth of Monday is from 2017 to 2021. That's when they went from 11 to 200 and something million. The power laws are there. So push on, push on to 8 to 10 million. The cavalry really does come. And Monday is an incredibly visceral example of it seeing just that incredible J curve and the incredible trajectory from 2017 to 2021. Okay, two last points, one of which we hit, but we'll just wrap up on it. Point number nine, we've Seen this with so many companies as we've dug in with Box, with Datadog, with others, which is that their biggest customers, their most enterprise customers buy multiple products. We even just saw this recently with Elastic. All different types of companies, right? From very technical to Box to Monday. What do Elastic, Box and Monday have in common? One thing. Their enterprise customers use multiple products. The more value add products folks buy from Box, their NRR goes up from 85 to over 120. We see similar usage at Elastic. And at Monday 96% of their enterprise customers use two of their solutions and 63% use three. So this will obviously mean different things for different companies. But if your customers love you like they love Elastic and Box and Monday they will want to buy more from you. And if those extra products aren't rip offs, if they aren't mere clones, if you're not charging somebody for something they don't really need, but they're really adjacent value add, your customers will take a listen and they will buy from you. And now we have the data from, from the IPOs, we have the data from the, from the Elastics and Boxes and Mondays and other folks that have multiple aligned products, which is enterprises buy more and they stay longer when you have multiple high value products. Now obviously can you pull this off in the early days? Some folks argue you can. But for most of us we've got to be pretty focused up until 10 or 20 million in ARR. But as founders think about it, think about that as you start to scale. What would your number two or number three products be? Can you run some experiments there? Can you at least plan them out? Can you think about how to add them? I see more and more SaaS companies adding a second core product as they approach 20 million ARR to give them that extra boost. It's something to think about. And now that we have the data from public companies, we can see it really works. It really pays off to have that second or third high value product. Okay, last point and mostly we hit this one. I'm just going to reiterate it because Monday showed us a few things. Just so viscerally it showed us how that NRR broke out, right? How they have 85% NR from the tiny little one or two seat self service and 120% from just 10 seats and up by adding customer success and sales. The last point which we hit above, but, but, but to wrap up on it, they waited to add a sales and customer success team. Monday did not start there. They started self service as do a lot of folks outside the US as do a lot of developer centric folks. You don't have to be even though the world has changed since COVID you don't have to be in San Francisco or the U.S. whatever that even means now so much. If you're self service the customers don't need to know, they just need to know you have a trustworthy brand. So a lot of folks start there Monday was slow to add a sales team again. They waited until 30 to 40 million in arrangement but once they did again boom at retention and NRR went way up. So it's just a reminder if you're not sure you want to have a sales team, you do not have to decide today. Slack waited. Zoom waited a bit and Monday waited. Asana waited. So you do not need a sales team on day one, but at least be thinking about it. Be thinking about. Be open to it. Be open to it. Monday was open to it. And when they saw deals getting a little bit bigger, when they saw humans humans customer success driving retention way higher than customers that were never touched, they leaned in heavily. They leaned in heavily and now have hundreds of folks on the sales and success team be open to it. They added 365 folks which they have today from zero in sales and success at 40 million ARR or a handful. Again an incredible success story. Let's watch where it goes. And a reminder that today Cloud is so big. SaaS is so big there is room for multiple unicorns and decacorns in a space it's not winner take all. At least for now. Monday is going to be huge, but Asana is huge and Atlassian and Trello are huge and Wrike was worth billions and Notions worth a billion and smartsheets worth like 8 billion. Just be great. This is the lesson. Be great. Build something that is epic. Build something your customers love and worry more about that than the competition because there can be 10 unicorns in every space.