Monday.com is Growing 65% (!) at $550,000,000 in ARR!! Here's How They Do It.

Hey everybody. I think what so many of us are wondering today in SaaS and cloud is is it a downturn? What kind of downturn is it? What's going on? And I think a great one to look at is Monday.com it plays in a very competitive space and despite that it has just crossed a stunning 550 million in ARR growing. Wait for it, 65. Now that's a smidge down before, from before 2/4 ago it was growing 84. So there's a a glass half full and a glass way of looking at it. Growth is still epic at Monday, but a smidge less epic than it was a couple quarters ago. So clearly everyone, not everyone, many of us are seeing some headwinds in SaaS. But boy, 65% growth at 550 million in revenue, that is just epic if you ask me. Monday probably should be a $20 billion company today, but the markets are tough. Monday's multiple is okay at about 9x but it's worth about 4 1/2 billion dollars today. Good, great. Don, get me wrong but but probably one of those a bit more punished by the crazy stock market and effects today given just again this jaw dropping growth. So Monday growing 65% at 550 million in revenue, adding almost 300 million in revenue a year. Let's talk about five plus five plus interesting learnings. Okay, so number one is NRR remains strong and that is important for a product that has many SB customers. Monday is continuing to go more and more upmarket and we will ch that in a minute. But it is still Its roots are SMB and its NRR is 135 for 10 plus seat deals and it's not coming down. Now there is a little bit of pressure. Monday is seen a little bit of pressure in its overall base. It's 10 plus seat customers have NRR of 135. Overall it's gone down a smidge from 125 to 120. So that is a bit as there is some macro pressure. But even its smaller customers have impressive NRR and 135% from 10 plus seats. So that's pretty and that will fuel an engine. If you have 135% NRR from those 10 plus seat customers at 550 million that's going to fuel half of their growth right there. So if you guys sell to SMBs and mid market there's no excuse today for your NRR to be plummeting. Monday certainly isn't seeing any of it with 135nrr from its 10/seat deals, 120% overall and a very impressive 145% from its 50k plus deals. Okay, next point. Free cash flow is up and maybe this is where everyone in the public markets is struggling. Not everyone, not the zooms, not the zoom infos. But Monday.com is getting more profitable but it's not yet hyper profitable. But it's on the path. This is important. So everyone in SaaS and Cloud the public markets today are saying growth at all costs is out of fashion. We want you to get to 20% operating margins and Monday isn't there yet but it's getting there. Free cash flow went is up from 3% of revenue at 400 million in revenue to 10% today. So they're on their way. They're not that magical 20% today that everyone's looking to get to. But it is impressive that Monday is getting more cash efficient, generating more cash and we'll talk in a in a minute about why. Fourth not an insight, just something to think about. The power of compounding revenue and high NRR Monday has gone from 11 million in revenue in 2017 to 500 plus million in 2022. It is just crazy. From 11 to 32 to 78 to 161 to 300 to 500 plus. Wow. That is what we like from a SaaS rocket ship. So again a reminder that it can be done. It took Monday three plus years, maybe four years to get to 10 million in revenue. But then boom rocket ship after that. Okay, point five while all of its roots are in SMBs and it still has thousands and thousands of SMB customers which we'll chat about in a second today granted at half a billion in revenue, its 50k customers are its engine of growth. It's 26% of their error, so still 75% is below 50k but it is the fastest growing segment and 76% of its customers are from 10 users and up team packs and up. And that's what a lot of us seen. That's what I saw back as an entrepreneur you start very small, you add team packs, you go more enterprise and money is a great case study of slowly, steadily, intentionally going more and more upmarket. Not crazy enterprise. For them a 50k deal is a big deal, but going more and more mark up market over time. And a couple other just interesting learnings from Monday today number six, their customer base remains and has been for years decidedly non tech. This is interesting. A lot of the competitors, Asana, Atlassian and others are own own the tech market, right? Talk your engineering team. They probably use Asana or Jira or others But Monday and to some extent ClickUp and a few of its other next generation competitors, they're focused on the rest of the world. 70% of their customers are non tech. So it's a reminder that there is the rest of the world. Tech isn't everything and that's one of the secret sauces of Monday was not being necessarily the tool for the developers and product development internally, but the way to manage software or manage projects for non tech companies.7 which is just interesting. Their marketing engine is getting more efficient. Folks are critical of Monday and I think they're wrongfully critical that hey, I see YouTube's everywhere. Hey, they're spending so much on sales and marketing and there is some truth. This is a competitive space. ClickUp Asana Monday. I don't know if you watch as much YouTube as I have since COVID but boy ads are everywhere. But they work if you do them well. It's not, it's not, it's not inefficient. Performance marketing can be measured, but in any event their cost has gone down dramatically while they, they, they don't quite label their X and Y axes on their performance marketing metrics. What, what they have shown is that their cost per signup has declined about 40% over the last year. So that's material. So yes, their ads have been everywhere. Monday's great, but they've been intentional about it and lowered their marketing spend and that's really one of the ways in addition to headcount, which we'll get to, that they've gotten much more profitable, gotten a 10% free cash flow per dollar and just three more points that I think are interesting. Three plus number eight in terms of what macro stress are we seeing? Where is the economy harder? Interestingly, Monday's biggest stress is in Europe. Its revenue is, and this is the next point, 55% in North America, 45% in the rest of the world. We also see that at HubSpot, Asana, others that sell to like this classic bigger SMB they tend to have about half their revenue in North America and half of it the rest. So they see everything going on across their customer base and Europe is the stressor. Add that and the sort of the currency effects everyone is seeing and there are definitely real headwinds in Europe, but that is weaker than the US 0.9 which we just touched on. They remain 55% of the revenue from North America, 45% from the rest of the world. A quarter of it's from Europe and Monday's always been that it has Israeli roots even though it's global. So they were more global earlier than some other vendors were. But I tracked this across our five interesting learning series just as a challenge to founders always to don't run from international growth. I mean the web browser works everywhere. The Internet works everywhere. Now if you have a highly regulated product, a lot of local legal complexities in in your country or even your state, it can be hard to scale internationally. A lot of fintechy SaaS companies are slow to go international. The the bills and the others, it takes a while. It's complicated for stripe and Bill and others to truly go global. But for B2B SaaS, usually if you localize your app into multiple languages and maybe do a little bit more in security and compliance, you people all across the world can use you on Monday is just a great example. 5055 from North America, but 45 of the rest world. What if they didn't aggressively service the rest of the world? They would be almost just half the size they are today. And the last point, and this is interesting, Monday, like all of almost all of us went through a huge growth spurt in 2021 and early 2022. I mean times for most of us were so good in 2021 not only were revenues up, which was great, but the stock market was crazy. Multiples were crazy. VCs were doing 100x ARR deals and Snowflake was trading at 80x revenues and everything was a decacorn. It's much tougher today. It's not so much that revenue has declined again. I mean, goodness gracious, Monday.com today is growing 65% at 550 million in revenue. But with public markets down so much, with revenue multiples down so much, there is a lot of pressure to get profitable and everyone just if they didn't over hire they, they certainly hired to the max last year. And so we're seeing a lot of stresses. In some cases we're seeing layoffs even at leaders just because they hired so many people. Monday is more interesting. There's no layoffs at Monday, but they hired so many people in 2021 that they added only 63 employees last quarter. That's almost flat. They kept their headcount almost flat. Quarter over quarter from 1489 employees to 1552. That's not much. And that's what we're going to see a lot. We're going to see a lot of folks slow down hiring, be more intentional about their hiring, raise frankly, raise the hiring bar. And it will probably take even leaders like Monday that are growing again at epic rates, probably a year of catching up. And that's what Monday said. They're anticipating the slow hiring being consistent for the foreseeable future. And I think that's the bigger story in SaaS. The layoffs get the headlines and they're often relatively small, 3%, 4%, sometimes 10 or 12%. But if you tripled your headcount last year, shrinking 10% actually often isn't that much but much more common will just be a quiet calming of the pace of hiring mainly to get more profitable, mainly to get more profitable. And that has material impact Monday's profit margins. It will materially impact others. And it's probably what most of us are doing right now, slowering the hiring but not stopping it to fuel still pretty darn impressive growth.