To achieve digital transformation, more and more organizations have adapted new technologies for their work. However, in many organizations, departments and functions might use their own specialized technologies – software such as Customer Relationship Management (CRM) for sales or Enterprise Resource Planning (ERP) for finances, campaign management for marketing, or Human Capital Management (HCM) for HR. These tools are not connected to one another, causing cross-departmental or cross-team data silos in organizations of all sizes. This makes it difficult for leaders and teams to see the bigger picture and make data-driven decisions with confidence.
These inadvertent byproduct is also increased workflow complexity (work coordination within teams and across functional department areas), information overload (more data to analyze), and communication sprawl (emails, video, voice, messaging, etc.). This can overwhelm workers and significantly undermine productivity as they bounce between various applications to do their work.
Besides, due to Covid-19, there is an increasingly mobile and global workforce accustomed to flexible work environments, time shifting, and constant connectivity. Faced with the above challenges, employees as well as businesses need breakthrough solutions.
Founded in 2012, Monday.com (MNDY US) offers a versatile, low-code/no-code cloud-based work management platform called Work Operating System (Work OS). The platform consists of modular building blocks that can be assembled in a simple, intuitive manner to fully integrate work management tools (dashboards, calendars, timelines, communication, etc.) with software application functionality (CRM, HR, software development inventory management, etc.) to address virtually all business types and use cases. When deployed, the platform creates a unified workspace that is fully integrated with external workflow execution tools and software (Microsoft, Salesforce, Zendesk, Jira, etc.). This centralizes all work in one place and eliminates silos across departments which limit operational productivity.
The company’s goal is to democratize software so that organizations can easily build software applications and work management tools that fit their workflows. In other words, it allows technical and non-technical knowledge workers (more than 70% of the customer base) to plan, run, and track work by leveraging templates and drag-and-drop building blocks, as well as set up code-free automations for their workflows.
To be brief, Monday’s platform optimizes for (1) flexibility (platform can evolve/adapt with building blocks); (2) simplicity (anyone can build using no-code tooling); (3) singular architecture (can be tailored to any department’s workflow needs, all on the same platform); (4) unified workspace (surfaces information from back-end systems, through connective integrations, into multiple display formats); and (5) fully customizable (nothing is defined).
Monday generates revenue through the sale of subscription contracts to its cloud-based platform (100% of the company’s revenue). Customer contracts are sold on a per-user basis and the platform’s pricing model is segmented into four tiers: basic at $8/month, standard at $10/month, pro at $16/month, and enterprise at approximately $40/month.
Today, the platform has nearly 128,000 paying customers, including customers in approximately 38% of the Fortune 500 companies such as Abbot Labs, Adobe, Hulu, Marriott, NBC, Visa, Uber and Unilever. The company’s customers implement thousands of use cases (project management, sales, marketing, design, HR, operations, etc.) across more than 200 different industries such as technology/software development, services, construction, finance, CPG/retail, creative production, etc.; and it has been broadly deployed across geographies in more than 190 countries.
Monday is one of the fastest-growing public enterprise software companies in the market, with revenue growth of 106% in 2020. According to William Blair, this gives Monday the third-highest revenue growth rate among its software peers, putting it in an elite category with the likes of Zoom, Snowflake, Square, and Olo. Monday has rapidly scaled from just about $30 million of revenue in 2018 to a run-rate of $267 million as of the first quarter of 2021. Over this time, the company has invested significantly in both product development and its go-to-market motion to cater its solution to more sophisticated enterprise use-cases. These investments have put Monday in a strong position to continue its rapid growth for many years to come as it attacks this increasingly important market.
Based on estimates from IDC, the relevant TAM was $56.1 billion in 2020 and is set to grow to $87.6 billion by 2024, or a 4-year CAGR of 12%. The TAM was composed of the following component markets: project and portfolio management (PPM); collaborative applications (CA); sales force productivity and management; software change, configuration and process management; and marketing campaign management. Monday believes the versatility of its platform will enable it to add verticals over time, expanding its overall market opportunity. Monday’s primary market opportunity is currently focused within the CA and PPM markets. IDC estimates these two segments at approximately $8.8 billion in 2020 and projects them to grow to $15.9 billion in 2024, a 16.0% CAGR from 2020-2024.
In its first quarter as a public company, Monday reported a strong quarter of growth acceleration, solid upmarket traction, and improved sales efficiency. Revenue in the period beat Street estimates by $9 million (14% above consensus), guidance for the third quarter was another $9 million ahead of consensus, and full-year revenue guidance was ahead by $20 million. Both revenue and billings growth accelerated during the quarter, with revenue growth of 94% (compared to the Street estimate of 70%) and billings growth of 117% (compared to the Street estimate of 62%). Monday continues to be one of the fastest-growing public enterprise software companies in the market and the quarter highlights solid execution on its growth strategy.
Some key advantages of Monday’s business include:
• Core Differentiation Is Flexibility Through Product Architecture: Monday’s core differentiation is that the underlying product infrastructure is agnostic to the data structure. Monday’s column values are functionally schemaless, and the schema are being defined as customers build their boards – the starting point for building anything in the platform. This creates significant value because to some extent, the functional equivalent of other software products (Jira, Zendesk, Comeet) can, in theory, be built on top of Monday.
• Low-Code and No-Code: Rather than waiting for IT to build what the business needs, Monday has put that power in the hands of knowledge workers. Monday provides modular building blocks, in a non-rigid or free-form app development “playground.” With no coding background required, customers can use Monday’s drag-and-drop user interface to capture data and manage processes with boards, represent nearly anything (e.g., actions, steps, leads, contacts, or other elements of a workstream) in their process with items, represent data in columns, visualize and manipulate a board’s content in views, and capture data from others (including non-Monday users) in forms. All this in concert leads to relatively frictionless adoption. Gartner forecasts 65% of all app development will be done this low-code way by 2024.
From a competitive standpoint, there are two other publicly traded pure-play vendors in the market in addition to Monday (Asana and Smartsheet). Of these three, Monday is the youngest, fastest-growing, and smallest vendor, but has the largest number of paying customers and is growing its large accounts (those with over $50,000 in ARR) at the fastest rate. Monday’s growth rate of 85% is much faster than Smartsheet’s growth of 37% in the first quarter of calendar 2021. Relative to Smartsheet, Monday has a solution that is much easier to use and, therefore, can attract many more potential users to its platform. While Asana’s solution is easy to use and easy to onboard, our customer diligence suggests that Asana falls behind Monday in terms of sophistication and scalability. Today, Asana has 485 customers paying over $50,000 annually, compared to Monday’s 335 customers. However, Monday’s growth in these accounts of 219% outpaces Asana’s growth of 92%, suggesting that Monday may soon have a greater enterprise presence than Asana.
Recently we are starting to see confirmation of the trend that companies will be complementing their synchronous work mechanisms (like Zoom) with asynchronous mechanisms such as Monday’s Work OS platform, reprioritizing this category of technologies which allow companies to keep hybrid teams in sync. We view Monday’s alignment with low-code/no-code application development as highly attractive, and we see strong tailwinds creating a solid magnitude of beat and raise, particularly in the near term.
