Asana and Monday are two fascinating businesses. I remember looking at private rounds many years ago and thinking "this is a commodity space, there won't be any big outcomes with a long tail of small / medium outcomes."

Both are ~$15B companies today. Software markets are huge!
Both have executed extremely well and this shouldn't be understated. What's been incredibly impressive is the growth in the enterprise segments. Both define enterprise as customers with >$50k ACV. Asana grew that segment 92%. Monday grew it 226%. Way more than just a SMB business
Both businesses have net dollar retention >110%. This might not sound good in a vacuum, but it's incredibly impressive for businesses with a large base of SMB customers. Asana ACVs are ~$3k. Monday ACVs are ~$2k.

>110% NDR is best in class for the SMB segment
Both have amazing gross margins and sit in the top 5 of all cloud software companies.

However, they both sit in the bottom 5 of operating margin. Monday spends the most on S&M as a % of revenue of all cloud software companies, and Asana is third most (both >75%)
This is a key question I'll be watching. They've shown they can grow, but can they grow efficiently?

A proxy for expected future profitability I look at is the CAC payback period. Asana is ~22 months, Monday is ~19 months. Median across all cloud software companies is ~25 months
Both payback periods are trending down and give me confidence that margins will improve quite a bit over time. Lower payback periods show me that newer cohorts will hit contribution margin profitability sooner than older cohorts
As these more profitable cohorts mature and start to represent a larger portion of overall revenue (and grow themselves through net expansion) we'll see margins improve quite a bit.
This is the beauty of software business models when they work - when older cohorts hit contribution margin profitability, every incremental revenue dollar from that cohort is basically straight FCF (for businesses like these with high gross margins)...
...The contribution margin from older cohorts can fund the acquisition of newer cohorts

I'll be watching to see if they execute and see margin expansion overtime


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More from @jaminball

26 Aug
Some confusion after hours in Snowflake. For some extra commentary on the Snowflake RPO figure (lots of talk about it this quarter), I'd point people to the pre-earnings research note Karl Keirstead at UBS published a few days ago. Screenshot below: $SNOW
To try and explain this further - RPO measures the aggregate total unrecognized contract value from all customers. Let's say a company had one customer that signed a $100k one year deal. After 6 months, the RPO would be $50k. this represents the remainder of the deal, or 6 months
Let's say instead that the same customer signed a $1M ten year TCV deal. The ACV is the same ($100k / year). However, after 6 months, this one customer would have a RPO of $950k (95% left on the 10 year deal, or 114 months of a 120 month deal)
Read 13 tweets
17 Aug
The acceleration across cloud software companies so far in Q2 has been very impressive. As of now, most companies with a June quarter end have reported Q2. Most accelerated. Graph below shows (Q2 YoY growth - Q1 YoY growth). Positive numbers represent acceleration (faster growth) Image
I removed 3 companies - Shopify, Olo and BigCommerce. All were major Covid beneficiaries. Q1 this year lapped a 2020 Q1 that did not see much Covid benefit, while Q2 lapped a 2020 Q2 which did see a Covid benefit. So the YoY compare between Q2'21 to Q2'21 isn't as relevant
If your curious where each would show up on the graph:

Shopify: (43%): 110% growth in Q1, 67% growth in Q2
Olo: (96%): 144% growth in Q1, 48% growth in Q2
BigCommerce: (6%): 41% growth in Q1, 35% growth in Q2
Read 5 tweets
12 Apr
Some great slides from the Crowdstrike investor briefing last week. A few call outs on what makes them such a great business, that others should aspire to:

1. TAM Expansion: The best businesses increase the size of the pie, not just their piece
2. Product Expansion Velocity: At IPO (in 2019) Crowdstrike had 10 modules. They now have 19. Amazing product development velocity
3. Upsell / Cross-Sell: Customers are using more and more Crowdstrike products. Very powerful platform flywheel
Read 5 tweets
10 Mar
I always enjoy reading Bessemer's annual State of the Cloud report. One of my favorite slides below. The takeaway? Leading cloud companies don't decelerate growth nearly as quickly as they're expected to. Why? Cloud markets are almost always much bigger than anticipated
Analysts constantly underestimate leading cloud companies ability to sustain higher growth rates for longer periods of time
I also liked the metric of Growth Endurance they discussed. This is defined as current year growth / last year growth. Nearly 1/3 of cloud companies accelerate growth! (growth endurance > 100%). Data points include every BVP Nasdaq Cloud company over last decade
Read 4 tweets
19 Jan
A trend I'm excited for this year: DataOps & the Analytical Engineer

~10 years ago DevOps was born. The role of system admins and developers merged. Infrastructure became self-serve

Today the role of data engineers and business analysts are merging. Data is becoming self-serve
Data infrastructure is becoming so powerful that the tools today allow non-technical folks to carry out the once complicated / custom code/ huge backlog jobs of data engineers.

Before getting into what this means, let's first discuss how we got here
Before 2012 the data world was dominated by transactional (OLTP) databases like PostgreSQL, MySQL, etc and analytical (OLAP) databases like Oracle, Netezza

Tools like Informatica / Talend were used to batch load (ETL) data into these databases, Tableau used to visualize
Read 25 tweets
10 Dec 20
My biggest takeaway from Q3 cloud earnings? We REALLY saw cloud businesses ACCELEERATE. Since Covid began we heard anecdotal data of "digital transformations accelerating." But the data was never there. It is now. Data below shows the absolute change in rev growth % from Q3 to Q2
For further clarification - the graph shows the delta between Q3 YoY growth rate and Q2 YoY growth rate (I tried to normalize for acquisitions where I could, sure I missed some). As an example - Zoom grew 367% in Q3 and 355% in Q2, so the delta, 12%, is graphed.
I'm defining "accelerating" as YoY rev growth that is increasing on an absolute basis. And as you can see, there are plenty of businesses who accelerated this quarter
Read 14 tweets

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