Over the past 3 years and through the pandemic, a handful of apps have achieved mass adoption and become synonymous with general work - Teams, Zoom, Slack. These have specifically tackled communication pain points, and by design and function, have improved the way in which we work.

One ought to ask, what is the next iteration or compliment of these apps? Where else can exceptional UX design solve a bunch of problems in workflow? Are their public market expressions of this?

It's looking like the next trend is about "Project Management" to me. Sure, let's call it PM-SaaS.

By and large, people tend to run into issues when teams grow larger, and projects get more complicated. Anyone who has worked in a team of 20 vs a team of 5 would have noticed the meaningful loss in efficiency that comes with scaling and slow down of execution. There are three public SaaS businesses (stocks below) that are pure plays in solving project management issues in particular. And they haven't yet seen the mass adoption of Teams or Zoom. Where Zoom does $4B in sales annually, these apps do about $300-500m. Prices are about the $8-$15 range per seat, so it's similar, and theoretically - any organization across any industry with more than some minor complexity could benefit from a streamlined Project Management SaaS tool. So there is big potential here. The case studies across any of the IR sites, and independent reviews, point to serious ROI. The best of those studies show game-changing, "oh-wow!" ROI. Increasingly obvious for years now, software continues to eat the world.

The three:

There seem to be some private market competitors here, too - notably "ClickUp", which raised $400m at a $4B val in Oct 21. I'll have a go and say that the VCs invested at a >12x CY22 sales round before the brunt of the tech carnage - that woke up everyone to the macro mess. I mention Clickup because that's still a lot of cash runway, which they'll probably be deploying fast now. So it's a competitive threat.

From the three existing public plays on this trend, I like $MNDY the most. It's a little smaller by sales volume, but the growth rates have been excellent while the stock maintains a mild Free Cash Flow burn on an $850m in cash & equivalents balance sheet. Perfectly acceptable to burn $150m this year if you ask me...

Now, I'd be lying if I say that Monday is definitively the better product from the category of businesses on hand. As far as I can tell, while the SaaS offerings are differentiated by design, there really is no clearly right answer for a software buyer to choose one of the three over the others. These three are the cream of the crop, though, going by alternative sources. All that said, I can say with some confidence that this rather brutal macro environment is going to separate the businesses that manage cash well from those that don't. The ability to spend on sales is still paramount to achieving widening moats + network effects. Thus the cash ammunition needed for market capture is extremely important. Asana has lesser balance sheet cash funds at $280m against deep burn, putting them at a strategic disadvantage. Smartsheet is perfectly fine ($400m and no burn) but doesn't have the hypergrowth sales + profit mix that Monday does. To add, when Smartsheet was doing $350m in sales a few quarters ago, they weren't growing as fast as Monday is now. Something about Monday is working extremely well, leading to rapid and perhaps network-effect driven adoption. Users certainly seem to love the software and may be championing it to others on Monday's behalf.

Part of the reason why Monday has such disciplined profit metrics is due to the fact that the company is based out of Israel, founded by an Israeli chap. Salaries for engineers that make up the bulk of expenses are lesser than in Silicon Valley - but the quality of engineering has seemingly still produced a class-leading product. Monday has a financial advantage by way of geography. With some luck, the timing of Monday's IPO was opportune enough to raise significant cash, and as for the 2021 quarters, they were actually FCF generative. The plan to engage in some burn for market capture is an intentional and well-reasoned one. Seemingly contrarian given macro, but smart in order to capitalize on their strategic advantages over competitors during a period where the others shall feel greater pain. Probabilistically, Monday seems well equipped to handle a recession should it come.

As for the valuation multiples:

Monday is the more expensive one on "next-twelve month" metrics at 8.3x EV/S, but I think the premium well justified given what I just talked about. I think it should be much higher.

At least for now, $MNDY seems like the way to go. I'm long Monday, with no positions on the other stocks mentioned.

I wouldn't write off $SMAR as a more value-oriented play given the current price and yet large market opportunity at hand. If one would like to hedge the macro thoroughly, going partially short $ASAN would make for a very sensible hedge if you're extra bearish on the economy. I think software multiples have compressed more than enough, and a lot of these businesses are going to prove their resilience through this period.