Monday & Asana goes head to head
Monday vs Asana
TLDR
Monday is growing more rapidly but is less efficient in their Sales & Marketing spend.
Monday’s founders having a background in building software gives them a profitability edge.
Monday and Asana are Project Management software that also provides workflow automation and integrations with 100+ apps.
In this write-up, we will be diving only into the key metrics and financials to determine which business is winning. Product comparisons will not be discussed as we believe both software are pretty similar and it boils down to business execution.
Annual Recurring Revenue (ARR) Growth
For this table and subsequent ones, we will focus on the numbers in red as we want to compare them from a fair starting line.
Asana took 10 Quarters to hit $358mil ARR while Monday took only 9 Quarters to reach $382mil. (Winner: Monday)
What about sequentially (QoQ)?
Sequential Growth
Monday is growing on average 3.3% faster each quarter. (Winner: Monday)
Customer Growth
It took Monday 7 Q’s to onboard 793 customers while Asana took 9 Q’s to bring in 739 customers. (Winner: Monday)
At this point, Monday seems to be running on 5th gear while Asana is running on 4th. While both companies are gaining customers rapidly, are they able to retain them?
Dollar Based Net Retention Rate (DBNRR)
Monday
Asana
DBNRR tells how much a company’s existing customers spend as compared to a year ago. For best-in-class software, we look for a minimum of 110% while 130%+ is excellent. Based on these standards, both Monday & Asana have proved that they can retain their customers and there is not a big difference between them.
Clearly, Monday wins in all growth categories albeit with a higher Sales & Marketing spend.
Sales & Marketing Efficiency
Monday spent an average of $1.12 per dollar of Gross Profits while Asana spent $0.81. That’s 38% higher relative spending! Talk about biting off more than you can chew. However, in terms of raw S&M dollars, Monday spent only 12.5% more at $426mil vs $373mil. We think this is acceptable in a competitive landscape where one must grab as much market share ASAP as long as the LTV/CAC makes sense.
One might wonder, does spending $1.12 to earn $1 makes sense? Well, not all $1 profits are created equal. For businesses able to retain customers, this $1 will grow to $1.30 in year 2, $1.70 in year 3, and so on based on their Dollar Based Net Retention Rate (DBNRR). Assuming an average customer stays with them for 3 years, a $1.12 investment would generate $4 of Profits in total at the end of year 3, nearly a 300% gain. That’s the beauty of a Subscription-based business!
This table shows the sales efficiency of each company, calculated by:
Quarterly ARR Gain / S&M spent the previous quarter (Higher = better).
Asana has a noticeable edge, gaining on average $0.05 more $ARR for each dollar spent on S&M. We think Monday’s slightly lower sales efficiency is warranted since they are growing faster than Asana based on our comparisons earlier.
R&D Spend
Asana spends nearly 3x more on R&D than Monday. However, I do not see that their products are far superior to Monday. Could the reason for lower spending be due to higher compensation in the form of stocks?
It seems like that is not the case as their dilution is only between 0.24% - 1.07% per quarter whereas Asana’s dilution falls within 1.30% - 8.45%. What could be the reason for this lower spending in R&D? We speculate that the 2 founders of Monday having a background in building software plays a role in this, which allows them to build more efficient, scalable, and maintainable code. Dustin Moskovitz, CEO of Asana, is a co-founder of Facebook but looking through his experiences on LinkedIn, we find that he does not have as much technical expertise as Monday’s founders. Does this lower R&D spending convert to their bottom line?
PROFITABILITY
In 2021, Monday achieved +ve adjusted free cash flow. Although this is not a perfect comparison given that Asana does not report this data, at least we can tell that Monday is well on its way to profitability and we believe their founder’s technical expertise is a factor.
Conclusion
Based on the above analysis, we believe Monday wins on 3 fronts.
Higher Revenue and Customer Growth
Their founders have a strong background in building software
Their path to profitability is underway
Disclaimer:
This write-up is neither a stock recommendation nor financial advice. Please exercise your own due diligence before buying any stock. The author owns shares of Monday.com.