The last decade has seen the rise of workplace collaboration and productivity as a valuable SaaS category. The success of companies like Slack, Zoom, and Atlassian in challenging the dominance of Microsoft and Google’s productivity suites accounts for part of this interest, but the rise of remote and distributed teams is the most important secular shift driving the trend. Zapier published a report on remote work which found that 74% of American knowledge workers would quit their jobs to work remotely. Since only 3% of American workers in 2017 worked from home, there’s a huge, aspirational gap between today and the future of work. These startups are building that future.
Categories of Workplace Collaboration
I’ve identified eight categories here: Messaging, Voice & Video, Calendar & Meetings, Documentation, Project Management, Design, Search & Context, and Low Code/No Code & Internal Tools. Companies across these categories share a melange of the same core customers: knowledge workers, remote and distributed teams, product development teams, and white collar SMBs.
Additional categories within a broader framing of workplace collaboration could include HRIS companies, mobile workforce productivity, and marketplaces for blue & pink collar workforces. Though viable and interesting, I’ve left these companies out to focus on private companies that rely on network-driven growth rather than enterprise sales.
Choosing the right early core customer
The ideal early customer for a collaboration product is a junior developer or designer. Junior folks on development teams have little or no social capital to lose by bringing a new tool into their company, and considerable social capital to gain if it goes well. Developers in particular are also the bleeding edge of any company — people with a natural proclivity toward working as efficiently as possible, with little patience for subpar performance.
Managers are often the people who purchase tools but they are not great early core customers: they have a lot to lose by pushing a tool that doesn’t take off and they don’t share the day-to-day problems of their team.
Why collaboration startups fail
Failure states for collaboration startups look very similar across the categories: poor GTM despite high quality product, selling into managers instead of individual contributors, poor performance, no Day 0 value to the end user, and no compelling multiplayer mode.
Why collaboration startups win
The je ne sais quoi of a founder’s storytelling ability, network, and founder/market fit can determine whether an initial team and/or funding comes together. But past that barrier, the early benchmarks for success look the same. The companies all have a strong, well-liked brand with a 60+ NPS, great PR sense and ability to generate earned media, strong expansion & networked growth evident with self-service motion, DAU/MAU over 60%, and early net revenue retention over 140%.
Incumbents and outcomes
Workplace collaboration is largely dominated by Microsoft and Google’s respective productivity suites. Most of the companies in this sector hope to fundamentally disrupt either or both of them, though nearly all these startups begin by using GSuite as an identity & data layer. It’s not wrong to do so — their early adopters are already there.
Slightly newer public companies like Atlassian, Slack, and Zoom have their own challengers. The speed at which startups like Taskade and Tandem came up to challenge Slack and Zoom even became somewhat of a joke at the Summer 2019 YC Demo Day, especially given that many startups were claiming to be “one tool” to replace the perceived fragmentation of incumbents.
There is potential for at least one multi-billion dollar outcome within most of these categories and there can be multiple impact winners and public companies in each category. Within the Project Management category for instance, Atlassian’s success and continued growth (they crossed $1B in revenue in 2018) has not blocked near-IPO companies like Monday.com and Asana from consistently growing. There is some verticalization within each of these categories, as startups tend to get traction within certain types of businesses or teams. This enables multiple winners.
Synchronous and asynchronous written communication is still the dominant medium of collaboration. This includes email, chat, forums and SMS. Messaging is arguably the core product at the heart of any productivity suite: it drives organic top-level growth as well as expansion within logos. Messaging is the hourly active use case that drives daily active use.
Many of the best startups within this space plan to expand into adjacent categories like documentation, CRM, and calendaring to capture more value and challenge the top two incumbents. By starting with a messaging product, these startups are challenging incumbents head on, which is more intimidating in the near term than innovating on a product category and growing value in an adjacent market first. But it’s a massive prize worth winning.
The most notable startups are Threads, Superhuman, Front, Consider, and Quill. Venture-backed messaging clients (email clients in particular) are likely to have high quality competitors that are bootstrapped, standalone products, like Airmail.
Voice & Video
Synchronous and asynchronous voice and video apps are challenging the dominance of written communication as the defacto collaboration model — particularly in the context of remote and distributed teams. Zoom is an incredible business with a fresh $20B market cap as a public company, but it’s still a 10 year-old company built with lessons learned from WebEx. Founders building voice and video applications today are often Millennials who are themselves members of a distributed team. Especially when paired with technical domain expertise, that founder/market fit is hard to beat. There’s room for a lot of product innovation and growth especially within video.
Voice is really interesting but is a harder hill to climb, in part because the value of these AI-driven startups is not immediate. It would be great to have access to voice recordings of all your meetings from a few months ago, but providing Day 0 value here is tough.
Calendars & Meetings
The only more-maligned incumbent within productivity than JIRA is the meeting itself. Almost no one feels as if they are making the best use of their time in meetings, or at work. This is the most underrated of the bunch — a lot of incumbents have built features that do some or most of what startups in the space are doing. None of them do it very well, and this is far from a solved problem.
This category is broad, which belies the investment from incumbents Microsoft and Google in documents, spreadsheets, and presentations over the last two decades. Most of the challengers within Documentation are focused on building just one of these products today, but given the dominance of suite products, most if not all of them are planning to move into the adjacent products. There are two product lines that form this category: Notes & Knowledge bases and Spreadsheets.
Notes & Knowledge Bases
These companies will often bill themselves as an “all in one” product and have some features around spreadsheets, messaging, or project management but tend to have best product/market fit as a knowledge base for teams. These products often compete against Google Docs, Google Sites, or Dropbox Paper.
These companies tend to have one foot in the low-code/no code app development space and one foot in productivity/collaboration, which separates them from the Project Management category and the known market caps of Atlassian or Smartsheets. The high level vision for most of these companies is seamless automation of knowledge worker tasks.
The challenge for these companies is that while at their best they are democratizing databases for non-technical workers, their first customers and early adopters are much more technical than the people these tools could ultimately empower. The existential question of this category is whether any of these can become impact companies. Simplifying the mental model, providing incredible onboarding, and selling empowerment to non-developers will go a long way.
Project Management, or, Everyone Hates JIRA
There are a mix of product approaches and go-to-market strategies within this category, but the job to be done of all these products is the same: helping customers organize and complete their work. Companies like Airtable and Notion could fit here, but this category is for startups where the explicit mission of the company is project management. These startups compete directly with public companies like Atlassian and Smartsheets for general task management, which remains a massive market allowing for several impact companies within this category.
JIRA’s dominance and continued growth keeps this sector top-of-mind for founders who want to build better ways for teams to work. It is a successful product with hundreds of millions of dollars in revenue, and everyone hates using it.
Overall, project management is an attractive category, but with a handful of growth stage companies as well as an established but still growing leader like JIRA, breaking out for an early stage company is challenging.
Years ago, a common refrain in tech was that Everyone is an engineer, or would be soon. People would learn to code the way they learn to read or write and it would become a basic form of communication. Lately this has evolved into the much more believable Everyone is a designer.
Design is a category that requires a lot of technical and product investment to get to market and where collaboration is at the heart of the craft. Companies range from disrupting Adobe (their smallish professional audience and high ARPU results in $165B market cap) to challenging Google Slides/Apple Keynote/Microsoft Powerpoint in visual storytelling and idea generation. The prize here is huge, and there’s likely room for many winners within this category.
Search & Context
The core problem many Search & Context companies want to solve is that the more people work at a company, the harder it can be to get work done. It’s difficult to find the person who understands a domain deeply, or can answer your question quickly. It’s easy to get distracted and overwhelmed by a near-constant deluge of process and communication.
Typically this category serves mid-market and large enterprise customers where the problem of productivity is at its peak. The companies I find interesting in this space tend to approach the overall problem through the lens of personal and team productivity. These tools could expand quickly if they provide clear value to the end user and not just an “innovation” story to the purchaser.
This category will become increasingly important and strategic over time. The greater the momentum of the workforce collaboration trend, the more knowledge proliferation and fragmentation within companies will exist. Search, a modality we’ve all been trained to use, then becomes the critical platform to unify knowledge and democratize access for knowledge workers.
Low Code/No Code & Internal Tools
This category has been the topic of constructive debate internally at Lightspeed as well as on Twitter. (In fact, I almost didn’t include this as a category, but a recent discussion inspired me to do so.) The core customer for a low code/no code or internal tool platform is a knowledge worker, and these tools often take off with developers or product development teams first. Ultimately these companies share the same or similar jobs to be done: making workflows more efficient and automating knowledge worker tasks.
Airtable (a clear winner in Documentation) is also a leader in this space. Airtable’s mission is to translate the power of databases for non-developers, one it shares with nearly every player within Low Code/No Code.
What’s next in 2020
I predict that we’ll continue to see a huge number of founders choose to build startups within workplace collaboration. The trend of remote/distributed teams will accelerate and by the end of 2020 there will be emergent leaders in most of these categories.
If you feel your company should be in this market map in 2020, let’s talk.