5 reasons why we invest 💸 in Collaboration Tech

TL;DR: We are hosting our third virtual open office hours on June 12th, this time for Collaboration Tech companies based in the UK, ES, DACH. Apply here to pitch virtually, or just to have a virtual coffee with us.

This is a (collaboratively written) love letter for the B2B Collaborative Tech space. We don’t want to bore you with another COVID19-WFH post but instead would like to share an investor’s perspective on the general collaboration space. We specifically focus on technologies that facilitate collaborative actions within and across teams, both intra and inter organizationally.

Some Facts — Collaboration is here, and here to stay

• The use of collaboration software makes teams more productive (15% faster), smarter (higher knowledge retention), better (69% work better when collaborating), and especially happier (56% more satisfied workforce).
• With Generation Y and Z entering the workforce, several studies predict that in six years 75% of the global workforce will be born after 1980. Gen Y and Z have shown to strive especially in collaborative work.
• COVID19 has accelerated the adoption of distributed work (e.g. Facebook, Twitter, Shopify), and thereby confirmed that the remote-future-of-work is already here:

5 reasons why we like it, and why you should, too:

1. Virality & network effects: Collaboration by definition requires multiple people and with that comes the opportunity for viral growth (think of R0>1). These virality dynamics can generate an exponential non-paid organic acquisition channel and thereby supercharge growth.
2. Stickiness: As proven by Slack, Zoom, or Trello, successful collaboration tools naturally experience high user engagement and achieve a relatively low churn as they become increasingly relevant and embedded in a company’s daily routine.
3. Bottom-up & frictionless sales models: User-focused collaboration solutions usually sell through bottom-up without face-to-face interaction. This leads to very short and automated sales cycles. Frictionless account expansion from the existing clients through e.g. seat-based pricing (from point 1) is an extreme plus, too.
4. Global & large markets: Point 1 and 3 enable a global user base from day one. This reduces the impact of regional shocks (think the sequential impact of COVID19 on markets). In 2018, the global market for collaboration software was worth $11bn and is expected to grow further at 17% CAGR, reaching $24bn until 2023.
5. Exit expectations: 50% of the top 20 NASDAQ emerging cloud index companies (e.g. zoom, Twilio, Atlassian) are collaboration facilitators. Over the past years, this index consistently outperformed overall stock markets (e.g. 192% uplift in the last 3 years vs. 26% S&P 500).

All these points (and there are many more) resonate well with our overarching thesis of capital efficiency for early-stage SaaS companies, as they can reach hyper-growth with relatively low acquistion spend. You can read more on why capital efficiency matters for founders too, here.

Common Problems & Helpful Tipps 💡

However, we are also conscious of the risks of collaboration solutions. Here are the most common risks and potential solutions:

Putting our 💸 where our mouth is

Here are some of our recent investments in the Collaboration Tech space, making up approximately a quarter of our last fund’s investments.

If you run a startup in the collaboration space and agree (or disagree 😉) with our views on this space, we would love to hear from you during our open office hours. You can apply here 🚀.

In the spirit of collaboration, this post is a team effort of Saagar, Theo, Xevi, and me.