SMAR- A Look Into Its Market Position

Investment Analysis Clubs Saul’s Investing Discussions
1

Still trying to wrap myself around what SMAR market is and where it is positioned in that market.

So did some more digging. The Forrester Wave Report on Collaborative Work Management Tools, seems to me to be the most accurate for SMAR in recognizing its market and who it’s competitors are. In reviewing the product websites these companies seem to be closest to the Smartsheet platform. The top 5 in order from the Forrester report are Smartsheet, Asana, Wrike, Clarizen, and Monday.com.

The report can be found here:

https://www.smartsheet.com/2018-forrester-wave

The report concludes
“Smartsheet leads the pack with a balance of features and future strategy. “

I did some more research. Every company except Smartsheet is private so information is sparse. To give an idea of market share among the top 5 I was able to track down paying customer counts. And some info on revenue. One would assume that for the most part, these companies count paying customers similarly.

Smartsheet: as of Jan 31, 2019
-96,000 Paying Customers. (79K “domain based” + 17K “ISP based”)

Asana: as of Dec 2018
-50,000 paying customers

Wrike: from company website
-18,000 Paying Customers

Clarizen: from company website
-2,000 Paying Customers

Monday.com: as of last private funding round June 2018
-35,000 Paying Customers

In this analysis Asana is the closest rival and they have slightly better than half the paying customers of Smartsheet.

Asana in January did an interview at business insider. They ended the quarter with ARR of $100M growing at 90%.

https://www.businessinsider.com/asana-raise-50-million-over-…

SMAR doesn’t issue ARR as a metric. Can we calculate that by latest quarterly subscription revenue x 4? If so that comes to $188M. That should at least be a descent approximation right? At a growth of 57%.

The Forrester report had the following criteria to be included in the study, in case you were wondering why such and such product wasn’t included.
-$30M in ARR for collaborative work tools
-5 or more implementation and integration partners
-Global Presence with Data centers in 2 or more countries and sales forces in 3 or more

Disclaimer: Paying customer count may not be the most precise in terms of market share due to varying ability to monetize those paying customers but may be the best we’re going to get.

In terms of paying customers, Smartsheet is the top dog and still growing incredibly fast. Asana is growing faster and at a little better than half the size. The others are smaller and it’s near impossible to gauge how fast they are growing. Clarizen provides that they grew billings 45% yoy.

Darth

26 Likes
2

Great work Darth! Demonstrates that SMAR is the clear market leader. It is so witty he next best player at half or less than half SMAR’s size. Clear evidence of the dominant leader in another hyper-growth category. Another category killer.

The conventional wisdom by many is to buy the smaller faster guy, but the risk/reward investment is to ignore the has been and focus on the dominant market leader and just shut out all the static. The dominant market leader in a new category, with a marketshare lead this great, almost inevitably remains that way throughout the hyper-growth period.

Any idea how long the hyper-growth period is? That is the S curve thing. Either way, a new category killer in hyper-growth. Our favorite cup of tea during any market condition.

Tinker

8 Likes
3

The only thing I’m not sure about is if “collaborative work management” is sufficiently different then “project management” that Atlassian would be in.

Can Atlassian do all the things Smartsheet can?

We agreed calling SMAR “project management” is incorrect. We said that on the npi board. But when I tried looking at examples of workflow process that had nothing to do with “project management” but workflow that would be up smar’s alley, Atlassian had solutions there too.

This is the one reason I have no SMAR stock.

Yes, Forrester did not include Atlassian. They properly described what SMAR was doing and got more appropriate peers. I still think there is a gorilla hanging over them able to do the same thing.

2 Likes
4

Depends on what you’re looking at from Atlassian.

Trello At $20M run rate doesn’t meet the criteria and probably isn’t really meant to compete here.

Jira Software is defined by Atlassian to be a software development tool. “Plan, track, and release world-class software with the #1 software development tool used by agile teams.” Very suitable for software development projects, not as much for other projects. Not a competing product.

Jira Core was developed from Jira Software to be a business project management tool. There is scant reviews for this product available from the usual places like G2crowd, etc. Maybe it’s because people lump it in with Jira Software or maybe it’s because there is scant use of it.

Any other products? I don’t know. Confluence? Haven’t looked into that one too much. FWIW Jira Software has 65,000 customers.

Darth

5

Darth,

We’ve been at this argument before. Atlassian has not just decided to do nothing. This is not their market, they are not going to compete here. It is when they try to move to tangential markets that at some point they may have overlapping products. By that time SMAR will be larger as well.

The big issue is how large until they hit a wall.

Software companies for some reason have systematically hit issues when they get to $1 billion in revenues. Seems arbitrary but I’ve seen it all the time over the years. Nutanix just surpassed $1 billion and they hit a wall.

The other great destroyer of software is when they build new corporate headquarters. Again arbitrary but systematically hitting a wall and building the headquarters have coincided.

This is why there are so few multi billion dollar software companies.

SaaS seems to be changing this. SaaS scales better and is different f even the traditional software license model.

SMAR is a long way f $1 billion in revs and is not building a new headquarters. Thus if growth continues like this we have a nice runway until they hit the traditional software destroying factors - arbitrary as they seem.

If this has any probative value at all ;).

Tinker

7 Likes