WSM’s portfolio review end of August

August was a great month for my portfolio and I was quite active; I ended up ytd 79.4%.

The reason my results spiked this month is because I increased Upstart to my number 1 position before earnings, and had Datadog as another top position - and both had good share price increases. I built my Upstart position from May by first selling Bandwidth (in May) and then Cloudflare (from June) and trimming Snowflake and some others. So going into earnings Upstart position was my biggest at about 23% and it was a little leveraged.

So there was a bit of luck on my side. However I’m currently re-reading John Train’s “Money Masters of our time” and one of the things that struck me about all of these fantastic investors - Buffett, Rowe Price, Lightbown, Fisher and others - is that literally all of them bet big if they really had strong conviction in a stock. Anyhow, I’m certainly not in that league, but with Upstart everything clicked for me, so I swung for the fences. I’m not a techie like many here, I’m trained in finance and spent my early years in financial services. I did some unsecured lending as an early venture in my earlier life. And now I’m the finance guy for a small SaaS company. This combination made me feel confident that betting big on Upstart was within my circle of competence - after doing my homework of course.

2021 ytd results were as follows:

End of Jan	+7.6%
End of Feb 	+7.7%
End of Mar 	-6.0%
End of Apr 	+4.6%
End of May	+6.6%
End of June	+24.1%
End of July	+22.1%
End of Aug	+79.4%


I made the following changes in the month.

I sold three small positions early in the month: GAN, Pubmatic and the last of my Cloudflare.

I used the proceeds to buy more Upstart before earnings - some of it leveraged, and sold all of the leveraged positions after earnings - in effect I trimmed my position after earnings, over a period of about two weeks.

I bought a position in Doximity after their first results as a public company were quite astounding and I added to Lightspeed and Zoominfo.

I added to Snowflake before earnings after reviewing their prior quarterly results here: , and built up and leveraged my Crowdsrtrike position a little going into earnings (we’ll see how that works out next week). And…I sold my whole Snowflake position after earnings and reading and thinking through Bear’s points about (lack of) RPO and large customer growth here:… . Finally, I built up a little bit of cash.

Why did I sell Cloudflare (NET)

I cut my Cloudflare position in half in June, reduced it further in July and sold out completely on 2 Aug. I wrote why I trimmed and finally sold this position in my June and July monthly reviews.

I know many people on the board disagree with me.

However, in terms of my own personal opportunity cost (and investing is very personal after all), this was a great decision because I had a much stronger personal conviction in some of my other stocks. Since selling Cloudflare the stock has gained about 20% on my earlier sales and a little less on the later sales. My Upstart position is up by more than 100% since I started buying in May.

Why did I sell Snowflake (SNOW)

Just before results I posted my thoughts and where I was going to focus on in the results, namely large enterprise growth and international growth, here:

In his response Bear pushed me to come up with a number which I was hoping for, for Q2 before results, and I did: I was hoping for $275m TOTAL revenue and they came in at $272.2m - so pretty close to the money.

But Bear was even more accurate - astounding actually, he expected $255m PRODUCT revenue and they came in at $255m. Exactly on the money. He went further and said he was hoping for $1.06bn full-year guide and they came in at $1.06-$1.07bn. So they guided slightly better than what he had hoped for.

However whereas Bear thought the market would shrug, I thought that the same numbers would be rewarded.

In the end it got rewarded a little just after results, but the results were not a surprise to the market - there was no big change after results. So we were both a little right, I guess.

The positives that stood out for me from the quarter’s results were:

- NRR, which increased from 168% to 169% this Q. I would like to stress just how amazing this is, especially at this scale. At our small SaaS company we pop the champagne when it gets above 120%. Snowflake is consistently >160% and just improved it even more - at incredible scale.
- Margins, which improved: Prod GM to 74% (from 72%) and operating margin to -8% (from -16%).
- Large customer spend growth - customers with >$1m ttm spend increased by 12% qoq. Given that this number is lumpy in a single quarter, looking at it in 6 months buckets is interesting to get to a trend imo: in the last 6 months this number increased by 39 (from 77 to 116), or 51% and in the prior 6 months it increased by 21 (from 56 to 77), or 38%.
- International growth - EMEA is now clearly gaining momentum - it grew 185% yoy and is now 14% of the total revenue up from 13% last Q and 12% the Q before. APAC is still very small - at 3% of total revenue but it also grew very fast, at 170% yoy.
Stable edges - up 20% qoq to 16% of the total customer base vs 15% last quarter.

So of the two things that I thought bore more scrutiny than other things, relatively speaking, namely international growth, and large customer acquisition, international expansion clearly came in as a positive.

However how about large customer acquisition?

From the Q&A:

So, you’ve now signed up more than 10% of the Fortune 500 over just the last 12 months. That’s incredibly difficult to do. And my question here is, given the nature of your model, would it be fair to say that a very small percentage of your Q2 revenue came from these 54 relatively new Fortune 500 customers?
I would say less than 1% has come from new customers we landed in the quarter. And for the full year, less than 10% will be for customers we land in the year. As a reminder, when we land these customers, it takes 9 months to 12 months before they really start consuming at a rate. So what’s really driving the revenue this year are all of the customers we landed - those large customers we landed last year.
And I want to stress too, it’s not just those large - we have a lot of small customers that drive a lot of revenue too. It’s just - the point is those large customers, they have a lot of growth potential within them still today.

So great financial performance in the quarter, and great large customer acquisition last year.


Looking deeper, there seems to be a crack in large customer acquisition of THIS quarter.

All of the performance described above is actually a reflection of success in the last year - in the past, not the current quarter, because revenue from customers take 9-12 months before hitting the P&L.

So to gauge sales/new customer acquisition success - a leading indicator of performance for them - we need to focus on RPO, as per management’s own steer.

And RPO disappointed.

Given that management explicitly stated more than once in the past that RPO growth was driven by large customers committing to multi-year deals, we have to conclude that the slowdown in RPO is likely due to a lack of those two things.

Which means at least some hiccups in sales to large customers in the current quarter.

And the impact of this will only hit the P&L in 9-12 months.

Once this penny dropped for me and given that Snowflake is priced for perfection, I sold out completely.

Why did I sell GAN (GAN)?

I’ll keep this short and sweet after my rather lengthy write-up last month.

Basically GAN is a software company selling software to casino’s as well as an online gambling company after a recent acquisition. They split revenue between B2B (subscription software) and B2C (online gambling).

What I was looking for in the results was acceleration in the core B2B part of the business. In stead, their online gambling business really boomed and their B2B business was flat. It actually declined qoq and they had to point to a “once off” last quarter to say that, actually if you exclude this once-off, they had a very small increase in the B2B side.

Also, the CEO just did not impress me on the call.

So that left me with the question: do I want to own a fast-growing online gambling company with a bit of a struggling core B2B SaaS business and a CEO who didn’t really impress?

Absolutely not. So I sold (even at the bargain-basement valuation).

Why did I sell Pubmatic (PUBM)

Pubmatic presented me with a bit of a conundrum. I’ve been looking for a good way to benefit from the rather big changes happening in the advertising space and thought that this could be it. It is a founder-led, VC bred company with strong growth and a differentiator of having their own infrastructure (which has positive echoes of NET).

And to be honest there wasn’t much not to like in the results.

They came in at $49.6m revenue for Q2, which was a beat and was up 14% qoq and 88% yoy in a seasonal business, with the second half of the year usually the strongest - so with potentially very good growth to come in the rest of the year. And the interesting parts of their revenue mix - mobile and CTV/OTT both grew even faster - with mobile up 108% yoy and CTV/OTT up more than 100% qoq!

GM was good - at 74% and with an upward trend over time, and NRR was exceptionally high at 150%.

And they were profitable - EBITDA margin of 37% and NET INCOME margin of 20%.

Lastly, the CEO talks the talk and sounded very convincing. The stock is also relatively cheaply valued: trading at 7-8 times sales at a market cap of approx $1.4bn.

Like I said last month too - I really like this company, and the results did not disappoint.

But, I decided to sell.

Why? Because I understand my other portfolio companies better and thought I had better prospects elsewhere - and I wanted to focus my portfolio in a smaller number of stocks. Their size also worried me a bit; are they too small to really make it in this space vs larger competitors? And I found a company which I immediately understood better with a more focused advertising offering and a land and expand model, optionality - and growing faster - in Doximity.

Still, I would really like to hear from anyone on the board who has looked at this company in more detail and understands the space better, as it still sounds like this could be one to keep an eye on.


I now have 8 positions - 3 top conviction, 4 mid conviction, 1 small position, and some cash.

**Crowdstrike		25.4%**
**Upstart			18.5%**
**Datadog			15.4%**

**Zoominfo		7.8%** 
**Docusign		6.4%**
**Lightspeed		6.3%**
**Doximity		6.6%**

**Digital Turbine		1%**

**Cash			12.6%**


Crowdstrike (CRWD)

Last month I wrote that I’ll be looking for revenue growth to tick up fuelled by the strong net new ARR performance of Q1. That is still the case. I expect a big quarter on 31 Aug and have positioned accordingly; Crowdstrike is now my largest position, and a little leveraged (with call options, NOT borrowed money or CFD’s - I never want to be exposed to a margin call).

Upstart (UPST)

Upstart had a fantastic set of results for Q2 2021.

For me the biggest number was their annualised qoq revenue growth rate. Revenue grew 60% qoq which annualises to 555% which is truly amazing.

So without regurgitating what others have already said about Upstart I’ll just leave you with this - if they can grow at that rate in what they describe as a depressed lending environment, what is a reasonable growth rate to expect over the next quarters and years - after they add other lines of business - of which auto loans will be the first and is currently only starting to gear up?

I really liked this monologue by the analyst from BoA in the Q&A, which summarises the question above pretty well:

“And just before the question, I want to do a quick quibble with some of my colleagues here on the sell side. “Pretty impressive results and another strong quarter” seems a bit understated when you’re talking about quadruple digit growth, which might be a first in my career… What’s more impressive is as you mentioned early on, this was on the back of an – even if you take that out, that Q2 of last year – you turned off revenue. So – if you compare it to Q2 of '19, you’re still looking at fivefold growth on that year. And if you look at the TransUnion data and other data on the personal loan market, obviously, the personal loan market is still down as credit card balances have fallen.
I know you mentioned that in your forward guidance, you’re not predicting any change to what has happened. But as we think about – what do you think your growth would have been on a more normal – maybe in the first half of this year in a more normalized market for personal loans, where credit card balances are higher and they’re on stimulus packages pushing down the need for personal ones?”

The number of partner banks they have signed up is a key driver of their growth, and it is a leading indicator as these banks take a while to fully gear up. And they just had the most net new ones signed in a quarter ever: 7. The last 3 quarters they added 5, 3 and now 7, bringing the total to 25.

Well the stock is up more than 90% from where it was pre-earnings, which is a lot, but not when compared to what could be the growth for the rest of the year and beyond.

This is a fantastic company with top notch leadership. It’s a profitable, cash-generative hyper-grower like DDOG and CRWD. On top of that they have unbelievable prospects and a low valuation imo compared to my other holdings. I’m very happy leaving this as a top position.

Datadog (DDOG)

Last month I said that the key thing I’ll be looking for in their earnings was accelerating revenue growth, and in June I said that I expected them to accelerate revenue growth to above 60% again in Q2, reversing the decelerating trend of 57% and then 52% of the last two quarters.

Well they delivered on that and more. They came in at 67% yoy and 17% qoq revenue growth, which was in the same range as the qoq growth rates for the second quarter they showed in 2018 (15%) and 2019 (19%), pre-Covid. 17% qoq annualises to 87%!

RPO was even stronger, growing qoq by 26% and yoy by 103%, from $464m in Q1 to $583m in Q2 - driven by multi-year commitments, so I don’t view this as directly pointing to revenue acceleration to come, but still: customers are choosing to commit for longer periods which is great. Contrasting this with Snowflake is instructive and makes clear why Datadog is still one of my top dogs, and Snowflake is not.

FCF was a healthy 18%, NRR was above 130 (and UP vs past q’s - in the Q&A the CFO said he won’t give a number but will give trends, and then basically said it was trending up), and operating margin at 13%, the highest ever.

Customer growth was strong, with total customers growing by 8% qoq - the fastest qoq growth rate of the last two years (2020 was slow, of course - 5% qoq but 2019, pre Covid was 7%).

In terms of runway, they had 75% of customers using 2+ products, and only 28% already using 4+ (vs Cloudflare’s 88% and Crowdstrike’s 64%). This means lots of potential to upsell still left.

They’re innovating: what they’re doing in security is very interesting. The CEO was cagey on exactly what it is they are doing in this space- he was pressed a couple of times for more detail by analysts and he deflected each time. He said they are learning from the sqreen acquisition, selling to the existing base and learning, and that they “will have some interesting things to do in the future”. This point has been made by others but it is worth repeating: they already have their software running in customers’ environments - same as Crowdstrike - and that gives them the ability to leverage the software easily for additional purposes - like they are doing with security. In the CEO’s words (answering a question about what their differentiation in the security space is):

“On the differentiation, what we’d bring to those categories, we already are instrumenting all those workloads. So we are present on those machines. Our agents are running there. The logs are being collected by us already. We already connect to all those cloud configurations. So there’s nothing else to be done really by our customers to turn on security, and that’s a major, major differentiator.

This bodes extremely well for the prospects of their security product imo.

Nothing not to like. Hypergrowth, with lots of runway to upsell existing products and NRR already trending up in the +130% range - and a whole new market in the form of security still to address. And already cash generative and profitable on the operating profit line with more leverage to come. Top position.

Zoominfo (ZI)

Zoominfo is probably the company that is most misunderstood by some on this board and perhaps in the market, imho. It is easy to do a cursory review of Zoominfo’s product and company and then to put them in the same bucket as all of those unsolicited calls that we get from people trying to sell us stuff that we don’t want.

That is like comparing a top salesperson, like the CEO of almost all of our companies here - and I want to stress that: our CEO’s SELL their product - all of them, to that same annoying call centre agent phoning you to try to sell you insurance that you don’t want and don’t need.

Both are in sales, but they could not be more different. B2B sales is not B2C sales. And Zoominfo enables B2B sales - very well, in fact.

So putting Zoominfo into the annoying unsolicited call bucket is incorrect. It is simply a mistake to think this way; it is an incorrect conclusion.

Ok, pounding of fist done.

To understand what they do better, I really recommend listening to this excellent very recent podcast, in which the CEO was interviewed and was exceptionally candid, that BroadwayDan posted - thanks Dan!!…

Here are my notes:

About how it started off: “And the business grew profitably - obviously because we had no other money” → this is why the company is still growing so profitably; it’s part of the culture.

Acquisition of Zoominfo in 2019 gave Discoverorg a world class tech team, which Henry Schuck - who is for me the stereotypical sales professional - was not able to scale by himself. Key person is Nir Keren - CTO : Israel.

Q:Where do you get your data?
A: Lots of different places:

  1. We buy data
  2. We gather data through public sources
  3. Two contributory networks
  4. Free Zoominfo access in exchange for email details - freemium model
  5. Customer contributory network from a portion of customers who share data: cleanse validate & send back to them and we use that
  6. Literally a million other sources other sources linked with ML which

Q: What information do you collect?
A: Business contact information which is non-sensitive information.

Q: Competition?
A: There aren’t really that many people innovating for sales people. Last big one was Salesforce.

Q: Revenue model: seat-based / data based?
A: Combination: 1) seat based - 100 sales people & 2) records under management / enrichment based. you may have a 100 sales reps for which you pay on a per rep basis and also marketing wants to enrich 1m records & keep them all up to date which is a data-based fee.

Q: What would drive market cap doubling?
A: Continuing to dev & deliver solutions for sales people & playing into their existing market white-space.

Q:What keeps him up at night?
A: It’s not competitors keeping up at night; only thing is execution - did I get the right people?

Q: What would he want investors to understand:
A: 1) Understand the end user of the product 2) Don’t underestimate the value of a great GTM motion. Investors do not adequately appreciate how big the end user market is, how underinvested it is, and how very few companies are investing in the sales person.

Some metrics that I’ve not seen previously:

  • Average sales cycle is less than 30 days.
  • ACV is $30k plus.
  • S&M efficiency: 1.5-2 return on spend IN THE FIRST YEAR
  • Unit economics: LTV/CAC is well north of 10x and closer to 15x !!

And here’s a great post on chorus - thanks rahcoon. Basically chorus is a very big deal for them and an incremental revenue stream which they use themselves, and can seamlessly sell to their existing base and vice-versa.…

ZI Q2 2021 Highlights

Revenue was $174m, up 56% yoy and 14% qoq - a clear acceleration; International contributed 11% and up 75% so faster than US growth
GM% of 89% - steady
OpM% of 43% - steady
NRR was not published but is clearly up markedly vs the 108% published in Q4 of 2020; they will report NRR again end of the year
FCF% of 53%!!

This is a company with a leader who comes from the ranks of the people they are selling to: B2B sales & marketing professionals. He understands them because he is one himself. And he is exceptionally driven. I get the impression that he will run through walls to make his company a big success - even bigger than it is now. It is hugely profitable and cash generative, growing at almost 60% yoy and accelerating. And it has a wide open TAM ahead in a relatively uncontested market, with a product that customers clearly love and which will become more and more relevant in the years ahead, as our business lives move increasingly online. I was previously worried about the seeming lack of customer growth, but I believe this is intentional, as they move their GTM motion more towards acquiring larger enterprise customers.

Docusign (DOCU)

Docusign will be reporting on 2 September, and I will not be changing anything before that date.

Lightspeed (LSPD)

It seems that with all the activity and attention going to Upstart and Snowflake, the board has all but forgotten about Lightspeed.

But they had a great quarter and seem poised for rapid growth.

I think the most important operational metric for them is the total number of customer locations (eg. restaurants) that they serve. And customer locations: ended at 150k, up 26% sequentially and 95% yoy - almost doubling from the 77k they had in Q1 2021.

Customer locations basically drive the business and showed amazing strength - some of it acquired and some organic. And whereas other companies acquiring would tempt me to focus more on the organic (i.e. excluding the acquisitions) growth, with Lightspeed, given that they’re buying customer locations - which is roughly the same as buying customers, so more akin in my mind to a form of S&M - I’m inclined to focus on the non-organic numbers. Still, the organic growth was also impressive at 60% yoy.

Financial highlights from Q1 2022:

- Revenue was $116m, up 41% qoq!! and 220% yoy (but compared to depressed COVID comps); organic growh yoy was up 81%.
- GMV was $16.3bn, up 51% qoq!!! and 202% yoy; organic growh yoy was up 90%.
- GM% was down to 50% from 53% in the prior Q, due to increased payments penetration (which is lower margin). However this is a good thing as they have a very clear path to increasing their ±10% penetration of the rapidly growing GMV to ±50% of the GMV for their own payment system. And all of that is contribution margin positive.

This is an easy to understand business for me with a clear flywheel for growth. They have a lot of locations, many of which have been really distressed in COVID. They used the COVID period to acquire a huge number of additional locations (via buying the companies that served them) at good prices. As people start going out more again, these locations come roaring back, generating revenue for Lightspeed. And the kicker on top is that they will be increasingly getting these locations to use their payment processing technology, which they see a clear path to 5x from current levels as a % of a very rapidly growing GMV. So payments is a massive opportunity on top of the subscription-based SaaS revenue.

And they have a lot of optionality to sell additional things of value to this base - like financing, which they are starting to do via Lightspeed capital.

The team sounded exceptionally upbeat on the conf call, and the business is firing on all cylinders.

Doximity (DOCS)

Doximity is a new position for me and I built it up quite fast. They reported on 10 Aug. After listening to the results presentation - their first as a public company - I decided to look deeper and came away very impressed. The leadership is very strong, the market wide open and they are dominant in the healthcare niche that they serve.

Product overview (5 mins - must watch if you’re new to the company):

Operational highlights:

  • 80%+ of US physicians, 50%+ of nurse practitioners and 90%+ of graduates use their platform.

They sell this audience to hospital and pharma customers’ marketing departments - which make up 80% of their revenue.

  • They also serve more than 30% of all US physicians with their paid telehealth system and
  • have 224 customers >$100k in subscription based revenue on a ttm basis, up 58% yoy
  • Subscription rev is 88% of ttm revenue

Q1 Financial highlights:

- Revenue was $72.7m, up 100% yoy
- GM% of 89% up from 79% in the prior year
- NRR was 167% and >130% for the full years 2019 and 2020 (pre pandemic)
- EBITDA of $31.2m, up 700%; EBITDA margin of 43% vs 11% prior year
- FCF of $32.4m, up 326%
- Cash on hand $726m

The team and mission:

“We’re a founder led mission driven team. And this isn’t our first rodeo. Shari, my Co-Founder; Joe our Commercial Head and I all took our last medical app from my dorm room to IPO in 2011. The average tenure of my direct reports is seven years of the company. We believe experience matters in the complex world of health tech and we’ve each done our 10,000 hours in it many times over. So it’s our life’s work to build better technology for medicine, to care for those who care for us.”

I really like this company; and it is already more than a try-out position. It hasn’t done so well for me yet, mainly because JPM has very recently cut it’s price target saying it’s overvalued, so I bought some more. I would love to hear others’ views.


What a month! I did a few things right this month, with the help of this board, which is really invaluable to me.

I guess going forward the thing to be careful of is overconfidence. So I’ll be reducing my leverage (i.e. selling all of my call options) and increasing my cash position in the weeks ahead.

  • WSM

Previous reviews:

July 2021:…
June 2021:…
May 2021:…
April 2021:…
March 2021 Q1 ytd:
Dec 2020 full year:


WSM, excellent write up and most excellent results. I’m curious to see where your conviction level lies on DOCU having another excellent report out on Sep 2nd.


1 Like

Thanks for the update, WSM, especially about ZI. Business people WANT to take phone calls from reputable salespeople because it’s their job to source out the best products and services for their company. In that regard, I was watching an early video interview with the CEO and noticed how well Schuck responded to the question of being adaptable. For his business to succeed long-term, he has to constantly pivot (as do great investors like Saul). Key moment: AT THE 14:40 MARK of the following video, Schuck explains the “undeniable truth:” He won’t be leading the same way in 12 months as he does now. Interviews like this one just cement my conviction around ZI.


Great thoughts on $DOCS. I’m curious to get yours/all thoughts. In looking at Revenue on a QoQ basis ---- it went from 24.0% QoQ to 30.1% to 13.6% to 9.0%. Seems to be decelerating. Thoughts?


I also had a question on Doximity. I am intrigued, mainly because it is different, but I might be missing where the growth would come from. They say in their S-1: “We count 20 out of the top 20 pharmaceutical manufacturers and 20 of the top 20 hospitals and health systems in the U.S. News & World Report Best Hospitals Honor Roll among our customers.” I realize they have the data and the pool of users by capturing such a large percentage of practicing physicians but I am having trouble seeing the avenue for growth. This would make me think that expansion within existing customers is the main route to growth.

I remember one of Saul’s month-end portfolio updates about Unity splashing water on my fire. I was pretty excited about this company but he brought up a really good point that I think applies here:
Saul: “Also they already HAVE all ten of the top ten auto manufacturers, and 94 of the top 100 game developers. Where is their room for growth?”

You seem very thorough with your analyses so I’d like to hear why you think there is strong growth ahead for this company.