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  1. 1. Work 3.0 Investment Thesis Dhanasree Molugu Zhi Huang 1
  2. 2. Table of Contents 2 I. U.S. Labor Market Overview – Which Groups Have We Overlooked? II. COVID-19 Tailwinds – A Likely Permanent Shift III. Future of Work – For Businesses of All Sizes and Workers of All Types IV. Market Overview – A Growing Space Ripe for Innovation V. Key Opportunities Deep-Dive – Investment Opportunities We Are Exploring VI. Related Pipelines 3 8 17 29 49 63
  3. 3. U.S. Labor Market Overview Which Groups Have We Overlooked? 3
  4. 4. How Big Is the U.S. Addressable Market? Source: U.S. Bureau of Labor Statistics as of July 2020 U.S. Civilian Noninstitutional Population 260MM U.S. Civilian Labor Force 160MM U.S. Employed Labor Force 142MM 4
  5. 5. The Labor Market is Transforming – Groups We Might Have Overlooked Source: U.S. Bureau of Labor Statistics as of July 2020 Participation Rate by Gender Growth of Older Age Groups 77% 75% 68% 64% 67% 63% 52% 60% 57% 1980A 2000A 2020A Men Women Total 78% 76% 75% 65% 65% 68% 17% 20% 23% 2008A 2018A 2028P 16-54 65+ 55-64 5
  6. 6. The Labor Market is Transforming – Groups We Might Have Overlooked (Cont’d) Source: Deskless Workforce 2018; Statista; Fortunly, Gig Economy Statistics 2020 The Deskless Workforce Freelancers 80% of global workforce is deskless… Agriculture: 858M Retail: 497M Hospitality: 122M Education: 226M Manufacturing: 427M Healthcare: 148M Construction: 265M Transp. & Logistics: 189M ~60M of Freelancers working in the U.S., representing 1/3+ of total labor force They work 11 – 30 hours per week on average 90%+ of U.S. workers would consider freelancing or independent contracting work 6
  7. 7. Forces Shaping Our Future Workforce Technological Breakthroughs Rapid advances in automation, robotics, AI and other technological innovation Demographic Shifts The changing size, distribution and age profile of the world’s population Repaid Urbanization Significant increase in the world’s population moving to live in cities Climate Change Depleted fossil fuels, extreme weather, rising sea levels and water shortages COVID-19 Impact A global health crisis that has disrupted and transformed our daily lives Source: PwC, Workforce of the Future report 7
  8. 8. COVID-19 Tailwinds A Likely Permanent Shift 8
  9. 9. COVID-19 Impact Index by Industry Negatively Impacted Positively Impacted Minimal Impact Energy Industrials Consumer Disc. Materials Real Estate Comm. Services Utilities Consumer Staples Financials Health Care Info Tech Source: FactSet Earnings Insight, July 31, 2020 To estimate the impact of COVID-19 by industry, we used y/y Q2 2020 revenue growth of S&P 500 companies as general guidance 9
  10. 10. CLM Impact of COVID-19 on Software Source: Goldman Sachs, Future of Work Report, May 22, 2020 Sales Cycle Shorter Longer Near-term COVID-19 Impact Headwinds Tailwinds Video Conferencing Team Messaging & Collaboration Web App Security & Performance Public Cloud VDI / DaaS Endpoint Security UCaaS Identity Management Monitoring Omnichannel & CPaaS E-Signature Project Management HCM CRM FMS 10
  11. 11. Remote Working - A likely permanent shift Source: GitLab, The Remote Work Report 2020 Earlier: New FoW applications and remote work was primarily adopted for a select few valley companies within the Tech & Media Industry, mainly for design and product teams. Even within the tech industry, Sales teams, Finance teams didn’t adopt remote work Now: Almost every industry of the world is adopting remote work, especially for knowledge workers, with multiple firms extending working from home until a reliable vaccine is found or announcing work from home forever option All-Remote is Surging Everyone Can Contribute 43% of remote workers feel that it is important to work for a company where all employees are remote 56% of remote workers said that everyone in their company can contribute to process, values, and company direction 11
  12. 12. Source: Statista 62% 84% 84% 86% 86% 87% 90% I would consider leaving my co-located company for a remote role My leadership team understands what it takes to operate a team remotely I am able to accomplish all of my tasks remotely Remote work is the future of work My leadership team gives me agency and autonomy while working remotely I am satisfied with tools and processes that enable remote team communication I would recommend working remotely to a friend Shift in Employee Attitudes Attitudes on remote work for employees in companies with digital output in 2020 12
  13. 13. Shift in Employer Attitudes Per a recent Gartner survey, nearly 75% of CFOs plan to shift a portion of previously on-site employees to permanently remote positions post-crisis. Fully Remote Companies § Stripe was one of the first to announce a fully remote development hub way back in early 2019. Smaller, emerging companies such as Zapier, Gitlab, Invision had fully remote/distributed teams even before COVID- 19 outbreak § Post COVID-19, established tech companies have become fully remote indefinitely § This trend is not just limited to the valley but can be seen in India, China, Singapore and other countries Source: Gartner; Data complied by Goldman Sachs Global Investment Research 26% 27% 25% 17% 4% 2% 0% 5% 10% 20% 50% >50% What % of your workforce will remain permanently remote post-COVID who were not before COVID? 13
  14. 14. § Teams concentrate on high-value results, getting rid of low-value routines (such as unnecessary meetings) that actually impede high performance § Teams develop ways of communicating that are effective, efficient, and enable time for concentrated work effort as well as for personal or family life § Time usually spent in stressful and often long commutes morphs into more relaxed time for personal pursuits or for concentrating on work § Higher levels of job satisfaction, employees are less likely to look for other jobs or quit Advantages and Challenges Faced by Employees Advantages Challenges 3% 4% 7% 8% 8% 10% 17% 19% 22% Finding reliable WiFi Other Taking vacation time Staying motivated Being in a different time zone than teammates Distractions at home Collaborating and/or communication Loneliness Unplugging after work 14
  15. 15. Challenges Faced by Employers Source: Statista COVID-19 Survey 29% 38% 25% 16% 38% 30% 71% 62% 75% 84% 62% 70% Sales have decreased Conferences or other meetings have been cancelled or postponed Problems with supply chains, such as decreased availability from usual suppliers Staff shortages due to illness I have been asked to work from home Other Yes No 15
  16. 16. Second Degree Impact of COVID-19 Macro: § Remote Work levels the playing field and may encourage more participation from women who may have left the workforce to focus on family and children. Remote work also fosters a better sense of work/life harmony and creates opportunity for everyone to contribute in the workplace § Increases availability of talent beyond geographical limitations: Technology companies can now hire best in-class talent from across the world (Asia, Eastern Europe). § Will observe a “wage normalisation” especially in the Tech industry which has seen drastic wage inflation in the last decade or so Micro: § Labor productivity is lower leading to longer product, sales and financing cycles § IT spending decreases overall thus leading to a decrease in SaaS ARRs § Entrepreneurial activity may see a short-term dip as funding dries up and the employment environment § Industry-specific solutions will gain more traction vs. horizontal solutions 16
  17. 17. Future of Work For Businesses of All Sizes and Workers of All Types 17
  18. 18. What is ‘Future of Work’? “ Future of Work is a complex interplay of globalisation, technological and demographic changes which leads to new opportunities as well as new challenges for all forms of workers (knowledge, liquid or gig workers) and enterprises of all shapes and sizes ” -OECD
  19. 19. Workplace Applications Is at a Tipping Point 1 COVID-19’s impact on workplace applications has been unprecedented, accelerating adoption of remote working and digital transformation 2 Organizations of all sizes want to modernize workplace application to improve employee experience and promote a more inclusive culture 3 Today’s diverse workforce have varied preferences and expectations, making it difficult to reach, engage and align them 4 Emerging technologies focusing on business intelligence, automation and digital experience create new opportunities and challenges 19
  20. 20. The Future of Workplace Applications Built to Connect Distributed Teams Intelligent Automation Is Here to Stay Human-Centric, Not Process-Centric § Transition from a centralized hub-and-spoke model to a mesh network § Supporting teams that are dislocated in both time and location § New tools for enterprise communication, employee engagement, collaboration and knowledge sharing § Build a culture bringing in workers of all types § Simplify legacy HR solutions that are complex and riddled with manual processes § Automation workflows turn distanced workers into citizen developers 20
  23. 23. What Do Today’s SMBs Need? § Full view of end-to-end HR, benefits and payroll processes § Single technology partner for all troubleshooting issues § Lower integrations & training costs § Automate time-consuming and complicated tasks § Reduce human errors in data management § Self-service solution with lower implementation hurdle § Move from DIY spreadsheet to HR software with intuitive workflows § Expedite new-hire processes through organized procedures § Simplify compliance efforts All-in-One Platform Organized Processes Automation 23
  24. 24. What Do Today’s Enterprises Need? § Best-of-breed solution for a specific department § Deep functionality for one channel § The ability to easily replace the specific component in the ecosystem § Integration with other HR applications to ensure a streamlined process § Integration with the wider ERP systems to ensure full visibility § Generate insights on employee engagement & productivity with data analytics § High usability with customizable features and unified reporting Best-in-Class Point Solutions Analytics & Reporting Integration 24
  25. 25. What Do Today’s Workers Need? – Female Workers Today’s Female Workers What are the Challenges? What Do They Need? Source: Catalyst, Women in the Workforce; Deloitte, Women in the Workplace 2019 Gender Parity at Senior Levels For every 100 men promoted and hired to manager, only 72 women are promoted and hired Lack of Sponsorship 47% of HR leaders surveyed said a lack of sponsorship is the biggest challenge for women Biased Behaviors 73% of women continue to experience microaggressions Balancing Caregiving Responsibilities with Work The labor force participation rate for working parents with children under 18 was 71% for mothers and 93% for fathers Clear and Specific Evaluation Criteria Set in Place Diverse Slates of Candidates at All Levels Required for Hiring and Promotions Mentorship / Sponsorship from Higher-Level Employees and Executives E-Learning Platforms Designed Train Women in More Technical Skills Work-Life Flexibility (e.g. maternity / paternity leave) Identification of Potential Biases with Data Learning Platforms Continual Assessment of Diversity Metrics and Workplace Environment § Obtain more higher-education degrees than men § Still earn less than their male counterparts § Overrepresented in the industries most likely to be affected by automation § Scarce among senior leaders § Undertake unpaid caregiving responsibilities disproportionally compared to men 25
  26. 26. What Do Today’s Workers Need? – Older Generations Today’s Older Workers What are the Challenges? What Do They Need? Source: AAPR, The Value of Experience: AARP Multicultural Work & Jobs Study Age Discrimination 61% of individuals age 45+ have experienced age-related discrimination in the workplace Long-Term Unemployment Older jobseekers are more likely to be long-term unemployed, resulting in an erosion of skills and career networks Age-Related Health Decline Older workers tend to have more health issues due to their age Inadequate Training 25%+ of workers age 45+ surveyed would stay with their current employer longer if their employer would provide for more work-related training Work-Life Flexibility (e.g. remote working, sick / vacation leave ) Benefits that Tend to Appeal to Older Workers (e.g. Health Insurance, Retirement Benefits) Training / Development Programs Designed for Continuous Learning Identification of Potential Biases with Data Learning Platforms Continual Assessment of Diversity Metrics and Workplace Environment Employee Engagement Tools & Events that Drive Insights and ROIs § Employees age 65+ are the fastest-growing segment of the workforce § Have a higher labor force participation rate than their counterparts in the past § Often considered less capable and less able to adapt than younger peers 26
  27. 27. What Do Today’s Workers Need? – Freelancers Today’s Freelance Workers What are the Challenges? What Do They Need? Source: The Freelancers by Cotently Attracting Clients Finding clients and holding onto them are ongoing challenges faced by freelancers Lack of Stability Freelancers often find themselves facing periods of no work or unwanted crowded schedules Managing Time Effectively Issues with low productivity and poor time management often arise as undesired byproducts of a flexible work schedule Not Getting Paid More than 70% of freelancers have trouble getting paid at some point in their careers Platforms Aggregating a Diverse Range of Projects / Clients Project Management Solutions Designed for Both Short-Term Tasks and Long-Term Projects Portfolio Builders to Create Online Portfolios Time Management / Calendar and Productivity Tools Social Media Management Tools to Expand Online Presence Legal and Finance Assistance in Insurance, Retirement and Taxes Mediation and Resolution Services to Ensure Payment Collection § Perform temporary or supplemental work on a project-to- project basis § Want to have more control over their own schedule and a better work-life balance § Want the flexibility to work from anywhere § Supplement full-time positions with extra income in a short-term way § Choose projects based on expertise and passion 27
  28. 28. What Do Today’s Workers Need? – Deskless Workers Today’s Deskless Workers What are the Challenges? What Do They Need? § Do not work in the office § Usually on the road § Limited or no access to a computer § Do not have a corporate email § Receive limited or no training § Cannot easily access company news and updates Source: TheEMPLOYEEApp, Challenging Realities of America’s Deskless Workforce Inforgraphics Dated Communications Only 9% of companies are using mobile and mobile apps as a channel to reach their employees; the rest rely on old school methods Inadequate Training 12% of workers surveyed were not fully satisfied with the amount of training they receive Underappreciation 27% workers surveyed said they receive no appreciation for the work they do Lack of Engagement 40% of the workers surveyed do not value performance feedback Mobile-Based Solution Vertical-Specific Solution Digital Multimedia SOPs Offline Mode that Allows Data Synchronization Real-Time Data Capture Analytics that Turn Operational Data into Actionable Insights Mobile Learning Platform Providing Microlearning in Efficient and Engaging Format KPIs that Track Workplace Safety, Recognition Initiatives, Engagement and Performance Integration with ERP Systems 28
  29. 29. Market Overview A Growing Space Ripe for Innovation 29
  30. 30. Market Landscape – Platform Solutions Individual Team Communication Collaboration Project Mgmt Productivity Knowledge Sharing Scheduling Search & Context 30
  31. 31. Communication Key Offerings Example Features 1 Centralized Communication for Distributed Teams § Provides frontline / remote workforce with real-time information § Public channels for key announcements § Reduce notifications to focus on what matters 2 Personal, Asynchronous Communication § Direct chats for quick conversations & follow-ups § Private channels for focused teams § Focus on non-real time communication Two-Way Communication Instead of One-Way Announcement § Foster continuous dialogue among and with employees § Include previously marginalized groups Re-Inventing Communication Experience § Video / audio-based communication § Simplified and advanced email experience § Cross-channel and cross-application integration Our Take - Deskbound workers have a plethora of communication tools, whereas the deskless workforce remains under catered. While the crowded landscape may even lead to a fragmented communication ecosystem in the white-collar space, there is still an opportunity in the market serving deskless workers despite the recent fundraises of BeeKeeper, CrewApp, etc. 1 2 3 4 31
  32. 32. Collaboration Key Offerings Example Features All-in-One Workspace § Centralized information to allow simplified knowledge storing, sharing and searching § Visually assign projects / tasks to team members § Comment, start conversations and call upon colleagues Workflow Automation § Auto-assign tasks based on predefined rules § If-then workflow to automate messages § Library of company templates Intuitive Organizations of Content and Data § Notes organizations tools § Database-like features in spreadsheet § Shared inbox Our Take – We’ve seen the rise of workplace collaboration software over the past decade. Companies such as Slack and Atlassian succeeded by unbundling email, Gsuite, Microsoft office and other legacy offerings. The market opportunity remains immense, but today’s collaboration tools need to focus on user-friendly features serving a dislocated and distributed team to continue to enjoy networked growth with a self-service motion. 1 2 3 32
  33. 33. Project Management Our Take – Product-led distribution strategies have become the dominant factor driving adoption. As companies attempt to shorten product launch timeline and to drive business initiatives, the project management market has experienced rapid growth over the past decade. However, today’s project management tools should expand into non-tech industries in order to continue its current success. Key Offerings Example Features 1 Project Management and Prioritization § Organized view on what work needs to be done and when work is due § Task list that prioritizes work across projects 2 Centralized Dashboard Allowing Coordination Among Members § Centralized information to allow simplified knowledge storing, sharing and searching § Visually assign projects / tasks to team members § Share roadmaps, feedbacks, files and status updates Continuous Progress Tracking and Monitoring § Status monitoring to identify red flags and manage workloads Visibility to Ensure Alignment with Company-Wide Goals § Real-time updates on how the organization is tracking toward strategic objective 1 2 3 4 33
  34. 34. Productivity Key Offerings Example Features To-Do List § Organize and prioritize tasks and projects § Include both work-related and personal items Goal Tracking § Set daily and weekly goals § Visualize productivity trends Integration with Other Work Management Tools § Pull in tasks from project management tools § Sync with calendars to keep track of tasks and meetings in one place Our Take – Even though there have been various productivity tools in the market, adoption rate among professionals remains low. The market is hyper-competitive with low barriers to entry. Turnkey solutions that offer an all-in-one platform and integrations with other workplace applications are seeing more success. Productivity software that specifically target freelancers will be an interesting use case as well. 1 2 3 34
  35. 35. Knowledge Sharing Key Offerings Example Features Document Management § Include a standard set of library services, such as versioning, check-in / check-out and document viewers § Serve as a secure corporate repository to support records management and regulatory compliance Team Workspace § Support knowledge workers who need access to relevant documents in the context of their project in a consolidated workspace Integrated Business Applications § Integration of content capabilities into common horizontal and vertical applications Our Take – As organizations continue infrastructure modernization efforts that move files from local storage to cloud repositories, knowledge sharing has become mission-critical. Dominated by players such as Dropbox, Box and Google, the market remains highly consolidated and has matured quickly, with minimal product differentiation across players. We’ve yet to see a solution that has mobile-first features and targets deskless workers. Source: Gartner, Critical Capabilities for Content Services Platform 1 2 3 35
  36. 36. Scheduling Our Take – Though calendar management has long been identified as inefficient and various scheduling tools have emerged, no solution has received massive adoption among working professionals, especially outside of the tech sector. A user-friendly interface and a bottom-up strategy are core to success. However, we believe scheduling does not need to be a standalone tool and can simply be a feature of other communication software. Key Offerings Example Features Personal Calendar Management § Allow counterparty to pick a time based on your availability § Integration with Google, Outlook, Office 365, iCloud and other calendars § Set buffer times between meetings § Allow for uninterrupted blocks of time to focus § Detect time zone automatically Team Calendar Management § Allow all parties to select the preferred time slots for a call / meeting § Access to everyone’s workload and status § Organize notes, action items and feedback associated with a call / meeting 1 2 36
  37. 37. Search & Context Key Offerings Example Features Unified Desktop Search Tool § Single interface for all work management applications § Open any document, contact or file using a single command § Retrieve structured and unstructured information across all applications and databases Predictive AI* § Key phrase extraction § Natural language processing (NLR) § Optical character recognition (OCR) Privacy & Security § Defined user permissions for accessing information § Data encryption § Multi-layer security across cloud, physical data centers, intranet and operations Our Take – With the amount of apps used and information created increasing, managing information becomes more difficult. Search & Context is a relatively new and untapped market that attempts to bring a consumer-like experience to enterprise search. However, because technologies such as predictive AI remain immature, the functionalities of enterprise search tools are still limited. 1 2 3 * Signals technology that is not yet mature 37
  38. 38. Market Landscape – Point Solutions Hiring Training, Assessment & Engagement Function Specific Tools SG&A 38
  39. 39. Hiring Our Take – The talent acquisition market is crowded. However, opportunities remain for solutions that offer creative sourcing channels (e.g. people affected by layoffs, passive candidates, talent matching games) or address companies’ needs in one specific category (e.g. freelancers, skilled consultants, tech talents). 1 2 Key Offerings Example Features Candidate Pipeline § Marketplace for skilled, niche workforce (e.g. software engineers and data scientists) § One-click job posting to job sites § Personalized email campaigns § Searchable databases of candidate profiles Candidate Evaluation § RPA screening § Interview scheduling; integration with calendars § Interview kits, feedback forms and scorecards to ensure fair and objective evaluations 39
  40. 40. Training, Assessment and Engagement Key Offerings Example Features People & Culture Platform § Examine company culture and detect employee disengagement through surveys § Measure against past survey results to track the health of company culture over time § Peer-to-peer recognition, custom bonuses and rewards Employee Training at Individual and Company Level § Scalable, enterprise-friendly programs with universal accessibility § Customized, leadership coaching § On-demand, mobile coaching with micro-learning sessions Analytics and Measurement § Performance evaluations and goal tracking § Tangible return on investment (ROI) § Measurable business impact and outcomes Our Take – As companies seek to tackle both employee development at scale, legacy solutions that provide cookie-cutter enterprise-wide training sessions are no longer sufficient. Training, assessment and engagement has become a revitalized market with a shifted focus on developing culture and supporting minority groups. However, most of the existing tools have yet to be proven effective in improving culture in a quantifiable way. 1 2 3 40
  41. 41. Function-Specific Tools Our Take – Function-specific tools, especially those with low / no-code (LCNC) features, will enable the rise of citizen developers. The LCNC market is large and fragmented, with the majority of companies being point solutions that lack a sustainable product moat. However, the market value for first-to-market technologies with deep bolt-on functionality and a multitude of workflows remains high. Key Offerings Example Features Web Builder § Drag-and-drop style with pre-built elements § Built in SEO tools § Publish to a hosting stack Mobile App Builder § Drag-and-drop style with pre-built elements § Preview on mobile devices § Publish a draft build Internal Tool Builder § Display and filter data through tables § Forms with text inputs, dropdowns, data pickers etc. § Visualize geographic data and display objects on a map Workflow Automation and Integration § Integration between apps and business systems § API connections 1 2 3 4 41
  42. 42. SG&A Our Take – From SMEs to enterprises, companies are increasingly looking to automate repetitive tasks across all functions. While the automation tools for HR and finance remain a crowded space, automation tools for legal, customer service, IT and other departments are rising. For these SG&A tools, integration with the large ERP system is a crucial factor to success. Key Offerings Example Features HR Process Automation § Payroll and benefits § Hiring and onboarding Finance Process Automation § Accounting and bookkeeping § Cap table management Legal Process Automation § Founder, team and employee agreements § Compliance with privacy and other regulations Customer Service § Centralize support tickets § Conversational AI § Integration with existing CRM, Shopify, Magento and others 1 2 3 4 42
  43. 43. Challenges Faced by New Workplace Apps 43
  44. 44. Slower Adoption Outside of the Tech Industry § New workplace applications such as Notion, Slack and Airtable still mainly cater to the “tech knowledge worker” § Non-tech savvy knowledge workers take a longer time to adopt these platforms • Leads to higher initial user churn and results in slower conversion from free to paid usage • May also limit the usage of these platforms to employees or teams in the tech industry and not expand to other industries such as manufacturing and healthcare § MSFT and Facebook Workplace have seen success in scaling to multiple industries as they have simplified the user adoption journey § Specifically, Facebook Workplace has been targeting enterprises with a large number of frontline workers, such as Walmart, Campbell’s and Starbucks 44
  45. 45. Ecosystem Premium of Incumbents § With its dominant position in the workplace app space, Microsoft Teams grabs more market share, making product bundling and integration with Office 365 an essential entry point § Despite Slack’s first-mover advantage into the chat applications space, Microsoft Teams was able to accelerate quickly and eventually win shares from Slack, especially in the enterprise space § Microsoft already has access to a lot of large enterprise clients from all verticals before launching Teams. By leveraging its vast distribution channel and long-term relationships with enterprise customers, it remains as the market leader § Microsoft has won the battle many times by creating a similar product to its competitors’ – Internet Explorer vs Netscape, or Lotus/WordPerfect/Harvard Graphics vs Excel/Word/PowerPoint § Its ecosystem premium and wide distribution channels will create a barrier to entry and even stifle the growth of the next upcoming workplace app 45
  46. 46. MSFT still Dominates the Workplace Source: Statista 3% 6% 8% 15% 33% 35% Google Hangouts Worplace by Facebook Slack Other Microsoft Teams Skype for Business Survey of the Most Popular Workplace Chat Applications 46
  47. 47. MSFT still Dominates the Workplace (cont’d) Source: Statista Chat applications used in organizations by priority 29% 11% 5% 14% 6% 30% 15% 3% 6% 8% 33% 35% Other Google Hangouts Workplace by Facebook Slack Microsoft Teams Skype for Business 2019 2018 47
  48. 48. Monetization Remains Elusive for the Newer Players 600,000 660,000 88,000 110,000 575 893 Jan-19 Jan-20 Organizations with 3+ Users Paid Customers Paid Customers > $100,000 Despite its rapid growth, monetization remains elusive for Slack – only 17% of customers are paid customers in Jan-20 (15% in Jan-19). While its freemium model drives adoption, Slack faces problem improving its conversion rate. The same issue applies to other players. Improving usage rate remains key. 48
  49. 49. Key Opportunities Deep-Dive Investment Opportunities We Are Exploring 49
  50. 50. Market Opportunities Low-code/No-code function- specific tools Developers, Designers, Sales teams etc. - each individual team or function area is looking for specific solutions. Thus, we see an emergence of Figma, Invision, Miros of the wold. 2 Deskless Workforce Communication & Management This is a majorly unsolved problems as most of the new-age team communication and collaboration platforms are built for knowledge workers and don’t have a mobile-first approach. 1 Team Productivity Given increasing percentage of remote workforce & no clear market leader in this space, there is an opportunity to build a category leader. The challenge however is to quantify productivity and deliver attributable results. 4 Point Solutions for SG&A More and more new-age solutions are being adopted by enterprises and SMBs to streamline their SG&A activities and cut down expenditure. RPA solutions fall into this bracket 3 Increasing order of ease of evaluation & pipeline 50
  51. 51. Deskless Workforce Communication & Management 51
  52. 52. § Employee Engagement still viewed as a cost-base § Though deskless technology is deployed remotely, most of the decisions are still made top-down from headquarters. 51% of buying decisions are made by the C-suite, 38% by mid-level managers and only 11% by the end user. This causes an interesting dynamic where the technology purchased is rarely used by the decision maker. § While GTM strategy must focus on the top, in order to be successfully deployed and adopted, product design must focus on the end users' needs, surroundings, capabilities, and preferences Employee Engagement Tools for Deskless Workforce Trends § Only 13% of employees across 142 countries worldwide feel engaged at work. The result is low individual and company-wide productivity, increased turnover, and a suffering bottom line § Many of these deskless industries have outdated processes that undermine productivity and efficiency as many of them still rely on the good old-fashioned clipboard and pen Market Opportunity § 80% of Global Workforce is Deskless § The top 8 deskless industries: Agriculture, Education, Healthcare, Retail, Hospitality, Manufacturing, Transportation, and Construction, employ 2.7B employees. § Even though these industries have traditionally been tech laggards but have show increasing interest in tech adoption to manage frontline millennial workforce who are “mobile-first” § Business technology market is $300 billion but only $3 billion is directed towards the deskless workforce Considerations § Venture is underfunding Deskless Technology § Despite the interest in increasing spend on deskless technologies, only 1% of software venture funding is going towards technology serving 80% of the world's workforce. Thus, there is a big opportunity for new company creation. Source: Deskless Workforce 2018 52
  53. 53. Deskless Workforce Often Lack Engagement and Work- Life Balance #1 Low engagement § Only 14% of employees feel connected to their organization's HQ § Many deskless workers don’t believe they can communicate effectively with their employer § Many deskless workers, especially in industries such as logistics and retail, don’t feel valued by their employer #3 Impact on work satisfaction § 31% believe lack of communication and advance notice about their work schedule is hurting their work/life balance. § Communication tends to go one way - in favor of managers § As a ”mobile-first” generation, 87% of millennials are contacted by employers “out of hours” compared to 74% of Baby Boomers #2 High Employee Churn § A major pain point is the ability for companies to effectively recruit and retain employees § The turnover rate for hourly workers is often orders of magnitude higher than the yearly turnover rate for office workers; cost of turnover is both a loss of expertise and a lose of revenue, regardless of the industry § Over 60% of workers have considered leaving their job in the Retail, Hospitality, Logistics, Healthcare & Transportation Industries 53
  54. 54. Spending on Technology for Deskless Workers Is on the Rise 54 55% 75% 77% 78% 82% 83% 91% 100% Agriculture Education Healthcare Constructi on Hospitality Retail Manufacturing Transportation % of Companies Planning to Increase Spending on Deskless Technology by Industry Top Reasons for Investing in Deskless Technology While Productivity is #1, keeping employees happy is critical to reduce turnover rates. Technology plays an important role in both retention as well as getting new hires up the productivity curve 33% 23% 21% 11% 10% 2% Productivity Employee Experience Cost Savings Communication Customer Experience Compliance Source: Deskless Workforce 2018; Statista
  55. 55. What Makes for an Ideal Tool for Deskless Workforce? #1 Vertical versus horizontal § Many deskless application areas are better-suited to a vertical (industry specific) approach rather than a horizontal (industry agnostic) approach § If the company still takes a horizontal approach, they may need to quickly deploy industry-specific functionality and marketing in order to compete with vertically-focused players #3 Go-to-market #2 Usability § There is a premium on usability when it comes to deskless workers § Optimize for making the most important actions and information accessible in a highly intuitive way § Invest heavily in UX testing initially #4 Multiple features § Freemium is much harder to do in many deskless environments as individual users in the deskless world often have limited spending authority and may have less influence with key IT decision-makers § 89% of buying decisions for deskless workers is still top- down. Hiring sales professionals with experience in top- down selling early-on is essential § Decision-makers often seek one-stop products which serve multiple needs of the deskless workforce § Deskless workers also prefer the ease of having one super-app for all their needs vs. switching apps to fetch different information on their mobile device § Most popular features are a) scheduling, b) task-tracking, c) P2P communication, d) training, e) repository of documents and checklists 55
  56. 56. Low-code/No-code Function-Specific Tools 56
  57. 57. § The low-code / no-code market is big ($5BN+), fragmented (200+ companies) and growing quickly (40%+ CAGR; reaching $52BN in revenue by 2024) § By 2023, 50%+ of medium to large enterprises will have adopted a low-code application platform as one of their strategic application platforms § The majority of citizen development software costs are covered by business unit budgets (73%) versus IT budgets Low-Code/No-Code (LCNC) Function-Specific Tools Market Drivers § Shortage of software engineers: On an annual basis, 120K computing jobs should be made available through 2022, while only 40K new graduates will enter the workforce § Digital transformation: Speed is crucial in introducing new disruptive products, engaging and responding to customers across different channels, and adapting existing services based on shifting competitive drivers § Successful exits and high valuation of recent startups have validated the market § Low-code is a platform that enables rapid application delivery with a minimum of hand-coding § Low-code solutions have been around for 15+ years. They traditionally have been considered insufficient for enterprise use cases, were generally built for on-prem environments and have retained an antiquated UI § However, as programming languages and GUIs mature, low-code platforms is combining the simplicity of graphical interfaces and the power of programming languages to enhance user experience Market Overview § The number of startups has exploded in the past three years. With no-code tools, startups require little capital to scale. Many companies can build a solid beta product with a single developer § Large enterprises across all industries need more software for every part of their business and there are not enough developers to deliver what is desired § SMBs outside of the tech industries do not have the capabilities to enable software development but are also are currently going through digital transformation Source: Forrester; Gartner, Magic Quadrant for Enterprise Low-Code Application Platforms; Medium, Where next for no-code?; WSJ, Can’t Code? You Can Still Make Your Own Apps 57
  58. 58. Market Segmentation 1: General Product Flexibility vs. Product Functionality Scenario Flexibility Functional Breadth Database Request- handling Mobile-first Process General- purpose Scenario Flexibility: the breadth of use-cases that the product is currently servicing or can service Functional Breadth: the different functional areas within an organization that the product is currently being used 58
  59. 59. Market Segmentation 2: User and Use-Case User: Business Unit User Content Creator / Designer Developer Use Case: Productivity automation Spreadsheets / databases Docs Mobile / Web app Robotic process automation Internal tooling Data science Membership Content creation automation Marketing automation Mobile app Website application Game development Data science Voice AR API creation/ management Internal tooling The go-to-market and customer value proposition is substantially different depending on the user and use case 59
  60. 60. A Lot of Fluff, but Valuable Unlocks § Low-code products enable more types of people (non-developers) to deliver software thus “10x”-ing the speed of tool and application development. These “non-developers” can be • Business analysts that work in large enterprise companies, or even • Your local restaurant franchise owner, the GM of a regional bank, the owner of your favorite coffee shop, and the yoga instructor teaching live classes online § Given the maturity and crowdedness of the low-code market, new companies building maximally flexible / general-purpose platforms are unlikely to see traction • The majority of LCNC companies are functionally, point solutions. Many do not have a sustainable product moat and lack the growth rates and features to attain $100 million in revenue • The big winners (e.g. Notion, Airtable) are likely already chosen given the strong first-mover dynamics. For companies with easy-to-built products, their growth is most dependent on efficient customer acquisition, giving incumbents strong new customer acquisition advantages § With that said, the market value for first-to-market technologies with bolt-on functionality is very high § Our take: Deep functionality for one specific end user group that is with a multitude of workflows drives scalable product uniqueness and is core to success 60
  61. 61. What Are The Takeaways for Investing in LCNC Tools? § Because user-experience is so important for a low-code platform, it would be difficult for existing platforms to seamlessly incorporate a new technology in a way that does not significantly disrupt their established UX § We should consider investing in a maximally flexible low- code platform if it brings a new technical capability to the mass-user § Companies like Orbiter and Rosebud.ai are making AI/ML more accessible for non-developers #1 New Capability #2 Vertical Niches § Industry-specific applications are likely to face less fierce competition, especially as big tech such as Microsoft, Salesforce and Google are entering the space § There are also opportunities in vertical niches where customers will pay high amounts for a uniquely, useful product § These niche products demand prices multiple-fold higher than general products (e.g., Airtable charges $10/month per user but industry specific applications can charge up to hundreds of dollars per month). General products are also more likely to face price compression, as the market becomes more crowded § Admittedly, a company might pay once at the company level for a niche tool and for multiple users for a more general application like Airtable § More diligence should be conducted on a specific solution’s tradeoff between price and usage Potential Under-Explored Opportunities Hotel industry workflow Booking, cancellations, cleaning Independent bars TV content automation, promotion workflows Health insurance Communication between carriers and broker platforms Creator economy Content management, CRM tools 61
  62. 62. What Are The Takeaways for Investing in LCNC Tools? (Continued) § Enterprises are also currently served by process automation vendors, which tend to better meet enterprises’ demands § While opportunities still exist with non-business users within enterprises, we believe the best opportunities lie with SMBs that have been using paper, traditional spreadsheets, and obsolete, unintuitive applications to handle their processes § While we’ve seen high adoption of various LCNC tools, it is unclear how deeply these tools will be used in enterprises § If a low-code application becomes recognized as mission critical, businesses may want more control over the application than low-code platforms typically allow. They may want enhanced customizations, security and admin tools #3 Targeting SMBs as the First Market #4 Go-to-Market § The majority of citizen development software costs are covered by business unit budgets (73%) versus IT budgets. This suggests an upper bound on pricing for an effective GTM § Ideally the product is purchasable by the business unit without escalation to higher levels for approvals § Citizen development is driven by need for speed, while ease of app building is most important tool criterion Source: Gartner, Survey Analysis: Citizen Development Is Happening and IT Needs to Be More Engaged 11 18 35 18 15 21 15 16 10 44 49 66 Fast time-to-market for apps Ease of integration into existing enterprise applications Ease of building apps Most Important 2nd Most Important 3rd Most Important Top Three Criteria for Selecting a Citizen Development Tool 62
  63. 63. Related Pipelines If you want to discuss pipeline or curious about Work 3.0 write to me: dmolugu@chicagobooth.edu 63
  64. 64. Related Pipeline Deskbound Workers Function Specific Tools Productivity & Engagement Communication Seed Series-A Series-B Series-B + 64
  65. 65. Related Pipeline Seed Series-A Series-B Series-B + Deskless Workers Vertical Specific Tools Productivity & Engagement Communication 65
  66. 66. Evaluation Criteria Products with a B2B revenue model and a B2C GTM & growth strategy We are seeing a consumerization of the enterprise/SaaS space – the decision funnel is moving more and more bottom-up. Under these scenarios, evaluation metrics will be consumeristic in nature such as § User growth, engagement & retention metrics § Penetration / usage rate in a team § Ease of onboarding & integrations § L28 distribution / cohort analysis § Minimum adoption barrier - a thumb-rule number which reflects the minimum amount of user penetration and engagement needed to make the product sticky and vital. This number is specific to the nature of the product. For example 1 2 Products with a B2B revenue model and GTM & growth strategy Under these scenarios, key non-GAAP performance metrics still apply § Retention: gross & net retention (showcase how mission critical a product is and whether it has product-market fit) § Salesforce efficiency: customer payback period (targeting 12-24 months), CAC ratio (targeting 1.5x+), quota achievement rate § Customer value: average contract value (ACV), lifetime value (LTV), LTV/CAC (targeting 3.0x+) § Pipeline metrics: win rate, conversion rate, sales cycle length, etc. 2000 messages sent One file in one Dropbox folder on one device User returns 1 day after signing up X users followed Y% followed back User connects with 10 friends in 7 days 66