2xing Asana with Common Sense

🧠 The Takeaways

Today, we’re getting Asana “Ramen Profitable” and flip it for $12B to 2x our money.

1. Spending 60% of Rev on Sales & Marketing is too much.

2. AI is a feature upgrade for SaaS, not a new product.

3. How we’ll create new products through acquiring top partners.

+ I started a private finance club.

Let’s Community - I started a Finance Club

As Americans, we talk about work too much, and money not enough. We don’t talk enough about how we invest, save, and spend it. I decided to change that.

Recently I started a Finance Nerds Club, where 3 of my friends and I talk about money. Once a month, we jump on for 1 hour. One person presents a finance topic that they’re skilled in/want to share, and the group asks questions/challenges them to learn more.

It’s a simple forum where we all can learn more about ways to better our financial situation and share tips/strategies/hacks we’ve been testing. We aren’t trading stock picks, but ways we actually make and manage money.

Some of the topics so far:

1. I ran through my Personal P&L Template + how I track my family’s finances.

2. A friend ran through the optimal 401k contribution strategies to maximize your income from 40-90.

3. Another friend ran through technical trading tools he uses to analyze stocks. (He day trades professionally.)

I originally got the idea from a Benjamin Franklin biography—he would start Juntos everywhere he went to learn more from other interesting people who were also hungry to learn.

As I continue on this journey to financial freedom and how to better manage money, I hope that the group grows, and we get on more interesting people to share unique topics on how they’re managing their family’s money.

Let’s Examine This Biz

Note: As always, none of what follows is legal, tax, investing, financial, or any other sort of advice. I previously was an investor in Asana, but sold my position long ago and have no affiliation with the company other than being a current customer. And I was never here 😉.

Asana the Project management tool that spun out of Facebook didn’t get the 2023 Get Fit memo.

Its stock is getting dragged through the mud for it.

Trading at $20.61/share with a $4.7B market cap, -20% L5. It’s in too competitive of a market to be this unprofitable.

Financial Summary

TLDR Analysis: Throwing Away Insane Margins

• Legit 90% SaaS margins. A boy’s dream does come true. 🤩

• 60% of Rev is spent on Sales + Marketing. 🤮

• Spending 1.3x of Rev on OPEX! 🤮🤮

I don’t care what growth-at-all-costs philosophy they had. Spending 131% of your Revenue on OPEX is unacceptable. A complete waste of 90% margins for a biz only growing +19% YoY.

Running the plane low to the ground is 1 thing. Intentionally nosediving is another. This has to stop.

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Let’s Fix This Biz!

Here are the 3 moves I’ll make to double Asana’s valuation (doing the basics).

1) Cut the Marketing budget in half

You know what the best way to ruin 90% Gross Margins? Spend 60% of Rev on Sales & Marketing.

AND that’s a massive cut from spending 80% the year before.

We can argue 6 ways to Sunday about how big of a Marketing + Sales budget Asana needs, but here’s the only reason why they should cut.

Spending that much money ($391m/yr) can’t be spent efficiently. 

Without knowing anything about the biz, I know they’re wasting at least $100m.

We can add $100-200m in profits back to this biz in a year while continuing to grow the biz. This alone will make this biz ramen profitable.

Takeaway: Keep Marketing & Sales as a % of Rev Reasonable (<40%).

2) Build AI into the Core Workflow

The biggest mistake every SaaS that wants to be AI, is making is treating their AI like a separate add-on product.

They should just replicate the drug dealer model that made them successful in the first place. 

1. Give a taste away for free.

2. Find the moment they’re hooked (the Aha moment).

3. Increase core product prices.

Asana has the 2 easiest use cases to provide immense value to customers and capture some of it. Customers won’t be willing to pay for a separate product, but they would be willing to pay more for:

1. Catch poorly written tasks.

2. Build the workflows I didn’t know I needed.

1) Be the ultimate QA tool.

Every person on a team writes tickets differently. It wastes hours going back and forth making sure the writers, designers, developers/producers are all aligned.

AI is the perfect tool to monitor the process, recommend updated templates + naming conventions, build then enforce them. Humans will always get lazy enforcing the nitty gritty/micromanaging work.

AI will do it + save everyone a ton of time on the tasks they don’t want to do.

Asana can price that to 10% of the savings.

2) Become the Workflow Wizard.

Great workflows are the difference between decent vs. amazing performing teams. When someone introduces you to a Tier 1 Workflow, it’s an unlock in your biz.

AI is the perfect tool to build them. 

1. Observe the team’s behavior

2. Make recommendations

3. Implement new workflows 

Great agencies transfer workflows/knowledge from 1 client to another. Asana could be doing that across the 150k+ accounts. Essentially creating the Netflix algorithm for Project Management workflows.

You’d never leave because it’d become too ingrained in every workflow to rip out.

Takeaway: In consumables get them hooked with a taste.

3) Acquire Marketing Agencies. SaaS-ify their processes.

Asana spends 50% of Rev on R&D (aka Product & Engineering). We’re going to take a portion of that budget and:

1. Buy 5 of their Top 20 partner agencies. 

2. Figure out everything they’re doing manually.

3. Turn them into AI-powered SaaS.

There are 2 reasons we need to acquire them.

1) 100x the insights 

Carta did this back in the day, but the principle is simple. If you purchase an agency, you have 100x more exposure vs. if they’re a partner.

Observing them, getting real feedback on new rollouts, tweaking on the fly is easier and faster when you own them.

+ When they’re part of your team, you hear about the other problems that lead to the really interesting new features.

2) Multiple arbitrage

Agencies are purchased on a multiple of EBITDA (Profits).

Asana trades at 7x their Revenue.

Flipping the agency revenue into additional SaaS Revenue is a simple buy low, sell high for Asana.

It’ll be a killer exit for the agencies, and Asana will come out the winner.

Takeaway:  Growth through Acquisition isn’t always via bolt-ons.

Final Thought

As someone who used to be an Asana investor, this biz should be so much more than it is today. If you remove the COVID insanity bump, this biz is essentially flat from its 2020 IPO, despite nailing a lot of the key drivers of successful SaaS (consistently growing Rev, moving upmarket, reducing churn).

But insane spending is deflating their stock price. Monday trades at an $11.8B cap (16x Rev) despite looking almost identical. 

The one major difference: Monday is ramen profitable.

The days of growth over everything are done, and Asana is getting stuck in the middle. At 20% topline growth, this isn’t a Scaler anymore. And at a -39% Net Income Margin, it damn sure isn’t profitable.

They’re doing so many of the right things already, but they have to figure out their finances.

No one is forcing them to change. They have plenty of short-term assets to cover their debt. They’re still growing, and lenders are still willing to extend them credit.

This is yet another Silicon Valley public startup that is doing the right things from a product/market perspective but is a terrible stock to own. They continue to:

1. Lose money.

2. Dilute shareholders with massive Stock Based Comp (SBC) plans.

3. See their valuation go nowhere.

This would be an incredibly easy flip, because we don’t have to do anything novel here. 

1. Follow what everyone else in Big tech has done.

2. Continue evolving the products already live.

3. Print cash.

Investors are already saying that the market for a barely profitable, scaled Project Management tool is 16x Revenue. That means Asana could easily be worth $12B in 2 years.

Not a bad way to double our money.