Productivity and Collaboration Startups at a Critical Point for Growth
- The recent shift to remote work has made productivity and collaboration tools essential.
- As a result, productivity startups thrive, but a downturn will give big suites an edge.
- Only productivity tools that break new ground or tackle new challenges have a chance.
Productivity startup Notion has quickly become one of the hottest companies in Silicon Valley, a boom only accelerated by the pandemic. Its “all-in-one” workplace in the cloud has become the go-to for tech companies, VCs and even TikTok influencers who use the software to organize their daily lives.
But Notion’s meteoric rise was overshadowed by news last November that Microsoft was launching a product called Loop, which looks and functions very much like Notion. Loop is now included in the company’s flagship Microsoft 365 productivity suite, which includes Word, Excel, and Teams, with over 300 million paying users as of April 2021.
This “clone” of Notion wasn’t a huge surprise. In fact, some might even have anticipated the move, which has become relatively commonplace at a time when tech giants face emerging competition. Enterprise workplace software, in particular, has long been dominated by a handful of giants, but the past two years have seen an explosion of startups seeking to capture market share.
Due in large part to the pandemic, new entrants like Miro, Airtable, and Notion have access to unprecedented funding and valuations, just as companies are ready to risk new software to power their suddenly remote workforces. Their use has skyrocketed, shaking up the industry.
However, these startups are now facing a critical moment. Just under pressure to live up to its sky-high valuations, many clients are looking to cut expenses amid a sluggish market. Industry insiders say tools from smaller, newer companies are likely to be phased out first, shifting dominance back to the main suite. Some newcomers have recently made layoffs, and companies that fall short of expectations could be gobbled up — further benefiting larger companies.
“Buyers are starting to make more conscious strategic choices around what is the core platform and what are the applications that plug into it,” Chris Marsh, an analyst at market research firm 451 Research, told Insider.
Analysts and investors say there’s still plenty of competitive opportunity for productivity tools that have carved out new niches or that can automate processes and help people collaborate asynchronously. However, the bar for success will be much higher.
Provides a complete platform that provides advantages to established productivity suites
Jody Shapiro, CEO and founder of software startup Productiv, which helps companies analyze which services employees are using, told Insider that he’s recently seen his clients’ interest in workplace software. Views have changed.
The initial frenzy to move to remote work early in the pandemic led companies to spend heavily on software tools without going through the typical procurement process, he said. But now they are becoming more strategic, trying to eliminate overlap and questioning which tools they really need.
For many companies, it can be difficult to justify the cost of a single tool when the kit provides a lot of what they need under one umbrella. Additionally, tools like Asana, Smartsheet, and Notion are often used by small teams within a company, rather than the entire workforce, making them easier to cut.
More importantly, a 2021 Survey Monkey Poll Among 252 IT decision makers, 54% cited cost savings as the main reason to consider emerging software vendors rather than more established players. This shows that even before the downturn, many companies were already looking for alternatives to save — rather than spend — cash.
The fact that it is much easier to prune a single tool than an all-inclusive suite not only gives software giants like Microsoft, Google, Salesforce, and Cisco an edge, but also suggests that adopting a platform strategy could be key to emerging software companies competing to become necessary.
Wolfe Research analyst Alex Zukin previously told Insider that “best-in-class companies either become multi-product companies” or “really don’t know how to do anything else, so they get acquired.” .
When asked about Microsoft’s launch of Notion-esque Loop, a spokesperson for the company pointed to the platform strategy. “People need more than one app to get work done. Microsoft 365 is an integrated suite of productivity and collaboration tools that work together, giving customers more than just piecing together multiple apps to create a complete solution. Cost savings and convenience,” a spokesperson told Insider.
At the launch of the Loop, Notion CEO Ivan Zhao told Insider: “Our mission is to enable everyone to use the software the way they want. It’s been a long journey and we’re just getting started.”
Platform strategies are now evident across the productivity landscape as companies thriving during the pandemic take various approaches to becoming platforms. For example, Zoom is using its momentum to build other products like cloud telephony services, meeting room technology and an app store. Slack, on the other hand, opted to join a dominant platform when it was acquired by Salesforce for $27.7 billion in 2020, forming a combined entity that could better compete with rival Microsoft.
Additionally, other competitors in the space are using integrations to act more like platforms and become a larger part of their customers’ day-to-day workflows. Miro integrates with Google Workspace to support virtual whiteboards in Google Meet, and Figma recently announced integration with Microsoft Teams.
“It is increasingly important that software companies have the ability to become a larger platform. Otherwise, they may not gain meaningful traction beyond a certain threshold,” RBC analysts said in a 2021 report.
Startups building new categories are more likely to survive
While the economic downturn has made it harder for productivity and collaboration startups to grow, experts say it’s not impossible. Many of the most popular productivity startups solve collaboration problems that existing software tools can’t, or are creating a new kind of workplace tool.
For example, tools like Notion and Coda are eradicating document collaboration and project management, while also adding automation to make simple tasks easier. Companies like Miro, Figma, and Canva are creating a new kind of visual collaboration tool for remote teams.
For many companies, virtual whiteboard tools like Miro are becoming a third important tool for productivity and collaboration alongside Slack and Zoom, says Accel partner Rich Wong.
The same is true within Salesforce. “Slack is the hub of our digital headquarters, so I’ll be joining Huddle with my team while building the product roadmap on Miro. We can record a Clip to share on our team Slack channel for asynchronous collaboration,” Andy said White, senior vice president of business technology at Salesforce, It owns Slack.
451 Research’s Marsh said that while these tools existed before the pandemic, they were niche and it was the push to remote work that “mainstreamed” them and “discovered a whole bunch of new use cases.”
He added, however, that some of these startups still have some “category creation” to do before they actually get out of the tech industry.
While most people are familiar with Word documents, PowerPoint presentations, email, and now even tools like workplace messaging and video conferencing, many startups are creating entirely new categories of workplace software. Whiteboard and smart document tools like Miro and Figma have to sell not only their products but also new ways of working to customers.
There’s also the issue of branding and product identification, another major advantage for suite makers like Microsoft, Salesforce, and Google. Not only have these companies dominated the workplace software market for decades, but they are also among the best-known in the world. Buyers are indeed more likely to buy software from vendors they are familiar with, According to a Gartner studywhich poses a huge challenge for startups.
It remains to be seen which companies will emerge as winners in these new categories, especially as larger companies replicate features and layoffs hit the industry.
In addition to Microsoft’s “clone” of Notion, Zoom has added its own virtual whiteboard tool. Apps Loom and Hopin, which are used for video communications and virtual events, respectively, both recently laid off workers in the wake of the pandemic. Both face increasing competition from Slack and Zoom as they both add similar features.
Those dynamics also made it unclear which new tools could make it a standalone business and which would be acquired, Marsh said.
Sandeep Bhadra, a partner at Vertex Ventures, told Insider that in the end, “those companies that are building products that users love are going to win.”
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