Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Asana, a well-known workplace productivity company, announced yesterday it has filed privately to go public. The San Francisco-based company is well-funded, having raised more than $200 million; well-known, due in part to its tech-famous founding duo; and valuable, having last raised at a $1.5 billion valuation.
Each of those factors — plus the fact that Asana is going public — makes the company worth exploring, but its plans to offer a direct listing instead of a traditional initial public offering make it irresistible.
Today, we’ll rewind through Asana’s fundraising and valuation history. Then, we’ll mix in what we know about its financial performance, growth rates and capital efficiency to see how much we can tell about the company as we count down to its public S-1 filing. The Asana flotation is going to be big news, so let’s get all our facts and figures straightened out.
Valuations and revenue
Asana has only raised a handful of times in the last few years, including its January 2018 Series D worth $75 million and its November 2018 Series E worth $50 million. The company has not raised known capital since those funding events.
The company’s valuation quickly expanded between the two funding events (data via Crunchbase):
- January 2018 Series D: $75 million at a $825 million pre-money valuation
- November 2018 Series E: $50 million at a $1.5 billion pre-money valuation
What happened in 2018 that led to the company’s valuation growing rising so rapidly? Looking back through coverage of the company’s last few years, the answer appears to be consistent revenue growth acceleration.
In February of 2019, Asana announced that it had recorded “eight consecutive quarters of revenue growth acceleration, measured on a percentage basis,” per my contemporaneous reporting. That implies that in 2017 and 2018, Asana’s growth rate consistently rose. By the time it raised its Series D, the firm had four quarters of revenue growth acceleration under its belt. Later that year, it had even more quarters of acceleration to crow about.
The result of rising growth rates over an extended period of time is large revenue accretion, something that Asana announced in early 2019 when it said that it had crossed the $100 million annual recurring revenue (ARR) mark in 2018. Precisely when isn’t clear, but the company’s accelerating growth got it over the nine-figure ARR mark over a year ago.
That Asana was at scale in 2018 makes its 2020 direct listing plans feel downright reasonable. In December of 2019 — after news broke that the company was considering a direct listing — I asked Asana if it had a new ARR number to share. The company declined to share new results.
Given its recent announcement, it’s not a surprise that Asana wasn’t in a sharing mood.
So how big is it?
We don’t know, but we can have a little fun all the same.
Let’s presume that Asana crossed the $100 million ARR mark as 2018 came to a close. And, for the sake of discussion, that its eight quarters of revenue growth acceleration left the company with a 60% expansion rate. Then, Asana would have closed up 2019 with $160 million in ARR. (You can easily change up the numbers by tweaking when the company reached the nine-figure ARR mark and its ensuing growth rate.)
Obviously, the $160 million number is made up, but our small thought experiment helps us understand that Asana above $150 million ARR and below $200 million ARR feels about right. That’s a range to keep in mind as the company moves toward its direct listing. Recall that the company is not selling primary shares in the transaction and will therefore not formally price. It will, however, set a reference price.
Asana is likely worth more than its final private valuation of $1.5 billion. Presuming it can get a bog-standard 12x multiple on its ARR, the company would be worth $1.8 billion. If it can do better, or is larger than that, the value of the firm quickly rises.
Why not raise more money?
Companies tend to direct list instead of pursuing traditional IPOs when they meet certain conditions. For example, the better-known a company, the more demand for its shares there may be, which can help it perform well in initial trading periods.
Direct listing companies also tend to be cash-rich. This makes sense as the listing entity is deciding against raising new funds. You don’t do that if you need cash. The corollary of this point is that cash-efficient companies are probably good candidates for direct listings. They can afford to not raise, as they don’t consume endless cash to grow.
Asana claims to be that sort of company. When I spoke to the company around the time of its $100 million ARR milestone, I reported the following:
[W]hen discussing its recent fundraising (and relatively modest $50 million Series E), Moskovitz said that Asana is a “really efficient business,” and that it has “the vast majority” of its recent capital raises “in the bank.” As Asana raised a total of $125 million last year, the comment implies that Asana won’t have to raise anytime soon.
Lots of efficient growth? That’s what we’re told the public market wants at the moment. Asana claimed to have just that not too long ago. More, hopefully, soon.