Eran Zinman: SaaS market transformation leads to 100x increase in software costs, Monday.com is undervalued despite $1.3 billion in revenue, and the disconnect between business operations and market sentiment

Main roads

• The SaaS market is going through a phase of change that is driving up software costs.
• Despite the significant revenue, Monday.com is an underdog in the current market.
• Market sentiment and business operations in the software industry are currently separated.
• Building comprehensive software involves more than just creating a user interface.
• Maintaining and improving software over time is a complex and trivial task.
• Vibe’s encryption, despite technological advances, is unlikely to disrupt established software companies.
• Investors don’t see code vibe as a major factor influencing the software company’s stock.
• The predicted dominance of companies like Amazon in enterprise software has not materialized; instead, there has been a boom in companies building on their own infrastructure.
• Companies like Anthropic and OpenAI are expected to capture the entire enterprise value due to their focus on different capabilities.
• Selling software to businesses requires a guided approach, not just product growth.
• The enterprise sales process is very different from selling consumer-oriented software.
• The introduction of AWS has led to an unexpected increase in enterprise software companies building on top of its infrastructure.

Introduction of guests

Eran Zinman is the co-founder and co-founder of monday.com, a leading desktop OS with $1.3 billion in ARR. He previously served as the company’s CTO from 2012 to 2020 and led its rebrand from dapulse to monday.com in 2017, expanding it from a team management tool to a full-fledged business operating system.

Transforming the SaaS market

• The SaaS market is undergoing significant changes, leading to a sharp increase in software costs.

  – Eran Zinman

• 10 software that will be 100x how much companies spend on software because what is real today is the apocalypse.

  – Eran Zinman

• Change in the SaaS market is marked by increasing economic pressures on software valuation.
• Understanding these trends is critical to navigating the current software landscape.
• Transformation is driven by both technological advancements and changing market dynamics.
• Companies are expected to increase their software spending significantly in the coming years.
• This shift presents both challenges and opportunities for SaaS companies.
• The evolution of the SaaS market is changing how businesses approach software investments.

Monday.com stock price

• Monday.com is significantly undervalued in the current market despite its significant earnings.

  – Eran Zinman

• With around 1,300,000,000.0 in revenue they are worth only $3,900,000,000 in the public markets today.

  – Eran Zinman

• The difference between Monday.com’s earnings and market valuations presents an important observation for investors.
• Understanding market valuation criteria is important to evaluating Monday.com’s financial performance.
• This underestimation reflects broader market trends affecting software companies.
• Investors should consider both earnings and market sentiment when evaluating software stocks.
• The current market environment presents challenges for accurately valuing SaaS companies.
• The Monday.com case highlights the importance of aligning business performance with market perception.

The relationship between business operations and market sentiment

• There is a significant difference between trading operations and market sentiment.

  – Eran Zinman

• We have to distinguish between what is happening in business, which is one thing, and the change in sentiment that has taken place… the negativity that is now attached to software companies…

  – Eran Zinman

• This disconnect highlights the complexity of the current software market dynamics.
• Understanding this disparity is important for market analysis and investment strategies.
• Negative sentiments associated with software companies do not always reflect their actual performance.
• Investors must distinguish between business fundamentals and market perception.
• This disconnect can lead to incorrect valuations and investment decisions.
• Navigating this landscape requires a keen understanding of both business operations and market trends.

Software Development Challenges

• There is a significant difference between building a user interface and building comprehensive software that works effectively across an organization.

  – Eran Zinman

• I think there’s a big difference between coding a user interface vibe and building actual software that works across an organization with all the depth and functionality built into it.

  – Eran Zinman

• Building comprehensive software includes addressing organizational and functional needs.
• The challenge of software development goes beyond creating a basic interface.
• Effective software must be seamlessly integrated throughout the organization.
• Understanding these challenges is critical to successful software implementation.
• The depth and functionality of the software are key factors in its long-term success.
• Developers must balance user interface design with comprehensive software functionality.

Software maintenance problems

• People underestimate how difficult it is to maintain software over time.

  – Eran Zinman

• I think people underestimate how hard it is to maintain software over time. I think it is very easy to create a first piece of software, but changing it for acceptance over time requires a lot of effort and dedication.

  – Eran Zinman

• Software maintenance is a complex and ongoing challenge for developers.
• The initial development of software is usually easier than its long-term maintenance.
• Customizing software over time takes a lot of effort and dedication.
• Understanding these problems is important for evaluating the software’s capabilities.
• Maintenance includes addressing user needs and technological changes.
• Developers must prioritize long-term maintenance strategies for software success.

Limitations of vibe coding

• Vibe encryption, despite technological advances, does not disrupt software companies.

  – Eran Zinman

• As much as I think the technology is great, we have the ability to encode our vibe within the product… that’s my favorite, I don’t think it’s going to happen.

  – Eran Zinman

• Vibe Coding’s technological advancements are unlikely to disrupt established software companies.
• The limitations of vibe coding are recognized by industry experts and investors alike.
• Understanding these limitations is important for evaluating emerging technologies.
• The impact of Vibe’s encryption on the software company’s valuation is minimal.
• Investors don’t see code vibe as a major influencer on software stocks.
• Established software companies are unlikely to be disrupted by vibe coding advancements.

The Impact of AWS on Enterprise Software

• The expectation that companies like Amazon will capture all the value of enterprise software has not materialized; instead, there was a boom in companies building on their own infrastructure.

  – Eran Zinman

• What actually happened is the opposite, we saw the growth of companies built on top of Amazon and the software grew exponentially.

  – Eran Zinman

• The introduction of AWS led to an unexpected boom in enterprise software companies.
• Amazon’s predicted dominance in enterprise software has not materialized.
• Understanding these changes is critical to evaluating the evolution of the software industry.
• The growth of companies that build on AWS infrastructure highlights new opportunities.
• The impact of AWS on the software industry has changed the dynamics of enterprise software.
• The enterprise software landscape is characterized by various development opportunities.

The role of AI companies in the enterprise space

• Companies like Anthropic and OpenAI are not capturing the entire value of the enterprise because their focus is not on the enterprise sales process, which is completely different.

  – Eran Zinman

• I don’t think they’re going to capture the full value of the enterprise because they have a bigger opportunity ahead of them and that’s not their focus.

  – Eran Zinman

• AI companies are unlikely to dominate the enterprise software market.
• Their focus on multiple opportunities limits the value of their enterprise.
• Understanding these limitations is critical to assessing the market roles of AI companies.
• The enterprise sales process is very different from consumer-facing software.
• AI companies’ focus on broad opportunities will shape their market influence.
• The role of AI in the enterprise space is characterized by various opportunities and challenges.

The challenge of selling enterprise software

• Selling software to enterprises requires a different approach than product development; organizations prefer a more guided adoption process.

  – Eran Zinman

• No one buys software for an entire organization based on a plg game…they want to be hands-on, especially if you want to use the software across the organization.

  – Eran Zinman

• Selling enterprise software requires a guided approach rather than relying on product growth.
• Organizations prefer a more structured adoption process for software implementation.
• Understanding these challenges is critical to successfully selling enterprise software.
• The enterprise sales process involves meeting the needs and priorities of the organization.
• Product growth strategies are less effective in the enterprise space.
• Driving enterprise software sales requires a keen understanding of organizational dynamics.