Should "Zoom" Buy "Notion"?

In Today’s (8th) Edition of “Element, by Arsh“ -

• Should “Zoom“ buy “Notion“ or just partner with them?

• Tesla’s Disastrous “Robotaxi“ Event…

ZOOM + NOTION

Is Buying Up “Notion“ In The Best Interest Of “Zoom“?

My Obsession With Zoom & Notion. In the last few months, I have spent 50+ hours understanding the business of Zoom, and the company’s history, and trying to understand where the company is headed. While my analysis of the company suggested that Zoom’s business focus in the next years, and their continuous focus on R&D is a sign of the company’s prosperous future, but the lack of an embedded digital collaboration with Zoom is really pulling the company back and could lead to a failed business in the long term.

Simply, put Notion’s role in the productivity software space and Zoom’s integral role in video and audio communication can become a massive threat to Google Suite (Google Docs, Google Slides, Google Meet, etc.) and Microsoft Office (Word, Powerpoint, Teams, etc.). If this still sounds complicated, let’s break the businesses down and understand their strengths and weaknesses.

Just to clarify - There is currently no news that Zoom will buy Notion. This is a scenario that I am imagining for the well-being of both companies.

Let’s Start With Zoom. Everyone reading this has probably used Zoom at least once in their lives or you are one of the 300 Million people who use the software almost every day for whatever reason. It is also highly likely that you, as an individual, have never paid for Zoom’s premium offering. Either your school or college has paid for it or the person on the other side of the meeting has. This is also reflected in the fact that out of Zoom’s $4 Billion annual revenue, massive companies and other small-to-medium businesses pay for close to 70% of the company’s revenue.

This can primarily be attributed to the fact that most people don’t want to pay for a service like Zoom individually. For whatever reason, they are expecting something else to come with it. Another reason some companies are moving away from Zoom (or paying for Google Suite or Microsoft Office) is because, with those other offerings, companies not only get a decent communication service (Google Meet, Microsoft Teams), but also platforms like Google Docs, Microsoft Word, PowerPoint, Slides, and many others where the whole team can come in and collaborate to make an incredible product. This flexibility is missing from Zoom! But, before we go deep into that, let’s understand what Notion does.

What is Notion? Notion calls itself a productivity software, which can help you organize essentially any part of your life. Students love Notion because they can take notes, keep track of assignments, and collaborate with their peers. Product & Project Managers in massive companies love this because it helps to keep track of what is happening with their teams (Design, Engineering, Marketing, etc.). Even on the landing page of Notion, they write “Write. Plan. Collaborate“ in bold fonts to let their customers know what they are offering. If you have ever used Notion, you know how incredible it can be, if you don’t get overwhelmed with its complexity.

Nevertheless, Notion is currently being used by nearly 100 Million people, far less than Zoom’s current daily active users. Notion is a private company, so we don’t have much data about it, but it is expected that the company generates around $250 Million in revenue each year, and is worth around $10 Billion. Notion currently is an extremely rapidly growing company, and they seem to be very selective with the kind of customers they are attracting. In my opinion, this is the same kind of customer that is spending a couple of hours on Zoom every day - And, there are at least 300 Million of those!

Why Should Zoom Buy Notion? This is a great question. Most companies put their productivity software front and center while their communication software becomes something that is “good to have“. I believe this is not the best marketing strategy for them. It is a basic human goal to be able to communicate with others, and therefore communication software should also be promoted just as passionately as other productivity software. Therefore, Zoom should be the one that initiates this partnership!

Secondly, Zoom is currently twice as big as Notion in terms of valuations and hence has simply more money to be able to initiate such a partnership. Lastly, as crazy as it is to think, Notion provides more value to Zoom than the other way around. Zoom’s revenue is almost flat, and it needs this theoretical partnership to boost that. But, Notion also gets an extra 200 Million users. So, it is a little difficult to judge the dynamic between the two companies.

Can Zoom Buy Notion? The short answer to this question is a resounding No! Zoom, even after becoming the massive company it has become today, does not have the cash flow to support this purchase. To buy Notion, they would at least need an offer that is at least 20-50% higher than the valuation of Notion. Assuming a $10 Billion valuation of Notion, Zoom’s offer has to be at least $12-15 Billion for the board members of the company to consider and eventually accept this offer. Zoom does not have that kind of cash right now.

Another way to approach this purchase is something called a Leveraged Buyout (LBO). This is where Zoom with partner with a venture capital firm to take A LOT of loans to pay Notion. In most cases, a leveraged buyout is a decent option if the party does not have cash, but my calculations suggest that Zoom will not be able to support this purchase using a Leveraged Buyout, considering their current finances!

Will Zoom Acquire Notion In The Future? Probably not! I would love to see this happen, but listening to Evan Zhao (Co-Founder & CEO of Notion), I can confidently say that he is not the kind of person to entertain an acquisition of his company. Even after raising over $200 Million from other parties, Evan has not given a seat to any of them on the board - This is incredibly odd to see. Evan and others at Notion have a vision for the company and they are probably not going to stop before they get there. Additionally, based on my calculations, Zoom would need to be 7 to 10 times the size it currently is to acquire Notion without any hassle (assuming Notion’s positions and finances do not change, which is highly unlikely.)

Conclusion. In an ideal world, Zoom and Notion together are companies that are destined to challenge the status quo in the world of productivity and communication software, but given the current conditions of these companies, an acquisition by either Notion or Zoom is probably not going to happen. However, a strong partnership between them can bring about some change in the way Google Suite and Microsoft Office operate and market themselves.

ELON MUSK + TESLA

Tesla Introduced Its New Robotaxi… And People Didn’t Like It

Tesla’s New Robotaxi. On the 10th of October, Tesla and Elon Musk introduced their long-awaited robotaxi (taxis with autonomous driving). Most people (including me) liked the idea of it but the presentation by Elon lacked the specifics that people were looking for. There were a lot of high-level facts that Tesla highlighted but did not talk about the strategy they plan to adopt in order for companies (like Uber & Lyft) to buy these from them or how Tesla will use them to attract customers and become a rideshare company like Uber.

Robovans & Optimus. In the same event, Tesla also introduced Robovans (Basically an automated cool-looking van) and shared their progress on Optimus (their humanoid robot). While the design of the Robovan is really cool, a wide-scale adoption of them will take an incredible amount of time, and most investors don’t like that. Tesla’s stock dropped almost 9% after this event.

Tesla also showed its progress with their humanoid robot - Optimus, which was shown dancing, serving drinks, and talking to the in-person attendees. However, rumors have started circulating that the humanoid robots at the event were controlled by a human!

Good News For Uber & Lyft. With the Tesla Robotaxi behind us, and nothing significant being introduced, investors were assured that rideshare companies like Uber and Lyft are safe from “competition“ for the time being. Their stocks rallied 10% after the event.