The productivity software market was valued at $54.8 billion globally in 2022 and is expected to grow at a 14% CAGR to reach $203.4 billion by 2032. Its growth is being driven in tandem with increasing adoption of SaaS tools in general; US companies spent $521 per employee on SaaS subscriptions in 2021, a figure which had reached $3.5K per employee by September 2023. Another report estimated that the average business used 371 SaaS tools in 2023; ranging from 253 for SMBs to 473 on average for enterprises.

Meanwhile, the need for collaboration tools has grown in tandem with the rise of remote work, which accounted for 28% of workdays in early 2023, up from just 6% before 2019. Remote work is seeing sustained growth in the post-pandemic era; a July 2023 survey found that US executives expect hybrid and remote work to continue to increase over the next five years. The collaboration tools market was valued at $39.4 billion in 2023 and is expected to reach $116.3 billion by 2023, growing at an 11.4% CAGR over this period.

Notion is a collaboration and productivity tool that describes itself as a “single space where you can think, write, and plan." Its users use it for everything from word processing to various types of project management, as it incorporates various types of functionality ranging from databases to calendars to personal website creation to task management to simple word processing and note taking. Overall, Notion functions as a workspace that is intended to be all-inclusive with a built-in generative AI writing assistant.

Notion was founded by Ivan Zhao (CEO) and Simon Last (CTO) in 2013.

Zhao was born in China and grew up in Canada. His interest in coding and programming stemmed from a young age. He studied cognitive science and fine arts at the University of British Columbia. After graduating, he worked in product at Inkling. Last, meanwhile, graduated in Computer Science from the University of Maryland. Before founding Notion, he worked as a software engineer at Space Telescope Science Institute and Nebula Inc.

Initially, the pair set out to build a “LEGO of productivity tools,” aiming to give non-technical users the ability to make their own tools without writing code. Over the first two years after Notion’s initial founding, Zhao and Last worked on Notion Beta, a no-code programming tool, hiring four employees and raising about $2 million in funding from angel investors in the process.

The tool, however, was built on a suboptimal tech stack, which made it crash constantly. In 2015, the co-founders were faced with the choice of either running out of money or starting over. Zhao and Last decided to lay off their employees, leave San Francisco, and move to Kyoto, Japan where they set out to rebuild Notion from scratch. While in Kyoto, Ivan began spending upwards of eighteen hours a day designing, while Last worked on coding the platform. In March 2018, they released Notion 1.0 — a flexible, all-in-one tool combining notes, tasks, wikis, and databases into one workspace.

Years before this, in 2011, Zhao had been living in San Francisco and posted a message on Hacker News looking for a job as a designer. Ashkay Kothari, CEO and co-founder of Pulse, wanted to hire him. Although this didn’t happen, the two kept in touch. In April 2013, Kothari sold Pulse to LinkedIn for approximately $90 million. He worked at LinkedIn until August 2018, when he left LinkedIn to join Notion as its COO and third co-founder.

Notion is designed to serve as an all-in-one workspace and productivity tool. It is available on desktop (Mac and Windows), mobile (iPhone and Android), and via browser (Chrome, Safari, and Firefox). Used by individuals and businesses, Notion can be used as a word processing and notes application or a flexible no-code solution for wikis, project management, and website publishing.

Notion Docs

Source: Notion

Notion can input, edit, and format text like any writing tool. Each page can function as a word processor powered by "blocks." Blocks can transform into different types, such as headings, texts, quotes, code, and pages. Notion describes itself as "a bottomless bin of building blocks. Every page you create in Notion will be composed of many "blocks," in the same way a LEGO castle is composed of many LEGO bricks."

Notion docs are designed to be collaborative with a sharing link function, comments, version histories, and more. Additional functions include adding databases in-line, media (images, videos, audio, files, code, and web bookmarks), and embeds (e.g., Google Drive, Tweet, Typeform, Loom, Figma, and Github Gist).

Notion AI

Notion AI is Notion’s integrated generative AI tool which was launched in November 2022. It’s an AI writing assistant that helps users throughout the writing process, from brainstorming, drafting, editing, and summarizing. Among other things, the AI tool is intended to help with repetitive tasks like writing job descriptions, summarizing notes, setting meeting agendas, and writing sales emails. It will also help with ideation by brainstorming outlines, pros and cons lists, and creating those first drafts.

The company says that its AI offering is distinct from other AI offerings, such as chatbots, because it integrates AI directly into the users’ existing workspace, preventing the need to switch tabs or windows. In addition, Notion says that in comparison “to other tools, Notion has a unique and highly flexible drag-and-drop text editor, where any AI-generated content can be easily rearranged and transformed”.

There are three principal use cases Notion envisions for its AI tool: a Q&A chatbot feature, an integrated writing assistant, and an autofill tool.

Q&A Chatbot

Source: Notion

Notion’s Q&A chat tool allows users to make better use of information and data across their workspaces by allowing users to submit natural language queries. To answer these queries, Notion AI pulls the relevant information and presents it with cited references to the Notion docs that the information was sourced from.

Integrated Writing Assistant

Source: Notion

Notion’s integrated writing assistant can be accessed by selecting any text within a Notion document and choosing “Ask AI” on the far left side of the menu. This brings up a dropdown menu with a variety of options. The writing assistant can summarize or interpret a selection of text or use the selection as seed data to generate an additional passage.

It also has editorial tools that enable the user to leverage AI to help change a passage’s tone, make it more concise or more verbose, spell and grammar check the writing, or just “improve” the writing in general according to the AI’s autonomous judgment. Finally, the writing assistant can be prompted to help draft a content format about a topic of the user’s choice, from blog posts to outlines to social media posts.

When a user makes a selection from the writing assistant dropdown, Notion then pulls up a window with the AI-generated draft which can be either accepted and integrated into the document in question or discarded.

Autofill Tool

Source: Notion

Notion’s autofill tool can use existing docs and write them into summaries of hundreds of docs, action items based on meeting notes, or generate insights and takeaways from call notes. It can also organize data into tables or databases.

Notion Wikis

Source: Notion

Notion’s wiki functionality enables users to centralize their knowledge in Notion with interlinking pages across the workspace. It includes features like a user-friendly interface, editing tools, and the ability to embed content from other applications. This is intended to allow users to centralize all their information of various types, from design mockups to user research, in one accessible and searchable location.

Notion Projects

Source: Notion

In May 2023, Notion released Notion Projects, a project management tool that aims to connect all aspects of collaboration in one place so that it’s easier for teams to plan, manage, and execute work with the help of AI tools.

Notion Projects allows users to break projects down into smaller tasks and sub-tasks that can be assigned to different members of a Notion workspace and that can be given a status and due date. Projects can be visualized in several ways, including a Kanban view, a database view, and a calendar view. Individual users can also filter tasks that are relevant to them, and particular projects can be given progress bars to visualize the status of a project.

Notion Calendar

Source: Notion

Notion offers a calendar app designed to integrate with users’ existing Notion workspace. The company emphasizes its ability to simplify time management, featuring an interface that is intended to be intuitive and the ability for users to view their schedules alongside their notes, tasks, and other projects. This is designed to create a unified view of a user’s work and personal commitments, potentially reducing the need to switch between different applications.

Notion Databases

Source: Notion

Databases in Notion are collections of pages that resemble spreadsheets. Each page can be set up as a table, board, list, calendar, or gallery. Each database gets viewed as a table, list, board, calendar, gallery, or timeline. Within each database, there are a multitude of properties which can be sorted depending on the database view. Finally, database search and filter menus help users find exactly what they need within a database.

Customer

Notion is used by both individual users and by companies of all sizes, including small businesses, medium-sized businesses, and enterprises. As of March 2024, Notion’s notable business customers include Amazon, Nike, Pinterest, DoorDash*, Plaid, Figma, Pixar, Nike, Robinhood, Uber, Snowflake, Toyota, and AngelList.

Source: Notion

As of 2022, Notion had reached 20 million users. Unconfirmed estimates indicate that this had grown to between 30-35 million as of November 2023. Similarweb data showed that, as of February 2024, Notion website visitors were distributed globally, with the highest concentration of traffic, only 15%, coming from the US as of March 2024. 79% of Notion users were under the age of 44 as of February 2024.

Market Size

The rise of remote work and individuals and teams wanting to consolidate the number of tools into one platform for cost-cutting and productivity purposes are key tailwinds for Notion. Traditionally, individuals and teams have used separate software for project management, word processing, spreadsheets, and more. A product team can use Microsoft Word for documentation, Microsoft Excel for budgeting and forecasts, Asana and Trello for project management, and Jira for software bug tracking. Consolidating tools into one platform helps lower costs, enhance security, and increase productivity.

Meanwhile, remote work has been a growing tailwind. It accounted for 28% of workdays in early 2023, up from just 6% before 2019, and is seeing sustained growth in the post-pandemic era; a July 2023 survey found that US executives expect hybrid and remote work to continue to increase over the next five years. The collaboration tools market was valued at $39.4 billion in 2023 and is expected to reach $116.3 billion by 2023, growing at an 11.4% CAGR over this period.

The productivity software market was valued at $54.8 billion globally in 2022 and is expected to grow at a 14% CAGR to reach $203.4 billion by 2032. Its growth is being driven in tandem with increasing adoption of SaaS tools in general; US companies spent $521 per employee on SaaS subscriptions in 2021, a figure which had reached $3.5K per employee by September 2023. Another report estimated that the average business used 371 SaaS tools in 2023; ranging from 253 for SMBs to 473 on average for enterprises.

Startups

Coda: Coda Docs purports to be an all-in-one productivity tool that aims to reimagine documents as flexible, modular canvases that allow users to do everything from writing text to calculating formulas to formatting information. It has raised a total of $240 million in funding as of March 2024, with a $100 million Series D in July 2021 which valued the company at $1.4 billion. Notable investors include Kleiner Perkins, Greylock, Khosla Ventures, General Catalyst, and Alumni Ventures. It has also been adopted by numerous enterprise customers which include Figma, Square, Uber, Robinhood, and the New York Times.

Airtable: Airtable is a no-code collaborative SaaS platform that utilizes a spreadsheet-like interface for building relational databases without code. Its main interface resembles an Excel or Google Sheets document, or a Notion database utilizing a table view. The company has raised $1.4 billion in funding, with a $735 million Series F in December 2021 which valued the company at $11 billion. As of December 2021, it counted almost 80% of Fortune 100 companies as customers.

ClickUp: ClickUp, which describes itself as “one app to replace them all”, is a cloud-based collaborative productivity platform with functionalities spanning from word processing to task management to goal setting to brainstorming. It has raised a total of $537.5 million in funding, having raised a $400 million Series C in October 2021 at a $4 billion valuation In February 2023, the company reported that it had more than 8 million users.

Incumbents

Microsoft: Microsoft, which was founded in 1975, is one of Notion’s biggest competitors. Microsoft launched a direct competitor to Notion called Microsoft Loop in November 2021. It is offered as part of Microsoft’s cloud productivity platform, Microsoft 365. While Microsoft has not yet disclosed Loop’s adoption statistics, it could follow a similar trajectory to Microsoft Teams in its competition with Slack. After launching in 2016, Microsoft Teams surpassed Slack in DAUs by 2019, reaching 20 million compared to Slack’s 12 million, despite Slack being first to market and seeing strong initial adoption.

Notion’s various features sought to replace Microsoft Word, Excel, and Sharepoint by offering drafting, databases, and file storage. While Notion’s customer base extends to both consumer and enterprise users, Microsoft’s advantage is its enterprise distribution capabilities. Microsoft Office was being used by over 1 million companies worldwide as of June 2021, and by August 2023 over 60% of the Fortune 500 were using Microsoft 365. This distribution advantage could prove to be decisive in Loop’s ability to acquire market share.

Atlassian: Atlassian, which was founded in 2002 and has a market cap of $51.3 billion as of March 2024, is the creator of Confluence. Confluence is a wiki-based content management tool to help teams align and organize information collaboratively, and it competes with Notion’s docs and wiki product offerings and with its collaborative workspace offer more generally. Users of Confluence consider it their source of truth for internal collaboration. Companies that leverage agile software development often rely on Confluence and Jira, another Atlassian product, which adds an incentive for customers to stay on Confluence instead of moving over to alternative tools like Notion.

Source: Notion

Notion has a SaaS business model and offers four pricing tiers for its subscriptions:

1. Free: Notion’s free plan, meant mostly for individual use, is limited to 10 guests per workspace. It offers unlimited blocks for individuals and a limited block trial for teams, with a limited seven-day page history.

2. Plus: Notion’s Plus plan costs $8 per user per month (billed annually) as of March 2024. It is meant for small teams, with a 30-day page history and the ability to invite 100 guests.

3. Business: Notion’s Business plan costs $15 per user per month (billed annually) as of March 2024. It offers a 90-day page history and room for 250 guests, among other features.

4. Enterprise: Notion’s Enterprise plan has custom pricing and offers a host of features not included in other plans.

In addition to this, Notion offers its Notion AI product at an additional subscription charge of $8 per member per month.

After launching on Product Hunt in 2016, Notion was able to achieve the #1 spot for its first full month. By 2018 it had generated press attention with a favorable article in the Wall Street Journal calling it “the only app you need for work-life productivity." By 2019, Notion shared that it hit 1 million users and by 2022, Notion had reached 20 million users. Unconfirmed estimates indicate that this had grown to between 30-35 million as of November 2023.

In September 2021, Notion acquired Automate.io, a company that built integration for software tools. Notion’s stated reason for the acquisition was that it was “accelerating our strategy to build high-quality, native integrations for teams and businesses." It has also acquired three other companies, including Cron (June 2022) which was used for its Calendar product which launched in January 2024, Flowdash (July 2022), and Skiff (February 2024). The acquisition of Skiff, which began as a secure alternative to Google Docs, was intended to enable the company to offer more privacy-focused features.

Notion raised a $275 million Series C in October 2021 at a $10 billion valuation led by Coatue Management and Sequoia. The round brought the company's total funding to $343.2 million. Its Series C valuation represented a 5x increase from its Series B valuation of $2 billion in April 2020. Other notable investors in Notion include Index Ventures, First Round Capital, and Felicis Ventures.

Strategic Acquisitions

When Notion acquired Automate.io, Cron, and Flowdash, it demonstrated the company’s intent to go after the enterprise software market. Doing so sped up its ability to compete with Microsoft and Atlassian, who are doing what they can to maintain their defensive moats. Future acquisitions could include whiteboarding, email, video, chat, and conferencing tools to help Notion expand its product offerings and compete with the more comprehensive product suites offered by competitors like Microsoft.

Targeting Enterprise Users

Since enterprise users are often the most lucrative customer segment for SaaS businesses, as well as the highest-retention users, Notion could continue to target the enterprise by offering features and improving the product, to support large teams. In October 2023, Notion introduced a number of admin, security, and compliance capabilities targeted at enterprise users, and it launched more than 20 enterprise features in the preceding months. Going forward, it can continue to expand its enterprise feature set in an attempt to win over more enterprises from incumbents and other competitors in the productivity tool market.

Enterprise Incumbents Playing Offense

Microsoft and Atlassian are large incumbents in the enterprise software market that have already started to respond to collaborative-first products like Notion with the launch of products like Microsoft Loop. Most enterprises have used both Microsoft and Atlassian for a long time, and have the advantage of existing distribution. While Notion has effectively attracted individual users, building its enterprise market share will require a new motion of selling into procurement cycles and satisfying enterprise demands. Notion will have to do so while competing with much more established companies like Microsoft that are often embedded into companies’ existing workflows.

Notion, founded in 2013 by Ivan Zhao and Simon Last, evolved from a no-code programming tool to an all-in-one workspace and productivity tool. Offering features like collaborative docs, wikis, AI writing assistant, and project management tools, Notion competes with startups like Coda, Airtable, and ClickUp, as well as incumbents like Microsoft and Atlassian. Notable customers include Amazon, Nike, and Uber. With pricing tiers ranging from free to enterprise, and an additional subscription for its AI product, Notion has seen rapid user growth, reaching 20 million users by 2022. The company raised a $275 million Series C in October 2021 at a $10 billion valuation, with total funding reaching $343.2 million.

*Contrary is an investor in DoorDash through one or more affiliates.