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As filed with the Securities and Exchange Commission on May 24, 2021.
Registration No. 333-256182
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
monday.com Ltd.
(Exact Name of Registrant as Specified in its Charter)
State of Israel
7372
Not Applicable
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
monday.com Ltd.
52 Menachem Begin Rd.
Tel Aviv-Yafo 6713701, Israel
+972(55) 939-7720
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
monday.com Inc.
34 W. 14th Street
New York, New York, 10011
(718) 303-1869
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Joshua G. Kiernan
Marc D. Jaffe
Ian D. Schuman
Latham & Watkins LLP
1271 Avenue of the
Americas
New York, New York 10020
Tel: (212) 906-1200
Fax: (212) 751-4864
Shachar Hadar
Efrat Ziv
Ran Camchy
Meitar | Law Offices
16 Abba Hillel Road
Ramat Gan, 5250608, Israel
Tel: +972(3) 610-3100
Fax: +972(3) 610-3111
Yossi Vebman
Ryan J. Dzierniejko
Skadden, Arps, Slate, Meagher &
Flom LLP
One Manhattan West
New York, New York 10001
Tel: (212) 735-3000
Fax: (212) 735-2000
Chaim Friedland
Ari Fried
Nir Knoll
Gornitzky & Co.
Vitania Tel-Aviv Tower
20 HaHarash St.
Tel Aviv 6761310, Israel
Tel: +972(3) 710-9191
Fax: +972(3) 560-6555
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
Proposed
Maximum
Aggregate
Offering
Price(1)(2)
Amount of
Registration Fee(3)
Ordinary shares, no par value
$100,000,000.00
$ 10,910.00
(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2)
Includes ordinary shares that may be sold upon exercise of the underwriters’ option to purchase additional ordinary shares. See “Underwriting.”
(3)
Previously paid.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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EXPLANATORY NOTE
The sole purpose of this Amendment No. 1 to the Registration Statement on Form F-1 (the “Registration Statement”) is to (i) correct a clerical error with respect to the date of the report of the registrant’s independent registered public accounting firm filed by the registrant with the Registration Statement on May 17, 2021 to change such date from May 17, 2021 to March 11, 2021, which is the date of the signed report and (ii) file certain exhibits to the Registration Statement, as indicated in Item 8 of Part II of this amendment. No other change is made to the preliminary prospectus constituting Part I of the Registration Statement or Items 6, 7 or 9 of Part II of the Registration Statement.
 

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 24, 2021
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PRELIMINARY PROSPECTUS
Shares
Ordinary Shares
This is the initial public offering of monday.com Ltd.
Prior to this offering, there has been no public market for our ordinary shares. We are selling       ordinary shares. The estimated initial public offering price is between $       and $      per ordinary share.
We have applied to have the ordinary shares listed on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “MNDY.”
We are both an “emerging growth company” and a “foreign private issuer” as defined under the U.S. federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements. See “Summary — Implications of Being an Emerging Growth Company and a Foreign Private Issuer.”
Upon the consummation of this offering, Roy Mann, one of our Co-Founders and Co-Chief Executive Officers and a member of our board of directors, will hold one founder share. Pursuant to our amended and restated articles of association to be effective upon the closing of this offering, such founder share will provide Mr. Mann with certain veto rights over the approval of any (i) merger, consolidation, acquisition, amalgamation, business combination, issuance of equity securities or debt securities convertible into equity securities or other similar transactions we may enter into or consummate, in each case that would reasonably be expected to result in any person becoming, as a result of such transaction, a beneficial owner of 25% or more of our ordinary shares issued and outstanding immediately following the consummation of such transaction, or in the increase in the beneficial ownership of our ordinary shares of any person who immediately prior to the consummation of such transaction holds 25% or more of the then issued and outstanding ordinary shares, (ii) sale, assignment, conveyance, transfer, lease or other disposition, in one transaction or a series of related transactions, of all or substantially all of our assets to any person and (iii) change to our strategy, policies and/or business plan in connection with our Equal Impact Initiative, including any change in our short- and long-term funding plan for the monday Foundation (as described herein). The founder share will not be tradable and will have no rights other than those described above, including no economic rights. These veto rights may limit our shareholders’ ability to influence certain key matters affecting our business and affairs, including our shareholders’ ability to approve potential mergers and acquisitions or modify the manner in which we fund the monday Foundation. The founder share will automatically convert to a deferred share with no rights (including no financial and voting rights), upon the earlier of (i) a transfer, pledge or other disposition of the founder share from Mr. Mann to any other person, (ii) the termination of Mr. Mann’s employment with the Company, (iii) the death of Mr. Mann or Mr. Mann becoming incapable of managing his financial affairs, (iv) Mr. Mann electing to convert his founder share to a deferred share and (v) the time Mr. Mann no longer holds 33% of the ordinary shares and fully vested options held by him in the Company as of the date our ordinary shares commence trading on Nasdaq. See “Risk Factors — Risks Relating to Our Ordinary Shares and the Offering — One of our Co-Founders and Co-Chief Executive Officers will hold one founder share with certain veto rights, thereby limiting your ability to influence key matters affecting our business and affairs” and “Description of Share Capital and Articles of Association — Special Voting and Consent Rights — Founder Share Voting Rights.”
Investing in our ordinary shares involves risks. See “Risk Factors” beginning on page 18 to read about factors you should consider before purchasing any of our ordinary shares.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Per Share
Total
Public offering price $     $    
Underwriting discounts and commissions(1) $ $
Proceeds to us (before expenses) $ $
(1) We have agreed to reimburse the underwriters for certain expenses in connection with this offering. See “Underwriting” for additional information regarding underwriter compensation.
We have granted the underwriters an option to purchase up to           additional ordinary shares from us at the public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus.
The underwriters expect to deliver the ordinary shares to purchasers against payment in New York, New York on            , 2021.
Goldman Sachs & Co. LLC
J.P. Morgan
Allen & Company LLC
Jefferies
William Blair
Piper Sandler
Oppenheimer & Co.
Canaccord Genuity
Cowen
Needham & Company
Prospectus dated            , 2021

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A LETTER FROM OUR FOUNDERS
When we first started monday.com, we started it with a mission: to give our customers the power to create their own work software. To do that, we revolutionized the way people use software, giving them the same abilities once reserved for software creators and designers.
Now, over 120,000 customers later, our customers use monday.com in ways we could have never imagined. The solutions our customers have created to address their needs could never have been created by anyone else.
With that mission, we are leading in a new category called Work OS.
From the early days of monday.com, we were fortunate to find a team that shares the same passion for building great digital products. Together, we built an amazing company that we hope will further shape the future of work.
Our customers are our partners. We are continuously molding our platform's future together.
As the number of our customers grew, we heard more and more stories of how we changed their businesses, and, for some, their lives. We began to feel an ever-growing sense of responsibility — a responsibility to be there for our customers with world-class support and an ever-improving platform that allows them to do anything their business demands or their imagination takes them towards.
We took that “no limits” approach to new heights when we opened up the platform completely for integrations to any other app or data source. We added even more freedom with our apps marketplace, where each customer can extend the platform for themselves. We believe this leads to happy customers that not only love our product but also feel they are a part of our journey.
monday.com’s success happened only because of our amazing employees and the culture of rapid execution we have built together. With a deep sense of trust we share in the company, we built monday teams to be autonomous and gave people the ability to move quickly without bureaucracy. Transparency and ownership allow each employee to make an impact on the company and to know their impact directly from our data — without a middleman. This, in turn, makes all of us at monday.com feel we share the same goal and walk the same path forward. It makes us faster, more agile and happier.
Since the very beginning, we felt a strong responsibility towards the societies we live in. We saw the amazing impact monday.com has on nonprofit organizations. From work we have done together, we see that many nonprofit organizations have a massive technological divide — a divide that prevents them from making the impact that they seek. Our “Equal Impact” initiative aims to close that digital divide with long-term, ambitious goals for making a lasting impact on nonprofit organizations. With our knowledge and resources in digital transformation, running business and scaling teams, we aim to be a partner for the world’s nonprofit organizations who want to make a positive change for all of us.
We believe that we are on the cusp of a massive change in work software. If the last 10 years were defined by the SaaS cloud, then the next 10 years will be focused on giving people the power to create software that fits their needs.
We believe that we are best positioned to be the leaders in this change.
We have built the company to take such an opportunity head on while keeping our culture, our values and the love we still have towards creating beautiful, powerful digital products.
   
Roy and Eran  [MISSING IMAGE: ic_hand-bw.jpg]
 

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F-1
Through and including            , 2021 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Neither we nor the underwriters have authorized anyone to provide any information or to make any representation other than those contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by us or on our behalf. Neither we nor the underwriters take any responsibility for, and can provide no assurance as to the reliability of, any information other than the information in this prospectus, any amendment or supplement to this prospectus and any free writing prospectus prepared by us or on our behalf. Neither the delivery of this prospectus nor the sale of our ordinary shares means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy these ordinary shares in any circumstances under which such offer or solicitation is unlawful.
For investors outside the United States: Neither we nor any of the underwriters have taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus in the United States.
As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our,” “our business,” the “Company,” “monday.com” and similar references refer to monday.com Ltd. and, where appropriate, its consolidated subsidiaries.
 
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SUMMARY
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before deciding to invest in our ordinary shares. You should read the entire prospectus carefully, including the “Risk Factors,” “Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and our consolidated financial statements, including the notes thereto, before making an investment decision.
Overview
monday.com democratizes the power of software so organizations can easily build software applications and work management tools that fit their needs. We call our platform ‘Work OS’, and we believe we are pioneering a new category of software that will change the way people work and businesses operate.
Our platform consists of modular building blocks that are simple enough for anyone to use, yet powerful enough to drive the core functionality within any organization. Our platform also integrates with other systems and applications, creating a new connective layer for organizations that links departments and bridges information silos.
By using our platform, our customers can simplify and accelerate their digital transformation, enhance organizational agility, create a unifying workspace across departments, and increase operational efficiency and productivity.
Turning the Traditional, Rigid Software Paradigm Upside Down
We believe software should empower businesses, not limit them. However, organizations are often forced to use rigid, function-specific software and disconnected tools that prevent them from operating productively and effortlessly. These constraints lead organizations to use multiple tools to fit their needs, resulting in inefficient workflows, data and employee silos, broken communication channels and insufficient institutional knowledge. As a result, organizations manage and evaluate their operations with an incomplete view of their businesses, limiting their ability to grow and move efficiently.
Our Work OS turns this paradigm upside down. It allows organizations to create software applications and work management tools that suit their needs across virtually any use case. By connecting them to other systems and applications, we then eliminate corporate silos and facilitate cross-functional workflows. With our platform, organizations have a holistic view of their businesses and are able to work with more agility, become more productive and increase operational efficiency.
Software Built Differently
Our cloud-based platform is a no-code and low-code framework. It consists of modular building blocks that allow our customers to create their own software applications and work management tools with robust capabilities and an enjoyable user experience. The categories of building blocks include items, columns, views, automations, integrations and widgets. With the platform’s no-code capabilities, customers can adapt each building block to build software applications and tools that fit their desired use case and evolving needs. This makes the platform both easy to adopt and scale over time.
We focus on advancing and developing new building blocks, thereby creating new possibilities across our entire platform. We also empower our customers and external developers to do the same by building their own apps and building blocks with our low-code apps framework.
The combination, customization and adaptability of these building blocks, and the compounding effect they create, allows us to expand the capabilities of our Work OS and enter new markets quickly and efficiently.
Our users have the ability to seamlessly leverage the same building blocks for a broad number of use cases. As a result, our customers use our platform to tackle obstacles they face, either by designing
 
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new software applications and work management tools or by easily integrating such tools with existing third-party solutions. We believe this makes our Work OS a core solution that customers rely on to run their operations.
As of March 31, 2021, we served 127,974 customers across over 200 industries in more than 190 countries. Our customers use our platform for thousands of use cases, typically deploying our software in one of the following three categories: (1) to build business-critical software applications, (2) to build work management tools and (3) to act as a connective layer to form a unified workplace and integrate applications across an organization.
Below is a representative list of our customers, which provides illustrative examples of a few of the business verticals and use cases for our platform. No single customer listed below accounted for more than 1% of our revenue in the years ended December 31, 2019 and 2020 and for the three months ended March 31, 2021. As of March 31, 2021, each customer listed below was a customer with more than 10 users, which means that such customers are representative of the core focus of our sales and marketing efforts. Additionally, the list of customers below includes both enterprise customers and non-enterprise customers.

Universal Music Group, the world’s leading music company, uses our platform as a standard across multiple territories, departments and labels for cross-departmental initiatives, label relations, campaign management, project management, information technology (“IT”) operations, iteration tracking and more;

HubSpot, Inc., an American developer and marketer of software products for inbound marketing, sales and customer service, uses our platform as a connective layer; integrating with external human resources software and collaboration tools to enhance and optimize its employee onboarding process and connect departments, people, data and processes;

Oscar Insurance Corporation, a health insurance company built around a full-stack technology platform, uses our platform as a unifying workspace to connect its 45 scrum teams to manage their backlogs and product roadmap as well as enable other departments to run multiple initiatives involving numerous internal and external stakeholders;

Indosuez Wealth Management, the global wealth management brand of Crédit Agricole Group, which is the world’s largest cooperative financial institution, uses our platform as a unifying workspace, bringing together several global entities to centralize data and provide executives with a single source of verified information;

The National Hockey League, the world’s premier professional ice hockey league, uses our platform within its IT department to track its development efforts and build new work tools for over 30 business units; and

The Ray White Group (Real Estate) Partnership, the largest real estate franchise in Australia and New Zealand, uses our platform as a customer relationship management interface to manage leads, with the added benefit of automated lead nurturing through an email integration and notification system.
Self-Serve Funnel Complimented by Expanding Sales-Led Motions
Our focus on seamless adoption of our platform starts with ensuring that customers can easily and independently get up and running on our Work OS. This is accomplished through a self-serve funnel where virtually any user can sign up and immediately gain value, regardless of their technical skills.
Once customers adopt the platform and realize its value, their usage often grows organically, expanding across use cases and departments. As this expansion takes place virally, it is also accelerated through our sales-assisted motions and our partners network. Our customer success teams engage with our customers in an effort to help them grow and achieve their business objectives through our platform. This has created a successful growth cycle: the more value customers gain from our platform, the more new users and use cases are added by such customers, which in turn adds even more value to our customers.
 
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As a result of this strategy, we have recently experienced significant growth in our larger customers. For example, the number of enterprise customers on our platform, which we define as customers with more than $50,000 in annual recurring revenue (“ARR”), grew from 76 as of December 31, 2019 to 264 as of December 31, 2020, representing an increase of 247%, and from 105 as of March 31, 2020 to 335 as of March 31, 2021, representing an increase of 219%. We define ARR to mean, as of a measurement date, the annualized value of our customer subscription plans assuming that any contract that expires during the next 12 months is renewed on its existing terms. ARR should be viewed independently of revenue and any other measure prepared in accordance with the U.S. Generally Accepted Accounting Principles (“GAAP”).
This strategy is augmented by our Product Solution go-to-market approach. Product Solutions are complete products, horizontal or vertical, built on top of the Work OS platform (“Product Solutions”). We customize the user experience across the customer lifecycle, from initial discovery through marketing campaigns to onboarding with pre-designed templates and workflows, leading to end-to-end Product Solutions.
Our Growing Ecosystem
We recently expanded the scope of our building blocks by extending our platform to external developers through a low-code framework and an apps marketplace. The apps framework and marketplace allow customers, partners and external developers to easily create their own building blocks and apps.
The monday.com Way
Our culture is why we win. Our culture is more than a catch phrase or a poster on a wall. It is what we do. It is how we act. Our culture is the ‘monday.com way.’
The ‘monday.com way’ includes five key elements that guide our actions: (i) transparency and trust, (ii) customer-centricity, (iii), product-first, (iv) ownership and impact, and (v) speed and execution. We carry out these values throughout every aspect of our business, both at the individual level and as a collective organization. These values instill a deep sense of commitment in every person on our team, empower us all to make informed decisions with speed, and focus our efforts on serving our customers through amazing product experiences. We believe the monday.com way has been a key factor in our success and a key differentiator for our business.
Our Success by Numbers
We have experienced rapid growth since launching our product in 2014. Our revenue was $78.1 million and $161.1 million for the years ended December 31, 2019 and 2020, respectively, representing an increase of 143% and 106% in the years ended December 31, 2019 and 2020, respectively. Our revenue was $31.9 million and $59.0 million in the three months ended March 31, 2020 and 2021, respectively, representing a period-over-period growth of 85%. Additionally, we had a net loss of $91.6 million, $152.2 million, $19.9 million and $39.0 million for the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, respectively. We had negative net cash used in operating activities of $36.7 million, $37.2 million, $5.1 million and $0.6 million in the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, respectively, with negative adjusted free cash flow of $38.4 million, $40.7 million, $6.0 million and $1.6 million for the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, respectively. Adjusted free cash flow is a non-GAAP financial measure. For additional information concerning the limitations and reconciliations of our non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures.”
From inception through March 31, 2021, we have used approximately $121 million of capital to finance our operations, generating more than $2 of ARR for every $1 of capital used in such time. We define capital used to finance our operations as the amount of proceeds generated from our financing
 
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rounds from inception through March 31, 2021, less cash and cash equivalents and short-term bank deposits as of March 31, 2021, plus borrowings under the Revolving Credit Facility (as defined herein) as of March 31, 2021.
Our Industry
We believe we are at the center of generational shifts in technology and the way people work that create significant opportunities for our business, including the following trends:
Organizations are Digitizing their Work
Organizations are digitizing the workstreams previously performed in physical environments and reengineering their existing digital processes to gain more speed and efficiency. Flexible and adaptable software will determine the success of these digital transformation efforts and how businesses will compete in the digital era. According to International Data Corporation (“IDC”), 65% of global gross domestic product is expected to be digitized by 2022, driving over $6.8 trillion in global spending on digital transformation from 2020 to 2023.
Organizational Agility is Critical to Business Success
According to Oliver Wyman, as of April 2018, nearly 90% of chief innovation officers and related roles said agility was highly important to the future success of their companies and 95% said they needed to become more agile in the future. However, only 26% rated their company’s agility as high or greater. To close this gap and keep pace with rising customer expectations and evolving needs, organizations are increasingly relying on software to increase their agility and become more resilient to change.
Work is More Distributed, Cross-Functional and Reliant on Software
Organizations are increasingly adopting distributed models of work across geographies through a combination of on-site and remote locations. According to Gallup, 33% of U.S. workers worked exclusively from home as of September 2020, while another 25% of U.S. workers will pursue employment which allows them to work partially from home in the future. Additionally, teams must increasingly work together and across departments within organizations to collectively address problems and achieve optimal outcomes. As a result, organizations are becoming more reliant on software to foster a culture of inclusion and drive business success.
Everyone Needs to Leverage the Power of Software to do Their Jobs
Historically, the full power of software was only accessible to a limited number of highly trained employees who could manipulate and customize it based on their organization’s preferences. The digital transformation of organizations and increasing need for flexible solutions to address evolving and complex problems have made it necessary for a larger portion of the 1.25 billion global information workers (according to Forrester in 2018) to be able to create software tools to fit their needs.
Access and Adoption of Software can be Frictionless
Software has historically been too complex, unapproachable and expensive for end users to access. More recently, software design has focused more on user experience and enabling frictionless adoption. Additionally, the internet has allowed users to download, experiment and purchase software on their own, and the emergence of the software-as-a-service industry has also enabled users to more easily adopt software. We believe these trends are important to democratizing the power of software for everyone and fostering a culture in which users enjoy using their software.
Software Automation is Poised to Unlock Human Potential
Recent advancements in software automation have the ability to transform human potential and productivity. Automation eliminates manual, repetitive work and enables information workers to focus on deeper, more impactful work, eliminate manual mistakes and increase productivity.
 
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Limitations of Existing Approaches to Software
Existing approaches to software have many or all of the following limitations:

Constraining Architectures.   Most software has been built to standardize repetitive workflows and processes. These architectures are rigid and use a common interface for all users accessing the software. These limitations force users to conform and adapt their working styles to the software in order to solve problems a certain way.

Ease of Use versus Complexity Tradeoff.   On one hand, software designed to be easy to use is unable to meet the demands of today’s work environment. On the other hand, software designed to handle complexity is difficult to use. Users are often forced to bridge this gap by using additional tools.

Function-Specific Orientation Leads to Silos.   Software solutions have typically addressed use cases for specific functions within a company, including sales, marketing, human resources and engineering, among others. However, this function-specific approach leads to silos within organizations as each department works within their own specific toolset and learns from data that is only available to them. This, in turn, leads to organizations having an incomplete view when making decisions and experiencing difficulty in efforts that require cross-functional work.

Work and Communication Are Disjointed.   Users tend to communicate through separate platforms from where they operate and work, resulting in repetitive and redundant meetings and double work. This results in slow processes, poor visibility across companies and uninformed decision-making.

Manual, Error-Prone and Repetitive.   Existing tools often lack automation capabilities. This results in significant amounts of employees’ time spent on manual and error-prone work that reduces their productivity and limits efficiency.

Closed Platforms that Lack Integration.   The majority of software currently on the market requires coding to integrate and synchronize data with other platforms and tools. The lack of integration, cooperation and openness amongst these tools often results in organizations and users being forced to use certain limiting software, regardless of whether it is the optimal solution for the specific use case.
Rise of the Work Operating System
Organizations have historically run their businesses completely dependent on pre-packaged software. They also relied on solutions internally developed by a fraction of their employee base who did not fully understand the way users think and want to work. As a result, organizations were forced to manage and run their businesses to fit the software they were provided, instead of in a way that fits their needs. These rigid frameworks limited their ability to work efficiently and with agility, grow their businesses and have a complete perspective of their businesses.
Work OS is our vision for democratizing the power of software for everyone so organizations can easily build software applications and work management tools that fit their needs. Our Work OS allows users, teams and organizations to create their own Product Solutions to suit their specific and ever-growing needs and gives organizations a unified view of their operations. As adoption of our Work OS grows within an organization, it becomes the unified workspace that acts as the connective layer across all of their applications and departments.
Our Opportunity
Our Work OS is broadly applicable for any organization and team across a growing number of use cases. According to estimates from IDC, our total addressable market was $56.1 billion in 2020 and will grow to $87.6 billion in 2024, representing a 4-year compounded annual growth rate (“CAGR”) of 12%.
 
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Our Platform
With our Work OS, organizations can build software applications and work management tools to fit their needs. Our no-code and low-code platform consists of modular building blocks that are simple enough for anyone to assemble yet powerful enough to build solutions that drive the core functionality of any organization in any vertical. On top of our Work OS, we are building Product Solutions, including software applications and work management tools, for verticals such as marketing, customer relationship management (“CRM”), project management, software development and more. The Product Solutions are built with our building blocks and apps to answer specific needs.
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Users use boards to hold any information and processes they have, within items and columns. Our schemaless database infrastructure is completely flexible, allowing users to easily define the way they capture and present data.They use views to manipulate and consume that board information in different ways. Users can create forms to capture data from anyone, including non-monday.com users.
 
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Integrations pull data from other applications into the board, export data to other systems and synchronize data across applications. Automations eliminate repetitive manual processes, saving time and reducing human error.
Users build dashboards that pull data across many boards so stakeholders can get a complete high-level view on anything they may want. Users can access a variety of monday.com “stores” to further customize any kind of building block: for example, the column store allows customers to add new data types to any board, including location, formulas, numbers, text and dates. The views store provides different types of interactive interfaces, including calendar, location and timeline views. The dashboard widget store includes many widgets such as graphs, lists and numbers for use in any dashboard layout customers want to create. Users can organize their boards and dashboards using workspaces.
External developers can extend the platform and develop their own views, dashboard widgets, integrations and automations with our low-code framework. The result is a platform that is virtually limitless and can solve nearly any complexity related to a business.
Our Apps Marketplace
We recently expanded the scope of our building blocks by extending our platform to external developers through a low-code framework and a new apps marketplace. Our low-code framework and flexible application programming interface allows customers, partners and external developers to easily create their own building blocks and apps, either for private or public use. Developers and app builders can also distribute their building blocks and solutions through our apps marketplace.
Key Benefits to Our Customers
Our platform enables customers to:

Democratize the Power of Software to All Users.   The possibilities of our platform are virtually endless, as it enables each user to manipulate and access software in ways that fit their needs.

Accelerate Digitization.   Our platform helps our customers digitize their business operations and reengineer existing digital processes to make them more efficient. This enables our customers to increase their organizational agility, speed and efficiency.

Create a Unified Workspace.   By serving as a connective layer, our platform brings organizations’ departments, applications and data into a unified workspace. As of March 31, 2021, 84% of our enterprise customers used integrations to connect our platform to other tools and systems used within their organization. This enables organizations to make complete, data-driven decisions, eliminate silos across the organization and centralizes all tools in one place.

Make Data-Driven Decisions.   Everything in our platform is data, which can be tracked, measured and analyzed. Our customers are able to capture new insights that were previously unavailable to them. This allows them to implement more data-driven decision making.

Increase Productivity and Deep Working.   We believe our platform greatly reduces the reliance upon meetings, communications and emails. This gives employees significant time back to their days to perform more work and unlocks greater potential. Additionally, our platform automates repetitive, manual and error-prone work, which frees up our users’ time and energy to focus on more impactful work, such as creative thinking, problem solving and innovative ideas. For the twelve months ended March 31, 2021, over 800 million manual actions where automated on our platform. As of March 31, 2021, 99% of our enterprise customers used automations on the platform and, as of April 30, 2021, 95% of our enterprise customers used more than 50 automations as part of their workflows.

Enhanced Company Culture.   Our platform helps to foster a culture of inclusion, ownership and clarity. By empowering everyone to think more holistically and have access to greater information, our platform helps promote better idea-sharing and brainstorming across organizations.
 
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Our Growth Strategies
We intend to drive the growth of our business by executing on the following strategies:

Innovate and advance our platform.   We have a strong history of technological innovation, releasing new building blocks and features on a regular basis and making frequent updates to our platform. We intend to continue making significant investments in research and development and hiring top technical talent to enable new use cases, serve more verticals and increase enterprise-grade features on our platform.

Drive growth by acquiring new customers.   We believe that our platform can be used by nearly every organization across the world and the opportunity to continue increasing our customer base is substantial.

Drive increased adoption and expansion within our existing customer base.   As our customers realize the benefits of our platform, they typically add more users and use cases, while expanding across different departments. As a result, our net dollar retention rate (“Net Dollar Retention Rate”) for customers with more than 10 users was 116% and 119% for the three months ended December 31, 2019 and 2020, respectively, and 119% and 121% for the three months ended March 31, 2020 and 2021, respectively. We plan to continue investing in ways to expand within our existing customer base. We calculate Net Dollar Retention Rate as of a period end by starting with the ARR from customers as of the 12 months prior to such period end (“Prior Period ARR”). We then calculate the ARR from these customers as of the current period end (“Current Period ARR”). The calculation of Current Period ARR includes any upsells, contraction and attrition. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12-month calculation, we take a weighted average of this calculation of our quarterly Net Dollar Retention Rate for the four quarters ending with the most recent quarter. Our Net Dollar Retention Rate may fluctuate as a result of a number of factors, including the level of penetration within our customer base, expansion of products and features and our ability to retain our customers.

Expand our global footprint.   We will continue investing in local advertising channels, partnerships and localizing our platform to address existing and new regions. As of March 31, 2021, our geographically dispersed sales workforce consisted of 237 employees from our sales and partners teams as well as 45 customer success managers. We also have 112 global channel partners spread across North America, Latin America (“LATAM”), Europe, the Middle East and Africa (“EMEA”) and Asia Pacific (“APAC”), including Devoteam Mexico, Avisi and Matrix in Europe, Dialog Information Technology in Australia, AktieNow in Brazil and Sphere Partners in the United States. For the year ended December 31, 2020 and the three months ended March 31, 2021, approximately 52% of our revenues were generated outside the United States and approximately 48% was generated in the United States. We believe there is an opportunity to increase our global presence even further over time.

Grow and invest in our ecosystem strategy.   We recently opened our platform to developers, channel partners, global system integrators and customers to create their own building blocks.
The monday.com Equal Impact Initiative
We believe that it is our responsibility as a company to use our unique expertise to create a positive social impact across the globe. As a Work OS provider, we empower teams and organizations of all sizes to focus on high-value work, increasing the efficiency and output of their businesses. While our customer base largely consists of for-profit entities, we also want to have an impact on nonprofit organizations that aim to have a positive impact on our world.
On            , 2021, we established the Equal Impact Initiative to further our mission of closing the digital divide between the for-profit sector and the nonprofit sector. We aim to aid the digital transformation of nonprofit organizations so they can make a greater impact. Our goal is for the Equal Impact Initiative to provide a robust digital transformation toolbox for nonprofit teams.
 
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The toolbox will consist of monday.com subscriptions and product support, digital infrastructure, education, services and volunteer support, including the following:

Product match.   We intend to offer up to $1 worth of free or substantially discounted monday.com subscriptions to nonprofit organizations, including product support, for every $1 of revenue we generate. We do not expect that these discounted subscriptions or donations will have a material impact on our results of operations.

Employee time.   We intend to provide every employee with the opportunity to volunteer 1% of their paid work time to any approved charitable or community initiative. We do not expect that such allocation of employee time will have a material impact on our results of operations.
In order to carry out our Equal Impact Initiative, we will establish the monday Foundation, a 501(c)(4) social welfare organization under Delaware law. The monday Foundation will be charged with helping us carry out our social responsibility mission.
We intend to fund the monday Foundation as follows:

Equity pledge.   Following the closing of this offering, we intend to issue the monday Foundation a warrant to purchase         ordinary shares, with an exercise price of $0.01 per ordinary share. Commencing two or more years following the closing of this offering, and for a period of approximately ten years, we intend to issue additional ordinary shares or warrants exercisable for ordinary shares to the monday Foundation in order to continue to fund its charitable initiatives to promote the Equal Impact Initiative. As of the date of this prospectus, we have not determined the amount of ordinary shares and/or warrants exercisable for ordinary shares that will be issued to the monday Foundation, as such decision will largely depend on the funding requirements and performance of the monday Foundation on an ongoing basis. However, we have determined that we will limit any equity contribution to the monday Foundation to no more than 1% of our outstanding ordinary shares on an annual basis, measured as of the end of each fiscal year, with any unissued amount up to a maximum of 1% in the aggregate measured as of the end of the prior fiscal year carried over to subsequent fiscal years. We expect that the monday Foundation will use the donated equity to fund the above-mentioned digital transformation toolbox, including cash grants to nonprofit organizations.

One-time grant.   We intend to donate 1% of the proceeds from this offering to the monday Foundation. See “Use of Proceeds.”
We believe our Equal Impact Initiative will play a large role in shaping the future of monday.com, our values and our ecosystem. See “Risk Factors — Risks Related to our Equal Impact Initiative and the monday Foundation.”
Risk Factors Summary
Investing in our ordinary shares involves substantial risks, and our ability to successfully operate our business and execute our growth plan is subject to numerous risks. You should carefully consider the risks described in “Risk Factors” before making a decision to invest in our ordinary shares. If any of these risks actually occurs, our business, financial condition or results of operations could be materially and adversely affected. In such case, the trading price of our ordinary shares would likely decline, and you may lose all or part of your investment.
The following is a summary of some of the principal risks we face:

we have a limited operating history at our current scale, which makes it difficult to predict our revenue and evaluate our business and future prospects;

we have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth;

if we fail to manage our growth effectively, we may be unable to execute our business plan or maintain high levels of service and customer satisfaction;
 
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we have a history of net losses, we anticipate increasing operating expenses in the future, and we may not be able to achieve and, if achieved, maintain profitability;

we derive, and expect to continue to derive, all of our revenue from a single product;

we have experienced, and expect to continue to experience, quarterly fluctuations in our results of operations;

real or perceived errors, failures, vulnerabilities or bugs on our platform could harm our business, results of operations and financial condition;

if there are interruptions or performance problems associated with the technology or infrastructure underlying our platform, then our users may experience service outages, other organizations may be reluctant to adopt our Work OS and our reputation could be harmed;

if we are unable to attract customers, grow our retention rates, expand usage within organizations and sell subscription plans, our revenue growth and any future profitability could be harmed;

because we recognize subscription revenue over the subscription term, downturns or upturns in new sales and renewals are not immediately reflected in full in our results of operations;

our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture;

if we fail to offer high-quality customer support, our business and reputation could suffer;

the COVID-19 pandemic has affected how we and our customers operate and has adversely affected the global economy, and the duration and extent to which this could continue to affect our business, future results of operations and financial condition remains uncertain;

one of our Co-Founders and Co-Chief Executive Officers will hold one founder share with certain veto rights, thereby limiting your ability to influence certain key matters affecting our business and affairs;

a security incident may allow unauthorized access to our systems, networks or data or the data of users and organizations on our platform; and

we are subject to stringent and changing laws, regulations, industry standards and contractual obligations related to privacy, data protection and data security.
Corporate Information
We were incorporated as DaPulse Labs Ltd. in Israel in 2012 under the Israeli Companies Law, 5759-1999 (the “Companies Law”). We changed our name to monday.com Ltd. in December 2017. Our principal executive offices are located at 52 Menachem Begin Rd., Tel Aviv-Yafo 6713701, Israel. Our website address is www.monday.com, and our telephone number is +972(55) 939-7720. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. We have included our website address in this prospectus solely for informational purposes.
We have proprietary rights to trademarks used in this prospectus that are important to our business, many of which are registered under applicable intellectual property laws. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the “®” or “™” symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Each trademark, trade name or service mark of any other company appearing in this prospectus is the property of its respective holder.
 
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Implications of Being an Emerging Growth Company and a Foreign Private Issuer
We qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). As an emerging growth company we may take advantage of specified exemptions from various requirements that are otherwise applicable generally to U.S. public companies. These provisions include:

the ability to include only two years of audited financial statements and selected financial data and only two years of related disclosure in the registration statement on Form F-1 of which this prospectus is part;

reduced executive compensation disclosure; and

an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) in the assessment of the emerging growth company’s internal control over financial reporting.
The JOBS Act also permits an emerging growth company such as us to delay adopting new or revised accounting standards until such time as those standards are applicable to private companies. We may choose to take advantage of some but not all of these reduced reporting burdens. We are electing to use the extended transition periods available under the JOBS Act for complying with new or revised accounting standards, and we currently intend to take advantage of the other exemptions discussed above.
We will remain an emerging growth company until the earliest of:

the last day of our fiscal year during which our annual gross revenue is at least $1.07 billion;

the last day of our fiscal year following the fifth anniversary of the closing of this offering;

the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or

the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our ordinary shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.
In addition, upon the closing of this offering, we will report under the Exchange Act as a “foreign private issuer.” As a foreign private issuer, we may take advantage of certain provisions under Nasdaq rules that allow us to follow Israeli law for certain corporate governance matters. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time;

the rules under the Exchange Act requiring the filing with the U.S. Securities and Exchange Commission (the “SEC”) of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events; and

Regulation Fair Disclosure (“Regulation FD”), which regulates selective disclosures of material information by issuers.
Foreign private issuers, like emerging growth companies, also are exempt from certain more stringent executive compensation disclosure rules. Thus, if we remain a foreign private issuer, even if
 
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we no longer qualify as an emerging growth company, we will continue to be exempt from the more stringent compensation disclosures required of public companies that are neither an emerging growth company nor a foreign private issuer.
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies:

the majority of our executive officers or directors are U.S. citizens or residents;

more than 50% of our assets are located in the United States; or

our business is administered principally in the United States.
 
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THE OFFERING
Ordinary shares offered by us
       ordinary shares.
Option to purchase additional ordinary shares
We have granted the underwriters an option for a period of 30 days after the date of this prospectus to purchase up to      additional ordinary shares.
Ordinary shares to be outstanding after this offering
      ordinary shares (or      ordinary shares if the underwriters exercise in full their option to purchase additional ordinary shares).
Use of proceeds
We estimate that the net proceeds to us from this offering will be approximately $      million (or $      if the underwriters exercise in full their option to purchase additional ordinary shares), assuming an initial public offering price of $      per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
The principal purposes of this offering are to obtain additional working capital, to create a public market for our ordinary shares and to facilitate our future access to the public equity markets. We intend to use substantially all of the net proceeds from this offering for general corporate purposes, including advertising and marketing, technology development, working capital, operating expenses and capital expenditures. We may also use a portion of the proceeds to acquire or invest in businesses, products, services or technologies; however, we do not have agreements or commitments for any material acquisitions or investments at this time. See “Use of Proceeds.”
We intend to make a one-time donation of 1% of the proceeds from this offering to the monday Foundation. As of the date of this prospectus, the monday Foundation has not determined how it will deploy the donated funds following this offering.
Dividend policy
We do not anticipate paying any dividends in the foreseeable future. Our board of directors has sole discretion whether to pay dividends. See “Dividend Policy.”
Directed share program
At our request, the underwriters have reserved for sale, at the initial public offering price, up to      % of the ordinary shares offered by this prospectus for sale to our friends, family and certain existing shareholders identified by our directors and management, through a directed share program. If these persons purchase reserved ordinary shares, this will reduce the number of ordinary shares available for sale to the general public. Any reserved ordinary shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other ordinary shares offered by this prospectus.
Risk factors
Investing in our ordinary shares involves a high degree of risk. See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.
 
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Listing
We have applied to list our ordinary shares on Nasdaq under the symbol “MNDY.”
The number of our ordinary shares to be outstanding immediately after this offering is based on ordinary shares outstanding as of March 31, 2021 and the immediate conversion of       Series A, B, B-1, B-2, C, D and E preferred shares, each having no par value, into       ordinary shares upon the closing of this offering (the “Preferred Shares Conversion”) and excludes:

       ordinary shares issuable upon the exercise of options outstanding under our equity incentive plans as of March 31, 2021 at a weighted average exercise price of $       per share;

       ordinary shares issuable upon the exercise of a warrant that will be issued to the monday Foundation following the closing of this offering, with an exercise price of $0.01 per ordinary share; and

       ordinary shares reserved for future issuance under our equity incentive plans as described in “Management — Share Option Plans.”
Unless otherwise indicated, all information in this prospectus assumes or gives effect to:

no exercise by the underwriters of their option to purchase up to        additional ordinary shares;

no exercise of the outstanding options described above after March 31, 2021;

the adoption of our amended and restated articles of association prior to the closing of this offering, which will replace our amended and restated articles of association as currently in effect;

the Preferred Shares Conversion; and

an initial public offering price of $       per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus.
 
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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables present our summary consolidated financial data and other data. We prepare our consolidated financial statements in accordance with GAAP. The summary consolidated statements of operations data for the years ended December 31, 2019 and 2020 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statements of operations data for the three months ended March 31, 2020 and 2021 and the selected consolidated balance sheet data as of March 31, 2021 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on a consistent basis as our audited consolidated financial statements. In the opinion of management, the unaudited data reflects all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the financial information in those statements. Our historical results for any prior period are not necessarily indicative of results expected in any future period.
The financial and other data set forth below should be read in conjunction with, and is qualified by reference to, “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere in this prospectus.
Consolidated Statement of Operations Data:
Year ended
December 31,
Three months ended
March 31,
2019
2020
2020
2021
(in thousands, except for share and per share data)
Revenue
$ 78,089 $ 161,123 $ 31,929 $ 58,972
Cost of revenue(1)
11,978 22,488 4,591 7,924
Gross profit
66,111 138,635 27,338 51,048
Operating expenses:
Research and development(1)
24,637 43,480 6,651 15,581
Sales and marketing(1)
118,534 191,353 36,945 63,048
General and administrative(1)
15,458 54,339 3,745 10,266
Total operating expenses
158,629 289,172 47,341 88,895
Operating loss
(92,518) (150,537) (20,003) (37,847)
Financial income (expense), net
1,590 526 349 (406)
Loss before income taxes
(90,928) (150,011) (19,654) (38,253)
Income tax expense
(683) (2,192) (209) (699)
Net loss
$ (91,611) $ (152,203) $ (19,863) $ (38,952)
Net loss per share attributable to ordinary
shareholders’, basic and diluted(2)
$ (9.22) $ (14.19) $ (2.08) $ (3.52)
Weighted-average ordinary shares used in
calculating net loss per ordinary share,
basic and diluted
11,348,428 12,048,909 11,778,108 12,392,298
Pro forma net loss per share(2)
$ (3.95) $ (0.52) $ (1.00)
Weighted-average shares used in
calculating pro forma net loss per share,
basic and diluted(2)
38,489,148 38,218,347 38,832,537
(1)
Includes share-based compensation expense as follows:
 
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Year ended
December 31,
Three months ended
March 31,
2019
2020
2020
2021
(in thousands)
Cost of revenue
$ 970 $ 2,720 $ 299 $ 1,531
Research and development
9,396 12,142 1,025 4,537
Sales and marketing
3,283 10,068 1,051 4,034
General and administrative
8,190 39,415 851 4,438
Total share-based compensation expense
$ 21,839 $ 64,345 $ 3,226 $ 14,540
(2)
See Note 2v, Note 13 and Note 14 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate basic and diluted net loss per share and pro forma net loss per share attributable to ordinary shareholders and the weighted-average number of shares used in the computation of the per share amounts.
Consolidated Balance Sheet Data:
As of March 31, 2021
Actual
Pro Forma(1)
Pro Forma
As Adjusted(2)
(in thousands)
Cash and cash equivalents
$ 124,281 $ 124,281 $       
Short term deposits
10,000 10,000
Total assets
160,479 160,479
Total liabilities
168,125 168,125
Convertible preferred shares
233,496
Additional paid-in capital
114,176 347,672
Accumulated deficit
(355,318) (355,318)
Total shareholders’ (deficit) equity
(241,142) (7,646)
      
(1)
Pro forma gives effect to the automatic conversion of all of our outstanding convertible preferred shares as of March 31, 2021 into 26,440,239 ordinary shares immediately prior to the completion of this offering.
(2)
Pro forma as adjusted gives further effect to (a) the pro forma items described immediately above and (b) our issuance and sale of       ordinary shares in this offering at an assumed initial public offering price of $      per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $      per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, total assets, and total shareholders’ (deficit) equity by approximately $      million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses. An increase (decrease) of 1,000,000 shares in the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, total assets, and total shareholders’ (deficit) equity by approximately $      million, assuming an initial public offering price of $      per ordinary shares, which is the midpoint of the price range set forth on the cover page of this prospectus,, and after deducting underwriting discounts and commissions and estimated offering expenses. The pro forma information discussed above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of our initial public offering determined at pricing.
Non-GAAP Financial Measures:
The following table summarizes our non-GAAP financial measures, along with the most directly comparable GAAP measure, for each period presented below. In addition to our results determined in accordance with GAAP, we believe these non-GAAP financial measures are useful in evaluating our operating performance.
 
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Year ended
December 31,
Three months
ended March 31,
2019
2020
2020
2021
(in thousands)
Non-GAAP operating loss
$ (70,679) $ (86,192) $ (16,777) $ (23,307)
Adjusted free cash flow
(38,417) (40,692) (5,959) (1,595)
For additional information concerning the limitations and reconciliations of our non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures.”
 
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RISK FACTORS
You should carefully consider the risks described below before making an investment decision. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price and value of our ordinary shares could decline due to any of these risks, and you may lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this prospectus. See “Special Note Regarding Forward-Looking Statements.”
Risks Relating to our Business and Industry
We have a limited operating history at our current scale, which makes it difficult to predict our revenue and evaluate our business and future prospects.
We started our company in 2012 and have experienced rapid growth since launching our product in 2014. Our limited operating history at our current scale makes it difficult to predict our operating results, and our historical results may not be indicative of, or comparable to, our future results. We have encountered and expect to continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, such as the risks and uncertainties described herein. If we do not address these risks successfully, our results of operations could differ materially from our expectations, our business, results of operations and financial condition could suffer, and the price of our ordinary shares could decline.
We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth.
We have experienced rapid growth in recent periods. Our revenue was $78.1 million, $161.1 million, $31.9 million and $59.0 million for the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, respectively, representing annual growth of 106% and 85%, respectively. Our historical revenue growth may not be indicative of our future performance. In future periods, we may not be able to sustain revenue growth consistent with recent periods, or at all. Further, as we operate in a new and rapidly changing category of work management software, widespread acceptance and use of our platform is critical to our future growth and success. We believe our revenue growth depends on a number of factors, including, but not limited to, our ability to:

achieve widespread adoption of our Work OS by organizations globally in lieu of, or in addition to, legacy systems;

continue to acquire new customers;

reach teams and organizations through our marketing and sales efforts;

sustain innovation and deliver a superior product and customer experience, allowing us to maintain a competitive advantage;

grow or maintain our retention rates and expand the usage of our platform within the organizations already using our platform;

continue successfully investing in our go-to-market approach with our sales, customer success and partners teams;

introduce and grow the adoption of our platform in new markets outside of the markets in which we currently operate;

expand the usage of our platform within certain industries;

maintain a high level of security and reliability in our platform;
 
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maintain compliance with applicable existing laws and regulations and comply with new applicable laws and regulations;

effectively price our platform to attract and retain customers while achieving and maintaining profitability;

successfully compete against new and existing market players and competing Product Solutions;

increase the global awareness of our brand; and

expand the features and capabilities of our platform.
If we are unable to successfully accomplish these objectives, our revenue growth may be adversely affected. If the assumptions that we use to plan our business are incorrect or change in reaction to changes in the market, or if we are unable to maintain consistent revenue growth, our results of operations could differ materially from our expectations, and our business, results of operations and financial condition could suffer.
If we fail to manage our growth effectively, we may be unable to execute our business plan or maintain high levels of service and customer satisfaction.
We have experienced, and expect to continue to experience, rapid growth, which has placed, and may continue to place, significant demands on our management and our operational and financial resources. For example, our headcount grew from 177 employees as of January 1, 2019 to 799 employees as of March 31, 2021. In the past five years, we have established a presence in multiple international locations, including New York, San Francisco, Miami, Chicago, London and Sydney, and we plan to continue to expand our international operations in the future. We have also experienced significant growth in the number of users and organizations on our platform, and in the amount of data that we collect and process. Our customer base increased from 45,427 customers as of January 1, 2019 to 127,974 customers as of March 31, 2021. Additionally, our organizational structure and our operations are becoming more complex, requiring us to scale our operational, financial and management controls as well as our reporting systems and procedures.
As we continue to grow our business, we will face challenges in integrating, developing, training and motivating a rapidly growing employee base in our various offices around the world and maintaining our company culture across multiple offices. Moreover, our continued growth will require significant capital expenditures and the allocation of valuable management resources. Our growth has placed, and our expected future growth could continue to place, a significant strain on our management, customer experience, research and development, sales and marketing, and other resources. In addition, as we expand our business and our customer base continues to grow, it is important that we continue to maintain a high level of customer service and satisfaction. As such, we will need to expand our account management, our customer service and other personnel so we can continue providing personalized account management and customer service as well as personalized features, integrations, capabilities and enhancements. If we fail to manage our anticipated growth in a manner that preserves high levels of customer service and the key aspects of our corporate culture, the quality of our products and services may suffer, which could negatively affect our reputation and harm our ability to attract employees, users and organizations.
We have a history of net losses, we anticipate increasing operating expenses in the future, and we may not be able to achieve and, if achieved, maintain profitability.
We have incurred significant net losses in each year since our inception, including net losses of $91.6 million, $152.2 million, $19.9 million and $39.0 million in the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, respectively. In addition, we expect to continue to incur net losses for the foreseeable future, and we may not achieve or maintain profitability in the future. Because the market for our platform and the features, integrations, capabilities and enhancements we offer is rapidly evolving and has not yet reached widespread adoption, it is difficult for us to predict our future results of operations or the limits of our market opportunity. We expect our
 
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operating expenses will increase significantly over the next several years as we hire additional personnel, expand our partners, operations and infrastructure, continue to enhance our brand, develop and expand our platform’s features, integrations, capabilities and enhancements, expand and improve our application programming interfaces (“APIs”), and increase our spending on sales and marketing. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently, or at all, to offset these higher expenses. Revenue growth may slow or revenue may decline for a number of possible reasons, including slowing demand for our products or increasing competition. In addition, as a public company, we will incur additional significant legal, accounting and other expenses that we did not incur as a private company. If we are unable to maintain revenue high enough to offset the expected increases in our operating expenses, we may not achieve or maintain profitability in future periods.
We derive, and expect to continue to derive, all of our revenue from a single product.
For the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, we derived 100% of our revenue from a single product — our Work OS, and we expect to continue to derive all of our revenue from our Work OS for the foreseeable future. As such, continued growth in market demand for and market acceptance of our Work OS is critical to our future success. Demand for our Work OS is affected by a number of factors, many of which are beyond our control, such as: the release of competing products; the development and acceptance of new features, integrations, capabilities and enhancements; price or product changes by us or our competitors; technological changes and developments within the markets we serve; growth, contraction and rapid evolution of our market; and general economic conditions and trends. If we are unable to continue to meet demands of our users and organizations or trends in preferences or to achieve more widespread market acceptance of our Work OS, our business, results of operations and financial condition could be harmed. Changes in preferences of our customers may have a disproportionately greater impact on our business than if we offered multiple products. In addition, some current and potential customers, particularly large organizations, may develop or acquire their own tools or software with similar capabilities as our platform or continue to rely on traditional tools and software, which could reduce or eliminate the demand for our Work OS. If demand for our Work OS declines for any of these or other reasons, our business could be adversely affected.
We have experienced, and expect to continue to experience, quarterly fluctuations in our results of operations.
Our results of operations have fluctuated from quarter to quarter in the past and may continue to vary significantly in the future so that period-to-period comparisons of our results of operations may not be meaningful. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, may be difficult to predict, and may or may not fully reflect the underlying performance of our business given that we recognize subscription revenue over the subscription term. Accordingly, our financial results in any one quarter should not be relied upon as indicative of future performance. Factors that may cause fluctuations in our quarterly financial results include, but are not limited to:

the level of demand for our Work OS;

our ability to grow or maintain our retention rates, expand usage within our customer base, and sell our Work OS subscription plans to existing and future customers;

costs and timing of expenses related to the acquisition of businesses, talent, technologies or intellectual property, including potentially significant amortization costs and possible write-downs;

the impact of market volatility and economic downturns caused by health epidemics, such as the COVID-19 pandemic, influenza and other highly communicable diseases or viruses;

the timing and success of new features, integrations, capabilities and enhancements by us to our platform or by our competitors to their products or any other change in the competitive landscape of our market;
 
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errors in our forecasting of the demand for our Work OS, which could lead to lower revenue, increased costs or both;

the amount and timing of operating expenses and capital expenditures, as well as entry into operating leases, that we may incur to maintain and expand our business and operations and to remain competitive;

the timing of expenses and recognition of revenue;

security breaches, technical difficulties, disruptions or outages on our platform resulting in service level agreement credits;

adverse litigation judgments, other dispute-related settlement payments or other litigation-related costs;

regulatory fines;

changes in the legislative or regulatory environment;

legal and regulatory compliance costs in new and existing markets;

number of new employees;

amount of share-based compensation and timing of the grant or vesting of equity awards to employees, directors or consultants;

pricing pressure as a result of competition or otherwise;

fluctuations in foreign currency exchange rates;

general economic conditions in either domestic or international markets, including geopolitical uncertainty and instability as well as economic conditions specifically affecting industries in which our customers participate; and

expenses incurred in connection with our Equal Impact Initiative.
Real or perceived errors, failures, vulnerabilities or bugs on our platform could harm our business, results of operations and financial condition.
We have historically experienced, and expect to continue to experience, errors, failures, vulnerabilities and bugs on our platform. Our customers use our platform for important aspects of their businesses, and any errors, failures, vulnerabilities or bugs affecting the performance of our platform may negatively affect the businesses of our customers and could harm our reputation. In addition, our online systems, including our website and mobile applications, could contain undetected errors, bugs or misconfigurations that could adversely affect their performance. Additionally, we regularly update and enhance our website, our platform and our other online systems and introduce new versions of our software applications. These updates may contain undetected errors when first introduced or released, which may cause disruptions in our services and may, as a result, cause us to lose market share, and our reputation, business, financial condition and results of operations could be materially and adversely affected.
If there are interruptions or performance problems associated with the technology or infrastructure underlying our platform, then our users may experience service outages, other organizations may be reluctant to adopt our Work OS and our reputation could be harmed.
Our continued growth and customer loyalty depends, in part, on the ability of existing and potential users to access our platform at all times and without interruption or degradation of performance. We have in the past, and may in the future, experience disruptions, data loss, outages and other performance problems with our infrastructure due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints, denial-of-service attacks, ransomware attacks or other security-related incidents. For example, our platform previously sustained an outage for a period of approximately two hours, and as a result we issued credits to our customers for the inconvenience. Remedial measures were adopted to better safeguard against future
 
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such disruptions. Nevertheless, in the future, we may not be able to identify the cause or causes of performance problems immediately or in short order. We may not be able to maintain the level of service uptime and performance required by our users, especially during peak usage times and as our user traffic and number of integrations continue to increase.
Our platform is accessed by a large number of users, and as we continue to expand the number of our users and features, integrations, capabilities and enhancements available to our customers, we will need to ensure that our platform can scale to meet the evolving needs of our customers, particularly as we continue to focus on organizations with over 10 users. However, we may not be able to scale our technology to accommodate the increased capacity requirements, which may result in interruptions or delays in service. In addition, because our customers rely on our Work OS to collaborate, access and manage their work, any outage of our platform could impair our users’ ability to perform their work. If such an event occurs, our customers may seek compensation from us for any losses they suffer and may cease conducting business with us.
Further, we have created mobile applications and mobile versions of our Work OS to respond to the increasing number of people who access the internet and cloud-based software applications through mobile devices, including smartphones and handheld tablets or laptop computers. If these mobile applications do not perform well, our business may suffer.
Any of the above circumstances or events may harm our reputation, cause organizations on our platform to terminate their agreements with us, impair our ability to obtain subscription renewals, impair our ability to grow our user base, subject us to financial penalties and liabilities under our service level agreements with our customers, cause us to issue credits or other compensation to customers, and otherwise harm our business, reputation, results of operations and financial condition.
If we are unable to attract customers, grow our retention rates, expand usage within organizations and sell subscription plans, our revenue growth and any future profitability could be harmed.
To increase our revenue and achieve and maintain profitability, we must increase our customer base through various methods, including but not limited to, converting customers using our trial version into paying customers, growing or maintaining our retention rates, and expanding usage of our platform within organizations that are our customers. We encourage customers using our trial version to upgrade to paid subscriptions plans. Additionally, we seek to expand within organizations by adding new users or expanding their use of our platform into other departments within an organization. While we have experienced significant growth in the number of customers on our platform, we may not continue achieving similar customer growth rates in the future.
Sales efforts targeted at organizations typically involve greater costs, longer sales cycles, greater competition and less predictability in completing some of our sales. As a result of these factors, these sales opportunities may require us to devote greater sales, research and development, and customer support resources to these customers, resulting in increased costs and lengthened sales cycles. If our efforts to sell to large organizations are not successful or do not generate additional revenue, our business could suffer.
Moreover, our business is subscription based. Organizations are not obligated to and may not renew their subscriptions after their existing subscriptions expire or they may renew at a lower price by downgrading the plans to which they subscribed or reducing their number of users. While many of our subscriptions provide for automatic renewal, organizations have no obligation to renew a subscription after the expiration of its term, and we cannot ensure that organizations will not renew subscriptions with a shorter contract period, with a smaller number of users or on a lower-tier subscription plan. Organizations may or may not renew their subscriptions as a result of a number of factors, including their satisfaction or dissatisfaction with our Work OS, our services, our pricing or pricing structure, the pricing or capabilities of the products and services offered by our competitors, the effects of economic conditions, decreases in the number of users at the organization, or reductions in our paying customers’ spending levels.
It is also difficult to predict attrition rates given our varied customer base of organizations, mid-market and small business customers. Our attrition rates may increase or fluctuate as a result of a
 
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number of factors, including customer dissatisfaction with our services, customers’ spending levels, mix of customer base, decreases in the number of users at our customers, competition, pricing increases, or changing or deteriorating general economic conditions. If organizations do not renew their subscriptions, renew on less favorable terms or fail to add more users, or if we fail to expand within organizations on our platform, our revenue may decline or grow less quickly than anticipated, which could harm our business, results of operations and financial condition.
Additionally, organizations can and do subscribe to multiple subscription plans simultaneously for a variety of reasons. For example, many of our customers are large organizations with distributed procurement processes in which different buyers, departments or affiliates make their own purchasing decisions based on distinct product features or separate budgets. Existing customers may also acquire or merge into another organization that is already subscribed to our platform or complete a reorganization or spin-off transaction that results in an organization subscribing to multiple subscription plans.
We recently began offering users a limited "Free plan" of our Work OS to encourage awareness, use, familiarity and adoption of our platform and products.
To encourage awareness, use, familiarity and adoption of our platform and products, we recently began offering a "Free plan" geared to small teams that provides free access for up to two users to certain features of our Work OS. This strategy may not be successful in driving potential customers to purchase subscriptions to our Work OS. Users of our Free plan may not lead to others within their organization purchasing and deploying our Work OS. To the extent that users do not become paying customers after subscribing to our Free plan, we will not realize the intended benefits of these marketing strategies and our revenue growth may be adversely affected.
Because we recognize subscription revenue over the subscription term, downturns or upturns in new sales and renewals are not immediately reflected in full in our results of operations.
We recognize revenue from subscriptions to our platform ratably over the term of the contract subscription period beginning on the date access to our platform is granted, provided all other revenue recognition criteria have been met. Our subscription arrangements generally have monthly or annual contractual terms and require advance payment for monthly or annual periods. As a result, much of the revenue we report each quarter is the recognition of deferred revenue from recurring subscriptions entered into during previous quarters. Consequently, a decline in new or renewed recurring subscription contracts in any one quarter will not be fully reflected in revenue in that quarter, but could negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in new or renewed sales of our recurring subscriptions are not reflected in full in our results of operations until future periods. By contrast, a significant portion of our costs are expensed as incurred while revenue is recognized over time. As a result, an increase in customers could result in our recognition of higher costs and lower revenue in the earlier portion of the subscription term. Finally, because revenue from new customers or from existing customers that increase their use of our platform are recognized over the applicable subscription term, our subscription-based revenue model makes it difficult for us to rapidly increase our revenue through additional sales in any period.
Our sales efforts may require considerable time and expense, and if we modify sales strategies to large organizations, our sales cycles could be extended.
Our current sales strategy to large organizations follows a ‘flywheel’ model where we attempt to engage a given customer’s account base by initially gaining acceptance from an individual user or team and, thereafter, expand vertically and organically within that user’s organization. A large organization’s decision to use or expand the use of our Work OS can sometimes be an organization-wide decision. Accordingly, we may need to engage with senior management and other key personnel within an organization in order for our flywheel model to be successful. Moreover, larger organizations may demand more customization, integration, features and support services. This may require us to devote greater sales support, research and development, customer experience and professional services resources to such an organization, resulting in increased costs.
 
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If we fail to offer high-quality customer support, our business and reputation could suffer.
While we have designed our platform to be easy to adopt and use, once organizations and their users begin using our Work OS, they rely on our support services to resolve any technical, administrative or other issues. High-quality customer education and customer experience has been key to the adoption of our platform, for the conversion of users and organizations on our trial version into paying customers, for the expansion of accounts, and for growth or maintenance of our retention rates. The importance of high-quality customer experience will increase as we expand our business and pursue new customers. For example, if we do not help our users quickly resolve issues and provide effective ongoing user experience at the user, team and organizational levels, our ability to convert organizations and users on our trial version into paying customers may suffer, and our reputation with existing or potential customers could be harmed. Further, our ability to sell our Work OS is highly dependent on our business reputation and on positive recommendations from our existing customers. Any failure to maintain a high-quality customer experience, or a market perception that we do not maintain a high-quality customer experience, could harm our reputation, our ability to sell our Work OS to existing and prospective customers, and our business, results of operations and financial condition.
In addition, as we continue to grow our operations and reach a larger and increasingly global customer base, we need to be able to provide efficient customer support that meets the needs of users and organizations on our platform globally at scale, which puts additional pressure on our customer support team. If we are unable to provide efficient customer support globally at scale, our ability to grow our operations globally may be harmed and we may need to hire additional support personnel, which could harm our business, results of operations and financial condition.
Failure to effectively develop and expand our direct sales capabilities could harm our ability to increase the number of organizations on our platform and achieve broader market acceptance of our Work OS.
Our ability to increase the number of our customers and users and achieve broader market acceptance of our Work OS among large organizations will depend, to a significant extent, on our ability to expand our sales operations, particularly our direct sales efforts targeted at senior executives and business unit leaders at such large organizations. We plan to continue expanding our direct sales force, both domestically and internationally, in order to connect with these large organizations. This expansion will require us to invest significant financial and other resources to train and grow our direct sales force in order to complement our self-service go-to-market approach. If our efforts do not generate a corresponding increase in revenue, our business, results of operations and financial condition could be harmed.
We may not achieve anticipated revenue growth from expanding our direct sales force if we are unable to hire and develop talented direct sales personnel, if our new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time or if we are unable to retain our existing direct sales personnel. There is significant competition in our industry for sales personnel with the skills and technical knowledge that we require. Our ability to achieve revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth.
If we fail to enhance our reputation and market awareness of our Work OS, our ability to expand the number of organizations on our platform may be impaired, our reputation may be harmed, and our business, results of operations and financial condition may suffer.
Our continued success depends upon our ability to create and maintain brand recognition and a favorable reputation for delivering an easy and efficient platform. A failure by us to build our brand and deliver on these expectations could harm our reputation and damage our ability to attract and retain customers, which could adversely affect our business. We believe that developing and maintaining awareness of our brand and a favorable reputation is critical to achieving widespread acceptance of our Work OS and is an important element in attracting new organizations and additional teams to our platform. Furthermore, we believe that the importance of brand recognition will increase as competition in our market increases. Successful promotion of our brand and our ability to increase awareness will
 
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depend largely on the effectiveness of our marketing efforts, our ability to ensure that our platform remains high-quality, reliable and useful at competitive prices, our ability to continue to develop new functionality and software applications, and our ability to successful differentiate our platform.
As our market becomes increasingly competitive, increasing awareness of our platform may become more difficult and expensive. Efforts to increase awareness may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur. If we fail to successfully promote our brand, or incur substantial expenses in an unsuccessful attempt to promote our brand, we may fail to attract new customers to our platform or grow or maintain our retention rates to the extent necessary to realize a sufficient return on our marketing efforts, and our business, results of operations and financial condition could suffer.
Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture.
We believe that an important contributor to our success has been our corporate culture, which creates an environment that drives and perpetuates our strategy to create a better, more productive way to work. As we continue to grow, including across multiple geographies or through acquisitions, and develop the infrastructure of a public company, we may find it difficult to preserve our corporate culture. If we do not maintain and continue to develop our corporate culture as we grow and evolve, it could reduce our ability to foster the innovation, craftsmanship, teamwork, curiosity and diversity that we believe we need to support our growth and operate effectively. In turn, the failure to preserve our culture could adversely affect our business, results of operations and financial condition by negatively affecting our ability to attract, recruit, integrate and retain employees, continue to perform at current levels and effectively execute our business strategy.
The COVID-19 pandemic has affected how we and our customers operate and has adversely affected the global economy, and the duration and extent to which this could continue to affect our business, future results of operations and financial condition remains uncertain.
In December 2019, COVID-19 was first reported to the World Health Organization (“WHO”), and in January 2020, the WHO declared the outbreak to be a public health emergency. In March 2020, the WHO characterized COVID-19 as a global pandemic. The COVID-19 pandemic, the measures attempting to contain and mitigate the effects of the COVID-19 pandemic, including stay-at-home orders, business closures, social distancing and other restrictive orders, and the resulting changes in customer behaviors, have disrupted our normal operations and impacted our employees, partners, vendors and customers. As a result of certain restrictive measures imposed by governments in locations where we have employees, we have taken a number of actions that have disrupted our business operations, including enabling our employees and contractors to work remotely, implementing travel restrictions, and shifting company events and meetings to virtual-only experiences, all of which could continue indefinitely. The operations of our partners, vendors and customers have likewise been disrupted.
While the duration and extent of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the extent and effectiveness of containment and mitigation actions, including restrictions on economic activity and the rollout of an efficient worldwide vaccination campaign, it has already had an adverse effect on the global economy, and the ultimate societal and economic impact of the COVID-19 pandemic remains unknown. While we have developed and expect to continue to develop plans to help mitigate the potential negative impact of COVID-19, these efforts may not be effective, and any protracted economic downturn will likely limit the effectiveness of our efforts. Accordingly, it is not possible for us to predict the duration and extent to which this will affect our business, future results of operations and financial condition at this time.
Actions by governments to restrict access to our platform in their countries or to require us to disclose or provide access to information in our possession could harm our business, results of operations and financial condition.
Our Work OS depends on the ability of our users to access our platform through the internet, and access to our platform could be blocked or restricted in some countries for various reasons. Further, if
 
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the governments of any foreign country in which we operate or seek to operate limit access to certain or all of the features of our Work OS in such country or impose other restrictions that affect the availability of our Work OS for an extended period of time or indefinitely, we may not be able to maintain or grow our revenue as anticipated and our business, results of operations and financial condition could be adversely affected. In addition, governments in certain countries may seek to restrict or prohibit access to our platform if they consider us to be in violation of their laws and may require us to disclose or provide access to information in our possession. If we fail to anticipate developments in laws and regulations, or fail for any reason to comply with relevant law, our platform could be further blocked or restricted and we could be exposed to significant liability that could harm our business.
Because our success depends, in part, on our ability to expand sales and customer support of our platform internationally, our business is susceptible to risks associated with international operations.
We currently maintain offices and have sales personnel in Israel, the United States, Australia and the United Kingdom. In the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, the revenue that we generated from customers outside of the United States accounted for approximately 53%, 52%, 52% and 52% of our total revenue, respectively. We expect to continue expanding our international operations, which may include opening offices in new jurisdictions and providing our Work OS in additional languages. Any additional international expansion efforts that we are undertaking and may undertake in the future may not be successful. In addition, conducting international operations subjects us to new risks, some of which we have not generally faced in Israel, the United States or other countries where we currently operate. These risks include, among others:

unexpected costs in the localization of our Work OS, including translation into foreign languages and adaptation for local culture, practices and regulatory requirements;

lack of familiarity and burdens of complying with foreign laws, legal standards, privacy standards, regulatory requirements, tariffs and other barriers;

the risk of penalties to our users and individual members of management or employees if our practices are deemed to not comply with applicable laws and regulations;

practical difficulties of enforcing intellectual property rights in countries with varying laws and standards and reduced or varied protection for intellectual property rights in some countries;

an evolving legal framework and additional legal or regulatory requirements for data privacy, which may necessitate the establishment of systems to maintain data in local markets, requiring us to invest in additional data centers and network infrastructure, and the implementation of additional employee data privacy documentation (including locally-compliant data privacy notice and policies);

as an Israeli company, we are subject to Israeli laws concerning governmental access to data and the risk, or perception of risk, of such access may make our Work OS less attractive to organizations outside Israel, and compliance with such Israeli laws may conflict with legal obligations that we, or our customers, may be subject to in other countries;

unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;

difficulties in managing systems integrators and technology partners;

differing technology standards;

different pricing environments, longer sales cycles, longer accounts receivable payment cycles and difficulties in collecting accounts receivable;

increased financial accounting and reporting burdens and complexities;

difficulties in managing and staffing international operations including the proper classification of independent contractors and other contingent workers, differing employer/employee relationships, and local employment laws;
 
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increased costs involved with recruiting and retaining an expanded workforce outside Israel and the United States through cash and equity-based incentive programs and unexpected legal costs and regulatory restrictions in issuing our shares to employees outside the United States;

global political and regulatory changes that may lead to restrictions on immigration and travel for our employees outside Israel and the United States;

regional and local economic and political conditions;

fluctuations in exchange rates that may decrease the value of our foreign-based revenue;

potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems, and restrictions on the repatriation of earnings; and

permanent establishment risks and complexities in connection with international payroll, tax and social security requirements for international employees.
Compliance with laws and regulations applicable to our global operations also substantially increases our cost of doing business in foreign jurisdictions. We have limited experience in marketing, selling and supporting our platform outside of Israel and the United States and only recently opened offices in the United Kingdom and Australia. Our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful. If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business, results of operations and financial condition may suffer. We may be unable to comply with changes in government requirements and regulations, which could harm our business. In many countries, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or other regulations applicable to us. Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, partners and agents will comply with these laws and policies. Violations of laws or key control policies by our employees, contractors, partners or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, reputational harm, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences or the prohibition of the importation or exportation of our platform and could harm our business, results of operations and financial condition.
Currency exchange rate fluctuations affect our results of operations, as reported in our financial statements.
We report our financial results in U.S. dollars. We collect our revenue primarily in U.S. dollars. However, a significant portion of our headcount related expenses, consisting principally of salaries and related personnel expenses and certain other operating expenses, are denominated in New Israeli Shekels (“NIS”). In the year ended December 31, 2020 and the three months ended March 31, 2021, approximately 17% and 18% of our expenses, respectively, were denominated in NIS. As a result, we are exposed to exchange rate risks that may materially and adversely affect our financial results. If the NIS appreciates against the U.S. dollar or if the value of the NIS declines against the U.S. dollar at a time when the rate of inflation in the cost of Israeli goods and services exceeds the rate of decline in the relative value of the NIS, then the U.S. dollar cost of our operations in Israel would increase and our results of operations could be materially and adversely affected. Our Israeli operations could also be materially and adversely affected if we are unable to effectively hedge against currency fluctuations in the future. The Israeli annual rate of inflation amounted to 0.8% and (0.6)% for the years ended December 31, 2019 and 2020, respectively. The appreciation of the NIS in relation to the U.S. dollar amounted to 7.8% and 7.0% for the years ended December 31, 2019 and 2020, respectively. We cannot predict any future trends in the rate of inflation in Israel or the rate of depreciation or appreciation of the NIS against the U.S. dollar.
 
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Future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute shareholder value, and harm our results of operations and financial condition.
We may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement our Work OS or expand its breadth, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated. We may not be able to find and identify desirable acquisition targets or we may not be successful in entering into an agreement with any one target. Acquisitions or strategic investments could also result in dilutive issuances of equity securities or the incurrence of debt, which could harm our results of operations. Any acquisition, investment or business relationship that we consummate may result in unforeseen operating difficulties and expenditures. In addition, we have limited experience in acquiring other businesses. If we acquire additional businesses, we may not be able to successfully integrate the acquired personnel, operations and technologies, or effectively manage the combined business following the acquisition. Specifically, we may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. Moreover, the anticipated benefits of any acquisition, investment or business relationship may not be realized or we may be exposed to unknown risks or liabilities.
We may also make strategic investments in early stage companies developing products or technologies that we believe could complement our Work OS or expand its breadth, enhance our technical capabilities or otherwise offer growth opportunities. These investments are generally in early stage private companies for restricted shares. Such investments are generally illiquid and may never generate value. Further, the companies in which we invest may not succeed, and our investments could lose their value.
We depend on our founders and other key employees, and the loss of one or more of these employees could harm our business.
Our success depends largely upon the continued services of our founders, Roy Mann and Eran Zinman, and other key employees. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time subject only to the notice periods prescribed by their respective executive agreements. The loss of one or both of our founders or key employees could disrupt or harm our business.
An inability to attract and retain other highly skilled employees could harm our business.
To execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel where we maintain offices or actively recruit is intense, especially for engineers experienced in designing and developing software and experienced sales professionals. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. In addition, certain domestic immigration laws restrict or limit our ability to recruit internationally. Any changes to Israeli and U.S. immigration policies that restrain the flow of technical and professional talent may inhibit our ability to recruit and retain highly qualified employees.
In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may harm our ability to recruit and retain highly skilled employee, which could harm our business and future growth prospects. Volatility or lack of appreciation in the share price of our ordinary shares may also affect our ability to attract and retain key employees. Many of our senior personnel and other key employees have become, or will soon become, vested in a substantial amount of options. Employees may be more likely to leave us if the shares they own or the shares underlying their vested options or
 
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restricted share units (“RSUs”), have significantly appreciated in value relative to the original purchase price of the shares or the exercise price of the options, or conversely, if the exercise price of the options that they hold are significantly above the market price of our ordinary shares.
Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies in the future could reduce our ability to compete successfully and harm our results of operations.
Historically, we have funded our operations and capital expenditures primarily through equity issuances, our credit facility and cash generated from our operations. Although we currently anticipate that our existing cash and cash equivalents, cash flow from operations and remaining amounts available under our credit facility will be sufficient to meet our cash needs for the foreseeable future, we may require additional financing, and we may not be able to obtain debt or equity financing on favorable terms, if at all. If we raise equity financing to fund operations or on an opportunistic basis, our shareholders may experience significant dilution of their ownership interests. If we need additional capital and cannot raise it on acceptable terms, or at all, we may not be able to, among other things:

develop new features, integrations, capabilities and enhancements;

continue to expand our product development, sales and marketing organizations;

hire, train and retain employees;

respond to competitive pressures or unanticipated working capital requirements; or

pursue acquisition or strategic investment opportunities.
Risks Related to Our Market and Competitive Landscape
The market and software categories in which we participate are competitive, new and rapidly changing.
We are creating a new category of software, our Work OS, that seeks to change the way people work and businesses operate. As a result, we compete across multiple different markets, all of which are highly competitive and rapidly evolving.
The markets in which we operate are extremely competitive, fragmented and subject to rapidly changing technology, shifting user and customer needs, new market entrants and frequent introductions of new products and services. Moreover, we expect competition to increase in the future both from our existing competitors and from new market entrants, including established technology companies who have not previously entered the market. Our competitors include the following:

companies that primarily offer project and work management solutions, including application of processes, methods, skills and knowledge to achieve specific objectives. This includes companies such as Asana, Inc., Wrike Inc., SmartSheet Inc., Notion, Inc., Citrix Systems, Inc., Zendesk, Inc. and Freshworks Inc.; and

companies that offer Product Solutions across other use cases we serve, such as customer relationship management solutions, software development tools and marketing campaign management. This includes companies such as SugarCRM, Pipedrive, Zoho, Inc., Atlassian Corporation PLC (Jira), Procore Technologies, Workday, Inc., BombooHR, LLC., Hootsuite Media Inc. and Adobe Experience Cloud.
In the future we will likely face increased competition from a number of Work OS providers. Our principal competitive factor is our open and modular infrastructure, leading in flexibility and adaptability, and our ability to scale our vertical and horizontal offerings as we continue to rapidly build end-to-end Product Solutions. We believe that our ability to compete successfully depends primarily on the following factors:

our ability to introduce new, and improve on existing, features, products and services in response to competition, user sentiment, online, market and industry trends and the ever-evolving technological landscape;
 
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our ability to continue to increase social and technological acceptance of our Work OS;

continued growth in digitalization of the workplace;

our ability to maintain the value and reputation of monday.com as a solution; and

the scale, growth and engagement of our community relative to those of our competitors.
Our competitors may be able to adapt more quickly and effectively to new or changing circumstances, technologies, standards or customer demands. Companies and/or joint ventures resulting from possible consolidations or alliances may create more compelling product offerings or be able to offer more attractive pricing options, making it more difficult for us to compete effectively.
In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that discourages users from purchasing our Work OS, including through selling at zero or negative margins, product bundling, or closed technology platforms. Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier regardless of product performance or features. As a result, even if the features of our Work OS are superior compared to that of our competitors, potential customers may not purchase our offerings. These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Our competitors may also seek to repurpose their existing offerings to provide software, programs and tools used by information workers with subscription models.
Conditions in our market could also change rapidly and significantly due to technological advancements, partnering by our competitors or continuing market consolidation, and it is uncertain how our market will evolve. New start-up companies that innovate and large competitors that are making significant investments in research and development may invent similar or superior products and technologies that compete with our Work OS. These competitive pressures in our market or our failure to compete effectively may result in price reductions, fewer customers, reduced revenue, gross profit and gross margins, increased net losses and loss of market share. Any failure to meet and address these factors could harm our business, results of operations and financial condition.
Our ability to introduce new features, integrations, capabilities and enhancements is dependent on adequate research and development resources.
To remain competitive, we must maintain adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of the market. If we are unable to develop features, integrations, capabilities and enhancements internally due to certain constraints, such as employee turnover, a lack of management ability or a lack of other research and development resources, our business may be harmed. Moreover, research and development projects can be technically challenging and expensive. The nature of these research and development cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we are able to offer compelling features, integrations, capabilities and enhancements and generate revenue, if any, from such investment. If we expend a significant amount of resources on research and development and our efforts do not lead to the successful introduction or competitive improvement of features, integrations, capabilities and enhancements, it could harm our business, results of operations and financial condition. In addition, our failure to maintain adequate research and development resources or to compete effectively with the research and development programs of our competitors may harm our business, results of operations and financial condition.
If we are unable to ensure that our Work OS interoperates with a variety of software applications that are developed by third parties, including our partners, our platform may become less competitive and our results of operations may be harmed.
Our platform must integrate with a variety of network, hardware and software platforms, and we need to continuously modify and enhance our platform to adapt to changes in hardware, software, networking, browser and database technologies. In particular, we developed our Work OS to be able to easily integrate with third-party applications, including the software applications of providers that
 
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compete with us as well as our partners, through the interaction of APIs. In general, we rely on the providers of such software systems to allow us access to their APIs to enable these user integrations. We are typically subject to standard terms and conditions for application developers of such providers, which govern the distribution, operation and fees of such software systems, and which are subject to change by such providers from time to time. Our business may be harmed if any provider of such software systems:

discontinues or limits our access to its software or APIs;

modifies its terms of service or other policies, including fees charged to, or other restrictions on, us or other application developers;

changes how information is accessed by us or our users;

establishes more favorable relationships with one or more of our competitors; or

develops or otherwise favors its own competitive offerings over ours.
We believe a significant component of our value proposition to users and organizations is the ability to improve and interface with these third-party applications through APIs on our Work OS. Third-party services and products are constantly evolving, and we may not be able to modify our Work OS to assure its compatibility with other third parties following development changes. In addition, some of our competitors may be able to disrupt the operations or compatibility of our Work OS with their products or services, or exert strong business influence on terms on which we operate our platform. For example, we currently directly compete with several large technology companies whose applications interface with our Work OS, including Google and Microsoft. As our respective products evolve, we expect this level of competition to increase. Should any of our competitors modify their products or standards in a manner that degrades the functionality of our Work OS or gives preferential treatment to competitive products or services, whether to enhance their competitive position or for any other reason, the interoperability of our Work OS with these products could decrease and our business, results of operations and financial condition could be harmed. If we are not permitted or able to integrate with these and other third-party applications in the future, demand for our platform could decrease and our business, results of operations and financial condition could be harmed.
We also depend on our ecosystem of developers to create applications that will integrate with our Work OS. Our reliance on this ecosystem of developers creates certain business risks relating to the quality and security of the applications built using our APIs, service interruptions of our platform from these applications, lack of service support for these applications, possession of intellectual property rights associated with these applications, and privacy concerns around the transfer of data to these applications. We may not have the ability to control or prevent these risks. As a result, issues relating to these applications could adversely affect our business and reputation.
In addition, our platform interoperates with servers, mobile devices and software applications predominantly through the use of protocols, many of which are created and maintained by third parties. We therefore depend on the interoperability of our platform with such third-party servers, mobile devices and software applications, as well as cloud-enabled hardware, software, networking, browsers, database technologies and protocols that we do not control. Any changes in such technologies that degrade the functionality of our platform or give preferential treatment to competitive services could adversely affect adoption and usage of our Work OS. Also, we may not be successful in developing or maintaining relationships with key participants in the mobile industry or in ensuring that our platform operates effectively with a range of operating systems, networks, devices, browsers, protocols and standards. If we are unable to maintain technical interoperation, our customers may not be able to effectively integrate our platform with other systems and services they use. Further, if we are unable to effectively anticipate and manage these risks, or if it is difficult for users and organizations on our platform to access and use our Work OS, our business, results of operations and financial condition may be harmed.
We rely on third-party application stores to distribute our mobile application.
We are dependent on third-party application stores that may prevent us from timely updating our Work OS, building new features, integrations, capabilities and enhancements or charging for access.
 
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We distribute the mobile monday.com application through smartphone and tablet application stores managed by Apple and Google, among others. We cannot assure you that the third-party application stores through which we distribute our mobile application will maintain their current structures or that such application stores will not charge us fees to list our application for download. We are also depending on these third-party application stores to enable us and our users to timely update our mobile application and to incorporate new features, integrations, capabilities and enhancements. In addition, certain of these companies are now, and others may in the future become, competitors of ours and could stop allowing or supporting access to our platform through their products, could allow access for us only at an unsustainable cost, or could make changes to the terms of access in order to make our platform less desirable or harder to access, in each case for competitive reasons.
If we fail to adapt to rapid technological change and create new features, integrations, capabilities and enhancements, our ability to remain competitive could be impaired.
The industry in which we compete is characterized by rapid technological change, frequent introductions of new products and features, and evolving industry standards and regulatory requirements. Our ability to attract new users and organizations and increase revenue from organizations on our platform will depend in significant part on our ability to anticipate industry standards and trends, continue enhancing our Work OS, and introduce new features, integrations, capabilities and enhancements on a timely basis to keep pace with technological developments. The success of any enhancement to our Work OS depends on several factors, including timely completion and delivery, competitive pricing, adequate quality testing, integration with existing technologies and overall market acceptance. Any new features, integrations, capabilities and enhancements that we develop may not be introduced in a timely or cost-effective manner, may contain errors, failures, vulnerabilities or bugs, or may not achieve the market acceptance necessary to generate significant revenue. If we are unable to provide enhancements and new features and integrations for our Work OS, develop new features, integrations, capabilities and enhancements that achieve market acceptance, or innovate quickly enough to keep pace with rapid technological developments, our business, results of operations and financial condition could be harmed.
We must also attract external developers to adopt and build software applications and integrations on our platform. We believe that these developer-built integrations facilitate greater usage and customization of our Work OS and enhance user experience. If these developers stop developing on or supporting our Work OS, we will lose the benefits that have contributed to the growth in the number of organizations and users utilizing our platform, and our business, results of operations and financial condition could be harmed. We must also keep pace with changing legal and regulatory regimes that affect our platform and our business practices. We may not be successful in developing modifications, enhancements and improvements, in bringing them to market quickly or cost-effectively in response to market demands, or at modifying our Work OS to remain compliant with applicable legal and regulatory requirements.
Upgrading our Work OS to introduce enhancements or new products depends on several factors, including the timely completion and market acceptance of such enhancement or new product. Any enhancement or new product we develop or acquire might not be introduced in a timely or cost-effective manner and might not achieve the broad market acceptance necessary to generate significant revenue. If any of our competitors implement new technologies before we are able to implement them, those competitors may be able to provide more effective products than ours at lower prices. Any delay or failure in the introduction of enhancements or new products could harm our business, results of operations and financial condition.
Risks Related to Third Parties
Our growth depends in part on the success of our strategic relationships with third parties.
We anticipate that the growth of our business will depend on third-party relationships, including relationships with our application developers, integrated services and other partners. The success of our platform depends, in part, on our ability to integrate third-party applications and integrations into our
 
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third-party ecosystem. External developers may change the features of their offering of applications or alter the terms governing the use of their offerings in a manner that is adverse to us. If third-party applications change such that we do not or cannot maintain the compatibility of our platform with these applications or if we fail to provide desirable third-party applications, demand for our platform could decline. We may also be unable to maintain our relationships with certain third-party vendors if we are unable to integrate our platform with their offerings. In addition, external developers may refuse to partner with us or limit or restrict our access to their offerings. Such changes could functionally limit or terminate our ability to use these third-party offerings with our platform, which could negatively impact our offerings and harm our business. If we fail to integrate our platform with new third-party offerings that our customers need, or to adapt to the data transfer requirements of such third-party offerings, we may not be able to offer the functionality that our customers expect, which could negatively impact our offerings and, as a result, harm our business.
We rely on traditional web search engines to direct traffic to our website through search engines and networking sites.
Our success depends, in part, on our ability to attract customers through paid and unpaid internet search results on web search engines, such as Google, and advertisements on social networking sites, such as Facebook. The prominence of our website in response to internet searches is a critical factor in attracting potential customers to our platform. Search engines revise their algorithms, methodologies or design layouts from time to time in an attempt to optimize their search results. If search engines modify their algorithms or design layouts, our website may appear less prominently or not at all in search results, which could result in reduced traffic to our website. If we are listed less prominently or fail to appear in search results for any reason, visits to our website could decline significantly, and we may not be able to replace this traffic.
Additionally, if the price of marketing our Product Solutions over search engines or social networking sites increases, we may incur additional marketing expenses or may be required to allocate a larger portion of our marketing spend to search engine marketing, which could adversely affect our business and operating results. Furthermore, competitors may in the future bid on the search terms that we use to drive traffic to our website. Such actions could increase our marketing costs and result in decreased traffic to our website. In addition, search engines or social networking sites may change their advertising policies from time to time. Any change to these policies that delays or prevents us from advertising through these channels could result in reduced traffic to our website, thereby harming our ability to attract new customers. New search engines or social networking sites may also develop, particularly in specific jurisdictions, that reduce traffic on existing search engines and social networking sites and, if we are not able to achieve awareness through advertising or otherwise, we may not achieve significant traffic to our website through these new platforms. If we are unable to continue to successfully promote our Work OS and maintain traffic to our website, or if we incur excessive expenses to do so, our business and operating results could be adversely affected.
Interruptions or delays in services from third parties or our inability to adequately plan for and manage service interruptions or infrastructure capacity requirements could impair the delivery of our services and harm our business.
We depend on services provided by various third parties to maintain our infrastructure. If a service provider fails to provide sufficient capacity to support our platform or otherwise experiences service outages, such failure could interrupt our users’ and organizations’ purchase of, or access to, our Work OS, which could adversely affect our reputation and our business. Any disruptions in these services, including as a result of actions outside of our control, could significantly impact the continued performance of our platform. In the future, these services may not be available to us on commercially reasonable terms, or at all. Any loss of the right to use any of these services could result in decreased functionality of our platform until equivalent technology is either developed by us or, if available from another provider, is identified, obtained and integrated into our infrastructure.
We rely on the internet and, accordingly, depend upon the continuous, reliable and secure operation of internet servers, related hardware and software, and network infrastructure. We host our
 
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platform by mainly using Amazon Web Services (“AWS”) data centers, a provider of cloud infrastructure services. Our operations depend on protecting the virtual cloud infrastructure hosted in AWS by maintaining its configuration, architecture and interconnection specifications, as well as the information stored in these virtual data centers and which third-party internet service providers transmit. Furthermore, we have no physical access or control over the services provided by AWS. Although we have disaster recovery plans that utilize multiple AWS locations, the data centers that we use are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, pandemics, floods, fires, severe storms, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events, many of which are beyond our control and any of which could disrupt our service, destroy user content or prevent us from being able to continuously back up or record changes in our users’ content. In the event of significant physical damage to one of these data centers, it may take a significant period of time to achieve full resumption of our services, and our disaster recovery planning may not account for all eventualities. Further, a prolonged AWS service disruption affecting our platform for any of the foregoing reasons could damage our reputation with current and potential organizations, expose us to liability, cause us to lose users and organizations on our platform or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the AWS services we use. Damage or interruptions to these data centers could harm our business. We may not carry sufficient business interruption insurance to compensate us for losses that may occur as a result of any events that cause interruptions in our service. Further, the contractual commitments that we provide to organizations on our platform with regard to data privacy are limited by the commitments that AWS has provided us.
AWS enables us to order and reserve server capacity in varying amounts and sizes distributed across multiple regions. AWS provides us with computing and storage capacity pursuant to an agreement that continues until terminated by either party. In some cases, AWS may terminate the agreement for cause upon 30 days’ notice. Termination of the AWS agreement may harm our ability to access data centers we need to host our Work OS or to do so on terms as favorable as those we have with AWS. We may also be unable to effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology. In addition, the failure of AWS data centers or third-party internet service providers to meet our capacity requirements could impede our ability to scale our operations.
Risks Related to Privacy, Data and Cybersecurity
A security incident may allow unauthorized access to our systems, networks or data or the data of users and organizations on our platform.
The secure storage, transmittal and processing of sensitive and proprietary information, including business strategies, financial and operational data, personal or identifying information and other related data, by users and organizations on our platform is essential to their use of our Work OS. Increasingly, companies are subject to a wide variety of attacks on their systems on an ongoing basis. In addition to threats from traditional computer “hackers,” malicious code (such as malware, viruses, worms and ransomware), employee theft or misuse, password spraying, phishing, credential stuffing and denial-of-service attacks, we also face threats from sophisticated organized crime, nation-state and nation-state supported actors who engage in attacks (including advanced persistent threat intrusions). Third parties may attempt to fraudulently induce employees, users or organizations into disclosing sensitive information such as usernames, passwords or other information or otherwise compromise the security of our internal electronic systems, networks, and/or physical facilities in order to gain access to our data or the data of users and organizations on our platform. Additionally, there is an increased risk that we may experience cybersecurity-related events such as COVID-19-themed phishing attacks and other security challenges as a result of most of our employees and our service providers working remotely from non-corporate-managed networks during the ongoing COVID-19 pandemic and potentially beyond. Security breaches impacting our Work OS or integrations on our Work OS could result in a risk of loss, unavailability, or unauthorized disclosure of this information, which, in turn, could lead to litigation, governmental audits, investigations and possible liability (including regulatory fines), thereby damaging
 
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our relationships with existing customers. This could have a negative impact on our ability to attract new customers and to grow or maintain our retention rates.
Actual or anticipated security breaches or attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. Furthermore, any such breach, including a breach of the systems or networks of our third-party providers, could compromise our systems or networks, creating system outages, disruptions or slowdowns and exploiting security vulnerabilities of our networks. In addition, the information stored on our network or the networks of our third-party providers could be accessed, publicly disclosed, altered, lost or stolen, which could subject us to liability and cause us financial harm. In addition, a breach of the security measures of one of our third-party providers could result in the destruction, modification or exfiltration of confidential corporate information or other data that may provide additional avenues of attack. These breaches, or any perceived breach, of our systems or networks or the systems or networks of our third-party providers, whether or not any such breach is due to a vulnerability in our platform, may also undermine confidence in us or our industry and result in damage to our reputation, negative publicity, loss of users, partners and sales, increased remediation costs, and costly litigation or regulatory fines. For example, we recently became aware that a third-party vendor that provides us with SaaS software code testing, Codecov, discovered instances of unauthorized access to its software, whereby a threat actor was able to export information stored in continuous integration environments, affecting hundreds of companies using their services, including us. Although investigations remain ongoing, as of the date of this prospectus, we have not seen any indication that our customers’ data was affected by this incident. The attacker did access a file containing a list of certain URLs pointing to publicly broadcasted customer forms and views hosted on our platform and we have contacted the relevant customers to inform them how to regenerate these URLs. We also found evidence that a read-only copy of our source code was accessed due to the Codecov vulnerability. However, as of the date of this prospectus, we found no evidence of any unauthorized modifications to our source code nor any impact on our products. However, the discovery of new or different information regarding the Codecov cyberattack, including with respect to its scope and any potential impact on our IT environment, including regarding the loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers, or vulnerabilities in our source code, could result in litigation and potential liability for us, damage our brand and reputation, negatively impact our sales or otherwise harm our business. Any claims or investigations may result in our incurring significant external and internal legal and advisory costs, as well as the diversion of management's attention from the operation of our business.
The security measures we have implemented or integrated into our platform and our internal systems and networks (including measures to audit third-party and custom applications), which are designed to detect unauthorized activity and prevent or minimize security breaches, may not function as expected or may not be sufficient to protect our platform and our internal systems and networks against certain attacks. In addition, techniques used to sabotage or to obtain unauthorized access to systems and networks in which data is stored or through which data is transmitted change frequently and generally are not recognized until launched against a target. As a result, it may not be possible for us to anticipate these techniques or implement adequate preventative measures to prevent an electronic intrusion into our systems and networks and we may be required to expend significant capital and financial resources to protect against such threats or to alleviate problems caused by breaches in systems, network or data security.
We maintain errors, omissions and cyber liability insurance policies covering certain security and privacy damages. However, we cannot be certain that our coverage will be available or adequate for all liabilities that might actually be incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. Further, if a high-profile security breach occurs with respect to another software company with communication, collaboration, data collection and integrations, our customers and potential customers could lose trust in the security of such solutions providers generally, which could adversely impact our ability to attract new customers to our Work OS or grow or maintain our retention rates.
 
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In addition, defending a suit based on any data loss or system disruption, regardless of its merit, could be costly and divert management’s attention. See “— General Risk Factors — We may be subject to liability claims if we breach our contracts, and our insurance may be inadequate to cover our losses.”
We are subject to stringent and changing laws, regulations, industry standards and contractual obligations related to privacy, data protection and data security.
We receive, collect, store, process, transfer and use personal information and other data relating to users of our services, our employees, contractors, prospects and other persons. We have legal and contractual obligations regarding the protection of confidentiality and appropriate use of certain data, including personal information. We are subject to numerous federal, state, local and international laws, directives and regulations regarding privacy, data protection and data security and the collection, storing, sharing, use, processing, transfer, disclosure and protection of personal information and other data, the scope of which are changing, are subject to differing interpretations, and may be inconsistent among jurisdictions or conflict with other legal and regulatory requirements. We are also subject to certain contractual obligations to third parties related to privacy, data protection and data security. We strive to comply with our applicable policies and applicable laws, regulations, contractual obligations and other legal obligations relating to privacy, data protection and data security to the extent possible. However, the regulatory framework for privacy, data protection and data security worldwide is changing constantly and is likely to remain uncertain and complex for the foreseeable future, and therefore it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that we do not anticipate or that is inconsistent from one jurisdiction to another, including across the various jurisdictions in which we operate remotely, and may conflict with other legal obligations or our practices.
For example, we are subject to the General Data Protection Regulation 2016/679 (“GDPR”) which imposes stringent legal and operational requirements regarding, among others, our collection, control, processing, sharing, disclosure and other use of data relating to an identifiable living individual (personal data), data breach notifications, data subject rights, documentation and cross-border data transfers, on entities collecting and/or processing personal data of individuals situated in the European Union and European Economic Area (“EEA”). Failure to comply with our obligations under the GDPR could result in penalties for noncompliance (including possible fines of up to the greater of €20 million and 4% of our global annual turnover for the preceding financial year for the most serious violations, as well as the right to compensation for financial or non-financial damages claimed by individuals under Article 82 of the GDPR).
In addition to the GDPR, following the United Kingdom’s departure from the EU, we became subject to a similar legal regime in the United Kingdom by virtue of its national legislation that imposes similar obligations to the GDPR (the “UK GDPR”), which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law. The UK GDPR mirrors the fines under the GDPR, e.g., fines up to the greater of €20 million (£17 million) or 4% of global turnover. The relationship between the United Kingdom and the EU in relation to certain aspects of data protection law remains unclear and it is unclear how UK data protection laws or regulations will develop in the medium to longer term and how EU data transfers to and from the United Kingdom will be regulated in the long term. Currently there is up to a six month grace period ended June, 30 2021 while the parties discuss adequacy; however it is not clear whether (and when) an adequacy decision may be granted by the European Commission enabling data transfers from EU member states to the United Kingdom long term without additional measures. These changes will lead to additional costs and increase our overall risk exposure.
We are also subject to evolving EU privacy laws on cookies and e-marketing. In the EU, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive are highly likely to be replaced by an EU-regulation known as the ePrivacy Regulation, which will significantly increase fines for non-compliance. In the EU, informed consent is required for the placement of a cookie or similar technologies on a user’s device and for direct electronic marketing, unless certain limited exceptions or alternatives apply. The GDPR also imposes conditions on obtaining valid consent, such as a prohibition on pre-checked consents
 
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and a requirement to ensure separate consents are sought for each type of cookie or similar technology. While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance are driving increased attention to cookies and tracking technologies. If regulators start to enforce the strict approach in recent guidance, this could require significant systems changes, limit the effectiveness of our marketing and product optimization activities, divert the attention of our technology personnel, adversely affect our margins, increase costs and subject us to additional liabilities. Regulation of cookies and similar technologies, and any decline of cookies or similar online tracking technologies as a means to identify and potentially analyze the behavior of users, may lead to broader restrictions and impairments on our marketing and personalization activities and may negatively impact our ability to understand users and cater to their preferences.
Additionally, we may also be subject to the California Consumer Privacy Act (“CCPA”), which came into effect in January 2020 and imposes heightened transparency obligations about data collection, use and sharing practices, adds restrictions on the “sale” of personal information, creates new data privacy rights for California residents and carries significant enforcement penalties for non-compliance. The California Attorney General currently enforces the CCPA and can seek an injunction and civil penalties up to $7,500 per intentional violation and $2,500 per other violation. The CCPA also provides California consumers a private right of action for certain data breaches where they can recover up to $750 per incident, per consumer or actual damages, whichever is greater, and which is expected to increase data breach litigation. The CCPA may require us to modify our data practices and policies and to incur substantial costs and expenses in order to comply. On November 3, 2020, California voters passed the California Privacy Rights Act (“CPRA”) into law, which will take effect in January 2023 and will significantly modify the CCPA, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. The CPRA will create the California Privacy Protection Agency (“CPPA”), which will be specifically tasked to enforce the law, likely resulting in increased regulatory scrutiny of California businesses in areas of data protection and security. Similar laws have been proposed in other states and if passed, such laws may have potentially conflicting requirements that would make compliance challenging. More generally, some observers have noted the CCPA and CPRA could mark the beginning of a trend toward more stringent United States federal privacy legislation, which could increase our potential liability and adversely affect our business.
We may also be subject to the Health Insurance Portability and Accountability Act (“HIPAA”), as supplemented by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), which establishes federal privacy and security standards for the protection of individually identifiable health information and carries significant enforcement penalties for non-compliance. Failure to comply with HIPAA can result in an injunction, civil monetary penalties ranging from $100 to $50,000 per violation with an annual maximum of $1.5 million, or in certain circumstances, criminal penalties with fines and/or imprisonment. Certain HIPAA standards may apply to ‘business associates,’ which are persons or entities that perform certain services for, or on behalf of, an entity covered by HIPAA that involves creating, receiving, maintaining or transmitting protected health information. We may function as a HIPAA business associate for certain of our customers and therefore must comply with applicable administrative, technical and physical safeguards as required by HIPAA, including data security obligations. HIPAA may require us to modify our data practices and policies and to incur substantial costs and expenses in order to comply, which could adversely affect our business. Furthermore, HIPAA covered entities and service providers to whom we serve as a business associate require us to enter into HIPAA-compliant business associate agreements with them. If we are unable to comply with our obligations as a HIPAA business associate, we could face contractual liability under the applicable business associate agreement.
In addition, we are also subject to the Israeli Privacy Protection Law 5741-1981 (the “PPL”), and its regulations, including the Israeli Privacy Protection Regulations (Data Security) 2017 (the “Data Security Regulations”), which came into effect in Israel in May 2018 and impose obligations with respect to the manner certain personal data is processed, maintained, transferred, disclosed, accessed and secured, as well as the guidelines of the Israeli Privacy Protection Authority. In this respect, the Data Security Regulations may require us to adjust our data protection and data security practices, information security measures, certain organizational procedures, applicable positions (such as an information security manager) and other technical and organizational security measures. Failure to comply with the PPL, its
 
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regulations and guidelines issued by the Privacy Protection Authority may expose us to administrative fines, civil claims (including class actions) and in certain cases criminal liability. Current pending legislation may result in a change of the current enforcement measures and sanctions. The Israeli Privacy Protection Authority may initiate administrative inspection proceedings, from time to time, without any suspicion of any particular breach of the PPL, as it has done in the past with respect to dozens of Israeli companies in various business sectors. In addition, to the extent that any administrative supervision procedure is initiated by the Israeli Privacy Protection Authority and reveals certain irregularities with respect to our compliance with the PPL, in addition to our exposure to administrative fines, civil claims (including class actions) and in certain cases criminal liability, we may also need to take certain remedial actions to rectify such irregularities, which may increase our costs.
Finally, any failure or perceived failure by us to comply with our posted privacy policies, our privacy-related obligations to customers, users or other third parties, or any other legal obligations or regulatory requirements relating to privacy, data protection or data security, may materially and adversely affect our business and compel us to change our business practices, result in governmental investigations or enforcement actions, litigation, claims or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our customers and users to lose trust in us, and otherwise materially and adversely affect our reputation and business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, other obligations and policies that are applicable to the businesses of our users may limit the adoption and use of, and reduce the overall demand for, our services. Additionally, if third parties we work with violate applicable laws, regulations or contractual obligations, such violations may put our users’ data at risk, could result in governmental investigations or enforcement actions, fines, litigation, claims or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our customers and users to lose trust in us, and otherwise materially and adversely affect our reputation and business. Further, public scrutiny of, or complaints about, technology companies or their data handling or data protection practices, even if unrelated to our business, industry or operations, may lead to increased scrutiny of technology companies, including us, and may cause government agencies to enact additional regulatory requirements, or to modify their enforcement or investigation activities, which may increase our costs and risks.
Evolving privacy laws and regulations, cross-border data transfer restrictions, data localization requirements and other domestic or foreign laws or regulations may limit the use and adoption of our services, expose us to liability or otherwise adversely affect our business
Certain laws and regulations related to data privacy, data protection and data security, including Canada’s Personal Information Protection and Electronic Documents Act, the GDPR, the UK GDPR and the CCPA, restrict our or our customers’ ability to process and store certain personal and business information outside specific jurisdictions. Some of these laws include strict localization provisions that require certain data to be stored within a particular region or jurisdiction. For example, the GDPR presumptively prohibits cross-border data transfers absent an adequacy decision or other mechanism that provides appropriate assurances as to the treatment and protection of such data. We rely on a variety of these adequacy mechanisms, including the European Commission Decision 2011/61/EU regarding the adequacy of the Israeli law and the European Commission-approved Standard Contractual Clauses (“SCCs”) to enable us to provide our services around the globe at scale. The European Commission is currently re-examining its Decision 2011/61/EU regarding the adequacy of the Israeli law, in light of the more recently adopted GDPR and developments in Israeli privacy legislation, which could result in revoking Israel’s adequate status. The outcome of this examination may also affect the UK’s approach on the adequacy of Israeli law with respect to the UK GDPR and UK Data Protection Act 2018, which could require us to further review and amend the lawful mechanisms by which we make and/or receive personal data transfers to and from the UK. We previously relied on the EU-US and Swiss-US Privacy Shield Framework as a lawful mechanism for the transfer of EU and Swiss personal data to the United States, however this was invalidated by the CJEU in July 2020 and we have taken steps to migrate customers and vendors onto the SCCs. The decision by the CJEU has created complexity and uncertainty regarding such data transfers from the EEA and the UK to the United States and other countries not deemed adequate by the European Commission. While the CJEU upheld the appropriateness of the Standard Contractual Clauses, it made clear that reliance on them alone may
 
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not necessarily be sufficient in all circumstances. These recent developments may require us to further review and amend the legal mechanisms by which we make and/or receive personal data transfers. As supervisory authorities issue further guidance on personal information export mechanisms, including circumstances where the Standard Contractual Clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines.
We rely on a globally distributed infrastructure in order to be able to provide our services efficiently, and consequently may not be able to meet the needs of customers who are located in or otherwise subject to such localization requirements, which may reduce the demand for our services. This could reduce our revenue and the general demand for our services. Additionally, such laws and regulations are often inconsistent and may be subject to amendment or reinterpretation, which may cause us to incur significant costs and expend significant effort to ensure compliance. Given that requirements may be inconsistent and evolving, how we choose to respond to these requirements globally may not meet the expectations of our customers, which could thereby reduce the demand for our services. Finally, some customers may respond to these evolving laws and regulations by asking us to make certain privacy or data related contractual commitments that we are unable or unwilling to make, or that would result in additional development costs. This could lead to the loss of current or prospective customers or other business relationships. If we are no longer able to rely on a particular adequacy mechanism or are otherwise unable to transfer personal information across borders, we may not be able to operate in certain jurisdictions, which may reduce the demand for our services and limit our opportunities for international growth. Beyond impacting the demand for our services, our failure to comply with these laws or regulations could expose us to significant fines and penalties imposed by regulators, as well as legal claims by our customers or other stakeholders.
Changes in laws and regulations related to the use of the internet as a commercial medium or changes in the internet infrastructure itself may diminish the demand for our Work OS and could harm our business.
The future success of our business depends upon the continued use of the internet as a primary medium for commerce, communication and business applications. Federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. The adoption of any laws or regulations that could reduce the growth, popularity or use of the internet, including laws or practices limiting internet neutrality, could decrease the demand for, or the usage of, our Work OS and our services, increase our cost of doing business and harm our results of operations. Changes in these laws or regulations could require us to modify our Work OS, or certain aspects of our Work OS, in order to comply with these changes. In addition, government agencies or private organizations have imposed and may impose additional taxes, fees or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally, or result in reductions in the demand for internet-based products such as ours. In addition, the use of the internet as a business tool could be harmed due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity, security, reliability, cost, ease-of-use, accessibility and quality of service. Further, our Work OS depends on the quality of our users’ access to the internet as certain features of our Work OS require significant bandwidth and fidelity to work effectively.
On June 11, 2018, the repeal of the Federal Communications Commission’s (the “FCC”) “net neutrality” rules took effect and returned to a “light-touch” regulatory framework. The prior rules were designed to ensure that all online content is treated the same by internet service providers and other companies that provide broadband services. Additionally, on September 30, 2018, California enacted the California Internet Consumer Protection and Net Neutrality Act of 2018, making California the fourth state to enact a state-level net neutrality law since the FCC repealed its nationwide regulations, mandating that all broadband services in California must be provided in accordance with state net neutrality requirements. The U.S. Department of Justice has sued to block the law from going into effect, and California has agreed to delay enforcement until the resolution of the FCC’s repeal of the federal rules. A number of other states are considering legislation or executive actions that would regulate the conduct
 
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of broadband providers. We cannot predict whether the FCC order or state initiatives will be modified, overturned or vacated by legal action of the court, federal legislation or the FCC. With the repeal of net neutrality rules in effect, we could incur greater operating expenses. As the internet continues to experience growth in its number of users, frequency of use and amount of data transmitted, the internet infrastructure that we and our users rely on may be unable to support the demands placed upon it. The failure of the internet infrastructure that we or our users rely on, even for a short period of time, could undermine our operations and harm our results of operations.
Internet access is frequently provided by companies that have significant market power that could take actions that degrade, disrupt or increase the cost of user access to our platform, which could negatively impact our business. We could incur greater operating expenses and our user acquisition and retention could be negatively impacted if network operators implement usage-based pricing or discount pricing for competitive products, materially change their pricing rates or schemes, charge us to deliver our traffic at certain levels or at all, throttle traffic based upon its source or type, implement bandwidth caps or other usage restrictions or otherwise try to monetize or control access to their networks. Furthermore, the performance of the internet and its acceptance as a business tool has been harmed by “viruses,” “worms” and similar malicious programs, and the internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the internet is adversely affected by these issues, demand for our Work OS could decline.
Risks Related to Taxation and our Operations
Changes in tax laws or regulations we are subject to in the various tax jurisdictions may have an adverse effect on us or our customers and could increase the costs of our platform and harm our business.
New income, sales, use or other tax laws, regulations or ordinances could be enacted or new interpretations of existing tax laws, regulations or ordinances could be adopted at any time. Those changes could adversely affect our domestic and international business operations, results of operations and financial condition. These events could require us or our customers to pay additional tax amounts on a prospective or retroactive basis, as well as require us or our customers to pay fines and/or penalties and interest for past amounts deemed to be due. If we are required to collect such additional tax amounts from our customers and are unsuccessful in collecting such taxes due from our customers, we could be held liable for such costs, thereby adversely affecting our results of operations and harming our business. If we raise our prices to offset the costs of these changes, existing and potential future customers may elect not to purchase subscriptions to our platform in the future. Additionally, new, changed, modified, or newly interpreted or applied tax laws could increase our customers’ and our compliance, operating and other costs. Further, these events could decrease the capital we have available to operate our business. Any or all of these events could harm our business, results of operations and financial condition.
In addition, we are subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The tax authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties or assert that various withholding requirements apply to us or our subsidiaries or that benefits of tax treaties are not available to us or our subsidiaries, any of which could harm our business and our results of operations.
Our results of operations may be harmed if we are required to collect sales or other similar taxes for subscriptions to our platform in jurisdictions where we have not historically done so.
The application of indirect taxes (such as sales and use tax, VAT, GST, business tax and gross receipt tax) to businesses that transact online, such as ours, is a complex and evolving area. An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. Following the U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., states are now free to levy taxes on sales of goods and services based on an “economic nexus,” regardless of whether the seller has a physical presence in the state. As a result, it may be necessary to reevaluate whether our activities give rise to sales, use and other indirect taxes as a result
 
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of any nexus in those states in which we are not currently registered to collect and remit taxes. Additionally, we may need to assess our potential tax collection and remittance liabilities based on existing economic nexus laws’ dollar and transaction thresholds. It is possible that we could face sales tax, VAT or GST audits and that our liability for these taxes could exceed our estimates as state tax authorities could still assert that we are obligated to collect additional tax amounts from our customers and remit those taxes to those tax authorities. Further, one or more U.S. states or non-U.S. authorities could seek to impose additional sales, use or other tax collection and record-keeping obligations on us or may determine that such taxes should have, but have not been, paid by us. We could also be subject to tax audits in states and international jurisdictions for which we have not accrued tax liabilities. A successful assertion by one or more states requiring us to collect taxes where we presently do not do so could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest, discourage organizations from purchase subscriptions to our platform, or otherwise harm our business, results of operations and financial condition. We continue to analyze our exposure for such taxes and liabilities including the need to provide for loss contingencies resulting from these potential taxes and liabilities. There have been, and will continue to be, legislation that could require us to incur substantial costs, including costs associated with legal advice, tax calculation, collection, remittance and audit requirements, associated with complying with the various indirect tax requirements in the numerous markets in which we conduct or will conduct business.
The enactment of legislation implementing changes in taxation of international business activities, the adoption of other corporate tax reform policies, or changes in tax legislation or policies could impact our future financial position and results of operations.
Corporate tax reform, base-erosion efforts and tax transparency continue to be high priorities in many tax jurisdictions where we have business operations. As a result, policies regarding corporate income and other taxes in numerous jurisdictions are under heightened scrutiny and tax reform legislation is being proposed or enacted in a number of jurisdictions.
In 2015, the Organization for Economic Co-operation and Development (the “OECD”) released various reports under its Base Erosion and Profit Shifting (“BEPS”) action plan to reform international tax systems and prevent tax avoidance and aggressive tax planning. These actions aim to standardize and modernize global corporate tax policy, including cross-border taxes, transfer-pricing documentation rules and nexus-based tax incentive practices which in part are focused on challenges arising from the digitalization of the economy. The reports have a very broad scope including, but not limited to, neutralizing the effects of hybrid mismatch arrangements, limiting base erosion involving interest deductions and other financial payments, countering harmful tax practices, preventing the granting of treaty benefits in inappropriate circumstances and imposing mandatory disclosure rules. It is the responsibility of OECD members to consider how the BEPS recommendations should be reflected in their national legislation. Many countries are beginning to implement legislation and other guidance to align their international tax rules with the OECD’s BEPS recommendations, for example, by signing up to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the “MLI”) which currently has been signed by over 85 jurisdictions, including Israel who signed the MLI on September 13, 2018. The MLI implements some of the measures that the BEPS initiative proposes to be transposed into existing treaties of participating states. Such measures include the inclusion in tax treaties of one, or both, of a “limitation-on-benefit” ​(“LOB”) rule and a “principal purposes test” ​(“PPT”) rule. The application of the LOB rule or the PPT rule could deny the availability of tax treaty benefits (such as a reduced rate of withholding tax) under tax treaties. There are likely to be significant changes in the tax legislation of various OECD jurisdictions during the period of implementation of BEPS. Such legislative initiatives may materially and adversely affect our plans to expand internationally and may negatively impact our financial condition, tax liability or results of operations and could increase our administrative efforts.
Risks Related to Our Proprietary and Intellectual Property Rights
If we fail to adequately maintain, protect or enforce our proprietary and intellectual property rights, our competitive position could be impaired and we may lose valuable assets, generate reduced revenue, experience slower growth rates and incur costly litigation to protect our rights.
Our success is dependent, in part, upon protecting our intellectual property rights, including those in our know-how and proprietary technology. We rely on a combination of copyrights, patents, trade
 
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secret and other intellectual property laws and contractual restrictions to establish and protect our intellectual property rights. While it is our policy to protect and defend our rights to our intellectual property, we cannot predict whether steps taken by us will be adequate to prevent infringement, misappropriation or other violations of our intellectual property rights.
While software and other of our proprietary works may be protected under copyright law, we generally have not registered any copyrights in these works. We primarily rely on protecting our software as a trade secret in addition to copyright. In order to bring a copyright infringement lawsuit in the United States, the copyright must be registered. Accordingly, the remedies and damages available to us for unauthorized use of our software may be limited if an infringement of our copyright in the software was to occur in the United States.
Policing unauthorized use of our know-how, technology and intellectual property is difficult and may not be effective. Although we attempt to protect our intellectual property, technology and confidential information by entering into confidentiality and invention assignment agreements with our employees and consultants and entering into confidentiality agreements with the parties with whom we share our confidential information, such parties may not comply with their confidentiality obligations under these agreements. These agreements also may not effectively grant all necessary rights to any inventions that may have been developed by the employees or consultants party thereto and may not be effective in controlling access to and distribution of our platform, technology and confidential information or provide an adequate remedy in the event of unauthorized use of our platform or technology or unauthorized access, use or disclosure of our confidential information. Despite our precautions, it may be possible for unauthorized third parties to copy our platform or technology and use information that we regard as proprietary to create products or services that compete with our offerings. Some of the provisions of our agreements that protect us against unauthorized use, copying, transfer and disclosure of our platform may be unenforceable under the laws of certain jurisdictions and foreign countries. Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to ours. We cannot guarantee that others will not independently develop technology with the same or similar functions to any proprietary technology we rely on to conduct our business and differentiate ourselves from our competitors. Unauthorized parties may also attempt to copy or obtain and use our technology to develop applications with the same functionality as our solutions. In connection with the Codecov cyberattack, an attacker was able to export a read-only copy of our source code which, if disseminated, may enable unauthorized third parties to develop such applications more easily. Any unauthorized disclosure or use of our trade secrets or other confidential proprietary information could make it more expensive to do business, thereby harming our operating results.
Circumstances outside our control could also pose a threat to our intellectual property rights. For example, the laws of some countries do not protect intellectual property to the same extent as the laws of the United States, and mechanisms for enforcement of intellectual property rights in some foreign countries may be inadequate. Changes in the law or adverse court rulings may also negatively affect our ability to prevent others from using our technology. To the extent we expand our international activities, our exposure to unauthorized copying and use of our platform and proprietary information may increase. Further, our competition, foreign governments, foreign government-backed actors, criminals or other third parties may gain unauthorized access to our confidential information and technology. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property rights.
We may be required to spend significant resources to monitor and protect our intellectual property rights, and we may or may not be able to detect infringement, misappropriation or other violations of our intellectual property rights by third parties. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Such litigation could be costly, time consuming and distracting to management, may not ultimately be resolved in our favor, and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. If we are unable to protect our intellectual property rights or prevent unauthorized use, infringement or misappropriation thereof by third parties, the
 
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value of our intellectual property and intellectual property rights may be diminished and our competition may be able to more effectively mimic our offerings and services. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our platform, impair its functionality, delay introductions of new features, integrations, capabilities and enhancements, result in our substituting inferior or more costly technologies into our platform, or injure our reputation. In addition, we may be required to license additional technology from third parties to develop and market new features, integrations, capabilities and enhancements, and we cannot assure you that we could license that technology on commercially reasonable terms or at all, and our inability to license this technology could harm our ability to compete. Any one or more of the foregoing could harm our business, results of operations and financial condition.
Our results of operations may be harmed if we are subject to a protracted infringement claim, a claim that results in a significant damage award or a claim that results in an injunction.
There is considerable intellectual property development and enforcement activity in our industry. We expect that software developers in our industry will increasingly be subject to infringement claims as the number of products and competitors grows and the functionality of products in different industries overlap. Our future success depends in part on not infringing upon or misappropriating the intellectual property rights of others. There is a risk that our operations, platforms and services may infringe or otherwise violate, or be alleged to infringe or otherwise violate, the intellectual property rights of third parties. Other companies may claim in the future that we infringe upon or otherwise violate their intellectual property rights. A claim may also be made relating to technology or intellectual property that we acquire or license from third parties in the future. If we were subject to a claim of infringement, regardless of the merit of the claim or our defenses, the claim could:

require costly litigation to resolve and the payment of substantial damages;

require and divert significant management time;

cause us to enter into unfavorable royalty or license agreements;

require us to discontinue some or all of the features, integrations, capabilities and enhancements available on our Work OS;

require us to indemnify organizations on our platform or third-party service providers; and/or

require us to expend additional development resources to redesign our Work OS.
Any one or more of the above could harm our business, results of operations and financial condition.
Our platform utilizes open-source software, and any defects or security vulnerabilities in the open-source software could negatively affect our business.
We use substantial amounts of open source software in our platform and expect to use more open source software in the future. Although we monitor our use of open source software to avoid subjecting our platform to conditions we do not intend, there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our platform. Moreover, we cannot assure you that our processes for controlling our use of open source software in our platform will be effective. Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use or grant other licenses to our intellectual property. If we were to combine our proprietary source code or software with open source software in a certain manner, we could, under certain of the open source licenses, be required to release the source code of our proprietary software to the public. This could allow our competitors to create similar products with less development effort and time.
From time to time, there have been claims challenging both the ownership of open source software against companies that incorporate open source software into their products and whether such
 
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incorporation is permissible under various open source licenses. There is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our platform. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software or breach of open source licenses. Litigation could be costly for us to defend, have a negative effect on our results of operations and financial condition, or require us to devote additional research and development resources to change our platform. If we are held to have breached or failed to fully comply with all the terms and conditions of an open source software license or inappropriately use open source software, we could face infringement or other liability, or be required to seek costly licenses from third parties to continue providing our offerings on terms that are not economically feasible, to re-engineer our platform, to discontinue or delay the provision of our offerings or certain features, integrations or capabilities thereof if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, financial condition and results of operations.
In addition to risks related to license requirements, usage and distribution of open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or other contractual protections regarding infringement, misappropriation or other violations, the quality of code, or the origin of the software. Many of the risks associated with the use of open source software cannot be eliminated and could adversely affect our business, results of operations, financial condition and future prospects. For instance, open source software is often developed by different groups of programmers outside of our control that collaborate with each other on projects. As a result, open source software may have security vulnerabilities, defects or errors of which we are not aware. Any undetected errors or defects in open source software could render it vulnerable to breaches or security attacks, and, in conjunction, make our systems more vulnerable to data breaches. Even if we become aware of any security vulnerabilities, defects or errors, it may take a significant amount of time for either us or the programmers who developed the open source software to address such vulnerabilities, defects or errors, which could negatively impact our products and services, including adversely affecting the market’s perception of our products and services, impairing the functionality of our products and services, delaying the launch of new products and services, or resulting in the failure of our products and services, any of which could result in liability to us or our vendors and service providers. Further, our adoption of certain policies with respect to the use of open source software may affect our ability to hire and retain employees, including engineers.
Our failure to obtain or maintain the right to use certain of our intellectual property could negatively affect our business.
Our future success and competitive position depends in part upon our ability to obtain or maintain certain intellectual property used in our platform. While we have patent applications pending, we may be unable to obtain patent protection for the technology covered in our current or future patent applications. In addition, we cannot ensure that any of the patent applications will be approved or that the claims allowed on any issued patents will be sufficiently broad to protect our technology or platform and provide us with competitive advantages. Furthermore, any issued patents may be challenged, invalidated or circumvented by third parties. The laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States, and we therefore may be unable to obtain the same degree of protection for our proprietary technology in foreign jurisdictions.
Many patent applications may not be public for a period of time after they are filed, and since publication of discoveries in the scientific or patent literature tends to lag behind actual discoveries by several months, we cannot be certain that we will be the first creator of inventions covered by any patent application we make or that we will be the first to file patent applications on such inventions. Because some patent applications may not be public for a period of time, there is also a risk that we could adopt a technology without knowledge of a pending patent application, which technology would infringe a third-party patent once that patent is issued.
We rely on our trademarks, trade names and brand names to distinguish our Product Solutions from the products of our competitors, and have registered or applied to register many of these. However, occasionally third parties may have already registered identical or similar marks for products or
 
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solutions that also address the software market. As we rely in part on brand names and trademark protection to enforce our intellectual property rights, efforts by third parties to limit use of our brand names or trademarks and barriers to the registration of brand names and trademarks in various countries may restrict our ability to promote and maintain a cohesive brand throughout our key markets. There can also be no assurance that pending or future trademark applications will be approved in a timely manner, or at all, or that such registrations will effectively protect our brand names and trademarks. Third parties may also oppose our trademark applications or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our platform, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands.
Risks Relating to Our Ordinary Shares and the Offering
Our share price may be volatile, and you may lose all or part of your investment.
The initial public offering price for the ordinary shares sold in this offering will be determined by negotiation between us and representatives of the underwriters. This price may not reflect the market price of our ordinary shares following this offering and the price of our ordinary shares may decline. In addition, the market price of our ordinary shares could be highly volatile and may fluctuate substantially as a result of many factors, including:

actual or anticipated fluctuations in our results of operations;

variance in our financial performance from the expectations of market analysts;

announcements by us or our direct or indirect competitors of significant business developments, changes in service provider relationships, acquisitions or expansion plans;

the impact of the COVID-19 pandemic on our management, employees, customers and operating results;

changes in or proposed changes in laws or regulations or differing interpretations or enforcement of laws or regulations affecting our business.

changes in our retention rates;

our involvement in litigation or regulatory actions;

our sale of ordinary shares or other securities in the future;

market conditions in our industry;

changes in key personnel;

the trading volume of our ordinary shares;

publication of research reports or news stories about us, our competitors or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;

changes in the estimation of the future size and growth rate of our markets; and

general economic and market conditions.
In addition, the stock markets have experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of our ordinary shares, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If we were involved in any similar litigation we could incur substantial costs and our management’s attention and resources could be diverted.
One of our Co-Founders and Co-Chief Executive Officers will hold one founder share with certain veto rights, thereby limiting your ability to influence certain key matters affecting our business and affairs.
Upon the consummation of this offering, Roy Mann, one of our Co-Founders and Co-Chief Executive Officers and a member of our board of directors, will hold one founder share. Pursuant to our
 
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amended and restated articles of association to be effective upon the closing of this offering, such founder share will provide Mr. Mann with certain veto rights over the approval of any (i) merger, consolidation, acquisition, amalgamation, business combination, issuance of equity securities or debt securities convertible into equity securities or other similar transactions we may enter into or consummate, in each case that would reasonably be expected to result in any person becoming, as a result of such transactions, a beneficial owner of 25% or more of our ordinary shares issued and outstanding immediately following the consummation of such transaction, or in the increase in the beneficial ownership of our ordinary shares of any person who immediately prior to the consummation of such transaction holds 25% or more of the then issued and outstanding ordinary shares, (ii) sale, assignment, conveyance, transfer, lease or other disposition, in one transaction or a series of related transactions, of all or substantially all of our assets to any person and (iii) change to our strategy, policies and/or business plan in connection with our Equal Impact Initiative, including any change in our short- and long-term funding plan for the monday Foundation.
Consequently, Mr. Mann will be able to control certain key corporate decisions, thus limiting the ability of the holders of our ordinary shares to influence certain key matters affecting our business. Using his founder share, Mr. Mann may be able to veto the adoption of certain key matters. This may prevent or discourage unsolicited acquisition proposals or offers for ordinary shares that you may feel are in your best interest as one of our shareholders. Circumstances may occur in which the interests of Mr. Mann could be in conflict with your interests or the interests of other shareholders. Accordingly, your ability to influence certain key matters affecting our business and affairs through voting your ordinary shares may be limited.
The concentration of our share ownership with insiders may limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring shareholder approval.
Our executive officers, directors, current 5% or greater shareholders and affiliated entities together beneficially owned approximately 90.2% of our total shares outstanding as of March 31, 2021. As a result, these shareholders, acting together, will have control over most matters that require approval by our shareholders, including matters such as the appointment and dismissal of directors, approval of certain related party transactions, including the terms of compensation of our directors and Co-Chief Executive Officers, capital increases, amendments to our amended and restated articles of associations and approval of significant corporate transactions. Corporate action might be taken even if other shareholders oppose them. This concentration of ownership could also delay or prevent a change of control of us that other shareholders may view as beneficial.
There has been no prior public market for our ordinary shares, and an active trading market may not develop.
Prior to this offering, there has been no public market for our ordinary shares. An active trading market may not develop following the closing of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling ordinary shares and may impair our ability to acquire other companies by using our shares as consideration.
If we do not meet the expectations of equity research analysts, if they do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our ordinary shares, the price of our ordinary shares could decline.
The trading market for our ordinary shares will rely in part on the research and reports that equity research analysts publish about us and our business. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If our results of operations are below the estimates or expectations of public market analysts and investors, the price of our ordinary shares could decline. Moreover, the price of our ordinary shares could decline if one or more securities
 
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analysts downgrade our ordinary shares or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.
We are eligible to be treated as an emerging growth company, as defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors because we may rely on these reduced disclosure requirements.
We are eligible to be treated as an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies. We intend to take advantage of this extended transition period under the JOBS Act for adopting new or revised financial accounting standards.
For as long as we continue to be an emerging growth company, we may also take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including presenting only limited selected financial data and not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if our total annual revenue exceeds $1.07 billion, if we issue more than $1.0 billion in non-convertible debt securities during any three-year period, or if before that time we are a “large accelerated filer” under U.S. securities laws. We cannot predict if investors will find our ordinary shares less attractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile.
We will be a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
Upon the closing of this offering, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, although we are subject to Israeli laws and regulations with regard to certain of these matters and intend to furnish quarterly information on Form 6-K. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.
As we are a “foreign private issuer” and intend to follow certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all corporate governance rules of Nasdaq governance requirements.
As a foreign private issuer, we have the option to follow certain home country corporate governance practices rather than those of Nasdaq, provided that we disclose the requirements we are not following
 
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and describe the home country practices we are following. We intend to rely on this “foreign private issuer exemption” with respect to Nasdaq rules for shareholder meeting quorums. We may in the future elect to follow home country practices with regard to other matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all corporate governance rules of Nasdaq.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we qualify as a foreign private issuer, and therefore, we are exempt from certain periodic disclosures and current reporting requirements under the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and therefore, we will re-evaluate our qualification as a foreign private issuer on June 30, 2021. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we no longer qualify as a foreign private issuer, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.
The market price of our ordinary shares could be negatively affected by future sales of our ordinary shares.
After this offering, there will be           ordinary shares outstanding. Sales by us or our shareholders of a substantial number of ordinary shares in the public market following this offering, or the perception that these sales might occur, could cause the market price of our ordinary shares to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities. Of our issued and outstanding shares, all the ordinary shares sold in this offering will be freely transferable, except for any shares acquired by our “affiliates,” as that term is defined in Rule 144 under the Securities Act.
We, our executive officers and directors, and the holders of substantially all of our outstanding ordinary shares have agreed with the underwriters that, subject to certain exceptions and certain early release provisions, until the earlier of (i) 180 days after the date of this prospectus and (ii) the date immediately prior to the opening of trading on the third full trading day after we have publicly furnished our second earnings release on a Form 6-K (the “Lock-Up Period”), we and they will not directly or indirectly offer, pledge, sell, contract to sell, grant any option to purchase or otherwise dispose of any ordinary shares or any securities convertible into or exercisable or exchangeable for ordinary shares, or in any manner transfer all or a portion of the economic consequences associated with the ownership of ordinary shares, or cause a registration statement covering any ordinary shares to be filed except for the ordinary shares offered in this offering, without the prior written consent of Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC, who may, in their sole discretion and at any time without notice, release all or any portion of the ordinary shares subject to these lock-up agreements. Following the expiration of the Lock-Up Period, the ordinary shares subject to these lock-up agreements will be available for sale in the public markets subject to the requirements of Rule 144. See “Shares Eligible for Future Sale.”
As of March 31, 2021, we had 7,091,672 ordinary shares that were subject to options outstanding. Of this amount, 4,074,085 were vested and exercisable as of March 31, 2021. All of the outstanding share options are subject to market standoff agreements with us pursuant to the terms of our equity incentive plans and will be available for sale following the expiration of the Lock-Up Period. Following this
 
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offering, we intend to file a registration statement on Form S-8 under the Securities Act registering the shares under our equity incentive plans. Subject to the market standoff agreements, shares included in such registration statement will be available for sale in the public market immediately after such filing, subject to vesting provisions, except for shares held by affiliates who will have certain restrictions on their ability to sell.
You will experience immediate and substantial dilution in the net tangible book value of the ordinary shares you purchase in this offering.
The initial public offering price of our ordinary shares substantially exceeds the net tangible book value per ordinary share immediately after this offering. Therefore, if you purchase our ordinary shares in this offering, you will suffer, as of March 31, 2021, immediate dilution of $      per ordinary share or $      per ordinary share if the underwriters exercise in full their option to purchase additional ordinary shares, in pro forma net tangible book value after giving effect to the sale of ordinary shares in this offering at an assumed initial public offering price of $      per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus. If outstanding options to purchase our ordinary shares are exercised in the future, you will experience additional dilution. See “Dilution.”
Provisions of Israeli law and our amended and restated articles of association to be effective upon the closing of this offering may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.
Provisions of Israeli law and our amended and restated articles of association to be effective upon the closing of this offering could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing so would be considered to be beneficial by some of our shareholders, which may limit the price that investors may be willing to pay in the future for our ordinary shares. Among other things:

the Companies Law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased;

the Companies Law requires special approvals for certain transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions;

the Companies Law does not provide for shareholder action by written consent for public companies, thereby requiring all shareholder actions to be taken at a general meeting of shareholders;

our amended and restated articles of association to be effective upon the closing of this offering divide our directors into three classes, each of which is elected once every three years;

an amendment to our amended and restated articles of association to be effective upon the closing of this offering generally, in addition to the approval of our board of directors, requires a vote of the holders of a majority of our outstanding ordinary shares entitled to vote present and voting on the matter at a general meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions, such as the provision dividing our directors into three classes, the provision that sets forth the procedures and the requirements that must be met in order for a shareholder to require the Company to include a matter on the agenda for a general meeting of the shareholders, the provisions relating to the election and removal of members of our board of directors and empowering our board of directors to fill vacancies on our board of directors requires, in addition to the approval of our board of directors, a vote of the holders of 65% of our outstanding ordinary shares entitled to vote at a general meeting;

our amended and restated articles of association to be effective upon the closing of this offering restrict us, subject to certain exceptions, from engaging in certain business combination transactions, with any shareholder who holds 20% or more of our voting power. The
 
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transactions subject to such restrictions include mergers, consolidations and dispositions of our assets with a market value of 10% or more of our assets or outstanding shares. Subject to certain exceptions, such restrictions will apply for a period of three years following (i) the closing of the offering for any of our shareholders holding 20% or more of our voting power immediately prior to the offering and (ii) each time a shareholder became the holder of 20% or more of our voting power;

our amended and restated articles of association to be effective upon the closing of this offering do not permit a director to be removed except by a vote of the holders of at least 65% of our outstanding shares entitled to vote at a general meeting of shareholders;

our amended and restated articles of association to be effective upon the closing of this offering provide that director vacancies may be filled by our board of directors; and

Roy Mann, one of our Co-Founders and Co-Executive Officers and a member of our board of directors, will hold one founder share, which founder share will provide Mr. Mann with certain veto rights over the approval of certain corporate transactions. See “— Risks Relating to Our Ordinary Shares and the Offering — One of our Co-Founders and Co-Chief Executive Officers will hold one founder share with certain veto rights, thereby limiting your ability to influence key matters affecting our business and affairs” and “Description of Share Capital and Articles of Association — Special Voting and Consent Rights — Founder Share Voting Rights.”
Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to a certain share swap transaction, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred.
We have broad discretion over the use of proceeds we receive in this offering and may not apply the proceeds in ways that increase the value of your investment.
Our management will have broad discretion in the application of the net proceeds from this offering and, as a result, you will have to rely upon the judgment of our management with respect to the use of these proceeds. Our management may spend a portion or all of the net proceeds in ways that not all shareholders approve of or that may not yield a favorable return. The failure by our management to apply these funds effectively could harm our business.
We do not expect to pay any dividends in the foreseeable future.
We have never declared or paid any dividends on our ordinary shares, and we do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and expand our business. Consequently, investors who purchase ordinary shares in this offering may be unable to realize a gain on their investment except by selling such shares after price appreciation, which may never occur.
Our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant. The Companies Law imposes restrictions on our ability to declare and pay dividends. See “Description of Share Capital and Articles of Association — Dividend and Liquidation Rights” for additional information. Payment of dividends may also be subject to Israeli withholding taxes. See “Taxation and Government Programs” for additional information.
 
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We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform, the Consumer Protection Act, the listing requirements of and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and make it more difficult for us to attract and retain qualified members of our board of directors.
We are evaluating these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
We have not yet determined whether our existing internal controls over financial reporting are in compliance with Section 404 of the Sarbanes-Oxley Act.
We are not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act (“Section 404”) and therefore are not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a publicly traded company, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our annual reports and provide an annual management report on the effectiveness of control over financial reporting. Though we will be required to disclose material changes in internal control over financial reporting on an annual basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. Additionally, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. We currently have limited accounting personnel and we have begun the process of evaluating the adequacy of our accounting personnel staffing level and other matters related to our internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses once we are a public company, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. As a result, the market price of our ordinary shares could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
Key members of our management team have limited experience managing a public company.
Many members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws
 
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pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition and results of operations.
Our amended and restated articles of association to be effective upon the closing of this offering will provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum of resolution of any claims arising under the Securities Act.
Our amended and restated articles of association to be effective upon the closing this offering will provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for any claim asserting a cause of action arising under the Securities Act. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both U.S. state and federal courts have jurisdiction to entertain such claims. This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may increase the costs associated with such lawsuits, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our amended and restated articles of association inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition. Any person or entity purchasing or otherwise acquiring any interest in our share capital shall be deemed to have notice of and to have consented to the choice of forum provisions of our amended and restated articles of association described above. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction.
There can be no assurance that we will not be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to United States Holders of our ordinary shares.
We would be classified as a passive foreign investment company (“PFIC”) for any taxable year if, after the application of certain look-through rules, either: (i) 75% or more of our gross income for such year is “passive income” ​(as defined in the relevant provisions of the Internal Revenue Code of 1986, as amended), or (ii) 50% or more of the value of our assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. For these purposes, cash and other assets readily convertible into cash or that do or could generate passive income are categorized as passive assets, and the value of company’s goodwill and other unrecorded intangible assets is generally taken into account. Passive income generally includes, among other things, rents, dividends, interest, royalties, gains from the disposition of passive assets and gains from commodities and securities transactions. For purposes of this test, we will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation of which we own, directly or indirectly, at least 25% (by value) of the stock. Based on our anticipated market capitalization and the composition of our income, assets and operations, we believe that we were not a PFIC for 2020 and do not expect to be a PFIC for U.S. federal income tax purposes for the current taxable year or in the foreseeable future. However, this is a factual determination that must be made annually after the close of each taxable year. Moreover, the value of our assets for purposes of the PFIC determination may be determined by reference to the public price of our ordinary shares at this initial offering and the future price, which could fluctuate significantly. In addition, it is possible that the Internal Revenue Service may take a contrary position with respect to our determination in any particular year, and therefore, there can be no assurance that we will not be classified as a PFIC for 2020, in the current taxable year or in the future. Certain adverse U.S. federal income tax consequences could apply to a United States Holder (as defined in “Taxation and Government Programs — U.S. Federal Income Tax Considerations”) if we are treated as a PFIC for any taxable
 
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year during which such United States Holder holds our ordinary shares. United States Holders should consult their tax advisors about the potential application of the PFIC rules to their investment in our ordinary shares. For further discussion, see “Taxation and Government Programs — U.S. Federal Income Tax Considerations — Passive Foreign Investment Company.”
If a United States person is treated as owning 10% or more of our ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences.
If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our ordinary shares, such person may be treated as a “United States shareholder” with respect to each controlled foreign corporation (“CFC”) in our group (if any). Because our group includes a U.S. subsidiary, certain of our non-U.S. subsidiaries will be treated as CFCs (regardless of whether or not we are treated as a CFC). A United States shareholder of a CFC may be required to report annually and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property by CFCs, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a CFC generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. Failure to comply with these reporting obligations may subject a United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such shareholder’s U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether we are or any of our non-U.S. subsidiaries is treated as CFC or whether any investor is treated as a United States shareholder with respect to any such CFC or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. The United States Internal Revenue Service has provided limited guidance on situations in which investors may rely on publicly available information to comply with their reporting and tax paying obligations with respect to foreign-controlled CFCs. A U.S. investor should consult its advisors regarding the potential application of these rules to an investment in our ordinary shares.
Risks Relating to Our Incorporation and Location in Israel
Conditions in Israel could materially and adversely affect our business.
Many of our employees, including certain management members, operate from our offices that are located in Tel Aviv, Israel. In addition, a number of our officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business and operations. In recent years, Israel has been engaged in sporadic armed conflicts with Hamas, an Islamist terrorist group that controls the Gaza Strip, with Hezbollah, an Islamist terrorist group that controls large portions of southern Lebanon, and with Iranian-backed military forces in Syria. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations.
Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.
Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial
 
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condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.
In addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely affect our business, financial condition and results of operations.
It may be difficult to enforce a U.S. judgment against us and our officers and directors named in this prospectus, or to assert U.S. securities laws claims in Israel or serve process on our non-U.S. officers and directors.
Not all of our directors or officers are residents of the United States, and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. our directors and officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Additionally, Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.
Moreover, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought. For more information, see “Enforceability of Civil Liabilities.”
Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.
We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our amended and restated articles of association to be effective upon the closing of this offering and the Companies Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder of an Israeli company has to act in good faith and in a customary manner in exercising his, her or its rights and fulfilling his, her or its obligations toward the Company and other shareholders and to refrain from abusing his or her power in the Company, including, among other things, in voting at the general meeting of shareholders, on amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and certain transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint or prevent the appointment of a director or officer in the Company, or has other powers toward the Company has a duty of fairness toward the
 
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Company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist in understanding the implications of these provisions that govern shareholder behavior.
We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
A significant portion of our intellectual property has been developed by our employees in the course of their employment for us. Under the Israeli Patent Law, 5727-1967 (the “Patent Law”), inventions conceived by an employee in the course and as a result of or arising from his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee (the “Committee”), a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his or her inventions. Case law clarifies that the right to receive consideration for “service inventions” can be waived by the employee. The Committee will examine, on a case-by-case basis, the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws. Further, the Committee has not yet determined one specific formula for calculating this remuneration but rather uses the criteria specified in the Patent Law. Although we enter into assignment-of-invention agreements with our employees pursuant to which such individuals waive their right to remuneration for service inventions, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.
The tax benefits that are available to us require us to continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.
We believe that as of December 31, 2019 and 2020 we have been eligible for certain tax benefits provided to a “Preferred Technological Enterprise” under the Israeli Law for the Encouragement of Capital Investments, 5719-1959, referred to as the Investment Law, including, inter alia, a reduced corporate tax rate on Israeli preferred technology taxable income, as defined in the Investment Law and its regulations. In order to remain eligible for the tax benefits for a “Preferred Technological Enterprise” we must continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended. If these tax benefits are reduced, cancelled or discontinued, our Israeli taxable income from the Preferred Technological Enterprise would be subject to regular Israeli corporate tax rates (currently 23%). Additionally, if we increase our activities outside of Israel through acquisitions, for example, our expanded activities might not be eligible for inclusion in future Israeli tax benefit programs. See “Taxation and Government Programs — Israeli Tax Considerations — Law for the Encouragement of Capital Investments, 5719-1959.”
Our amended and restated articles of association to be effective upon the closing this offering will provide that unless the Company consents otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes between the Company and its shareholders under the Companies Law and the Israeli Securities Law.
The competent courts of Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Israeli Securities Law, 5728-1968 (the “Israeli Securities Law”). This exclusive forum provisions is intended to apply to claims arising under Israeli Law and would not apply to claims brought pursuant to the Securities Act or the Exchange Act or any other claim for which federal courts would have exclusive jurisdiction. Such exclusive forum provision in our amended and restated articles of association will not relieve the Company of its duties to comply with federal securities laws and the rules and regulations thereunder, and shareholders of the Company will not be deemed to have waived the Company’s
 
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compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholders ability to bring a claim in a judicial forum of its choosing for disputes with the Company or its directors or other employees which may discourage lawsuits against the Company, its directors, officers and employees.
Risks Related to our Equal Impact Initiative and the monday Foundation
The novelty of our Equal Impact Initiative makes its efficacy unpredictable and makes us susceptible to unintended consequences.
Our Equal Impact Initiative is predicated on us using our platform and resources to facilitate a robust digital transformation in the nonprofit sector. Pursuant to this initiative, we intend to offer up to $1 worth of free or substantially discounted monday.com subscriptions to nonprofit organizations, including product support, for every $1 of revenue we generate. We also intend to provide every employee with the opportunity to take time off to volunteer 1% of their paid work time to any approved charitable or community initiative.
In order to facilitate the activities described above, we established the monday Foundation. Following the closing of this offering, we intend to issue the monday Foundation a warrant to purchase         ordinary shares, with an exercise price of $0.01 per ordinary share. Commencing two or more years following the closing of this offering, and for a period of approximately ten years, we intend to issue additional ordinary shares or warrants exercisable for ordinary shares to the monday Foundation in order to continue to fund its charitable initiatives to promote the Equal Impact Initiative. As of the date of this prospectus, we have not determined the amount of ordinary shares and/or warrants exercisable for ordinary shares that will be issued to the monday Foundation, as such decision will largely depend on the funding requirements and performance of the monday Foundation on an ongoing basis. However, we have determined that we will limit any equity contribution to the monday Foundation to no more than 1% of our outstanding ordinary shares on an annual basis, measured as of the end of each fiscal year, with any unissued amount up to a maximum of 1% in the aggregate measured as of the end of the prior fiscal year carried over to subsequent fiscal years. See “Use of Proceeds” and “Business  —  The monday.com Equal Impact Initiative.”
We designed the monday Foundation in a such a way as to restrict our ability to control its affairs in order to minimize our risk of negative tax or accounting consequences. However, despite our best efforts to remain independent from the monday Foundation, our auditors or regulators could, nevertheless, determine that we exercise control over it. If we were deemed to exercise control over the monday Foundation, we could be required to consolidate its financial statements with our own, which could have a material impact on our operations. Additionally, we could experience other negative consequences as a result of such a determination of control over the monday Foundation, including heightened litigation risks, additional accounting complexities, higher insurance premiums and increased regulatory oversight, particularly from U.S. and international tax authorities.
We designed our Equal Impact Initiative with the intention of increasing our positive social impact, and not to maximize shareholder value or to further our business model. Our Equal Impact Initiative may not operate as intended over time or on a larger scale, and we may suffer unintended consequences as a result of perceived problems with the monday Foundation. For example:

Our commitment to charitable donations through the monday Foundation may not align our interests with those of our customers and shareholders. Moreover, our commitment to charitable donations may not resonate with new or existing customers and shareholders, and may fail to attract new customers and shareholders to the Company.

The amount of equity contributed to the monday Foundation over time may be viewed as excessively dilutive to new and existing shareholders.

We have no control over how the monday Foundation will deploy the capital that we donate to it over time. As such, the monday Foundation may deploy funds in a way that fails to align with our corporate values and culture.
 
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If the majority of the members of the monday Foundation’s board of directors do not remain independent from the Company or if in the future we try to exert control over the monday Foundation, tax authorities may view the monday Foundation as an extension of the Company and require us to treat the monday Foundation as a consolidated subsidiary of the Company for financial and tax reporting purposes.
The failure of our Equal Impact Initiative to function as intended could materially and adversely impact our reputation, business, results of operations and financial condition.
In connection with our Equal Impact Initiative, we intend to fund the monday Foundation by issuing it a warrant to purchase          ordinary shares following the closing of this offering. Moreover, we intend to continue to fund the monday Foundation by issuing it additional equity and equity-linked securities over time following the closing of this offering, which will result in dilution to our existing shareholders.
The monday Foundation will be charged with helping us carry out our Equal Impact Initiative, which is guided by our ambitious social responsibility mission. Due to the intended scale and the desired impact of our Equal Impact Initiative, the monday Foundation will require additional capital to fund its operations and meet the Equal Impact Initiative’s desired goals. We anticipate that part of this financing will be in the form of issuances of our equity and equity-linked securities, including ordinary shares and warrants exercisable for ordinary shares.
Following the closing of this offering, we intend to fund the monday Foundation by issuing it a warrant to purchase      ordinary shares, with an exercise price of $0.01 per ordinary share. Commencing two or more years following the closing of this offering, and for a period of approximately ten years, we intend to issue additional ordinary shares or warrants exercisable for ordinary shares to the monday Foundation in order to continue to fund its charitable initiatives to promote the Equal Impact Initiative, in an amount not to exceed 1% of our outstanding ordinary shares on an annual basis, measured as of the end of each fiscal year, with any unissued amount up to such 1% carried over to subsequent fiscal years. As of the date of this prospectus, we have not determined the amount of ordinary shares and/or warrants exercisable for ordinary shares that will be issued to the monday Foundation, as such decision will largely depend on the funding requirements and performance of the monday Foundation on an ongoing basis. The issuance of equity and equity-linked securities to the monday Foundation, including ordinary shares and warrants exercisable for ordinary shares, will result in substantial dilution to our current shareholders’ ownership and may be limited by the number of shares we have authorized and available for issuance.
General Risk Factors
Adverse or weakened general economic and market conditions may reduce spending on sales and marketing technology and information, which could harm our revenue, results of operations and cash flows.
Our revenue, results of operations and cash flows depend on the overall demand for and use of our Work OS. Concerns about the systemic impact of a recession (in Israel, the United States or globally), energy costs, geopolitical issues, or the availability and cost of credit could lead to increased market volatility, decreased consumer confidence and diminished growth expectations in the U.S. economy and abroad, which in turn could affect the rate of IT spending and could adversely affect our customers’ ability or willingness to purchase our services, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscription contracts, or affect attrition rates, all of which could adversely affect our future sales and operating results. Some of our customers may view a subscription to our Work OS as a discretionary purchase, and our paying users may reduce their discretionary spending on our platform during an economic downturn. In particular, spending patterns of smaller businesses are difficult to predict and are sensitive to the general economic climate, the economic outlook specific to smaller businesses, the then-current level of profitability experienced by smaller businesses and overall consumer confidence. In addition, weak economic conditions can result in customers seeking to utilize free or lower-cost information that is available from alternative sources. Prolonged economic
 
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slowdowns may result in requests to renegotiate existing contracts on less advantageous terms to us than those currently in place, payment defaults on existing contracts or non-renewal at the end of a contract term.
During weak economic times, there is an increased risk that one or more of our paying customers will file for bankruptcy protection, which may harm our revenue and results of operations. We also face risk from international paying customers that file for bankruptcy protection in foreign jurisdictions, particularly given that the application of foreign bankruptcy laws may be more difficult to predict. In addition, we may determine that the cost of pursuing any creditor claim outweighs the recovery potential of such claim. As a result, weak economic times could harm our business, results of operations, cash flows and financial condition.
We may be subject to liability claims if we breach our contracts, and our insurance may be inadequate to cover our losses.
We are subject to numerous obligations in our contracts with organizations and our partners. Despite the procedures, systems and internal controls we have implemented to comply with our contracts, we may breach these commitments, whether through a weakness in these procedures, systems and internal controls, negligence or the willful act of an employee or contractor. Our insurance policies, including our errors and omissions insurance, may be inadequate to compensate us for the potentially significant losses that may result from claims arising from breaches of our contracts, disruptions in our services, failures or disruptions to our infrastructure, catastrophic events, and disasters or otherwise. Further, our insurance may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all.
Our business and financial results may be affected by various litigation and regulatory proceedings.
In the ordinary course of business, we may be involved in and subject to litigation for a variety of claims or disputes and receive regulatory inquiries These claims, lawsuits and proceedings have included, and could in the future include, labor and employment, wage and hour, commercial, antitrust, alleged securities law violations or other investor claims, and/or other matters. The number and significance of these potential claims and disputes may increase as our business expands. Further, our general liability insurance may not cover all potential claims made against us or be sufficient to indemnify us for all liability that may be imposed. Any claim against us, regardless of its merit, could be costly, divert management’s attention and operational resources, and harm our reputation. As litigation is inherently unpredictable, we cannot assure you that any potential claims or disputes will not have a material adverse effect on our business, results of operations and financial condition.
We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.
We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 5737-1977, the Israeli Prohibition on Money Laundering Law, 5760-2000, and other anti-corruption, anti-bribery laws and anti-money laundering laws in countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and generally prohibit companies and their employees and agents from directly or indirectly promising, authorizing, making, offering, soliciting or receiving improper payments of anything of value to or from government officials or others in the private sector. As we increase our international sales and business, our risks under these laws may increase. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecutions, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal
 
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penalties or injunctions, adverse media coverage and other consequences. Any investigations, actions or sanctions could harm our business, results of operations and financial condition.
In addition, we use third parties to sell access to our Work OS and conduct business on our behalf abroad. We or such current and future third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities, and, in certain circumstances, we could be held liable for the corrupt or other illegal activities of our third-party intermediaries even if we do not explicitly authorize such activities. We have implemented an anti-corruption compliance program and have controls in place with respect to our third-party relationships, but we cannot guarantee that all of our employees and agents will comply with our policies and applicable law, for which we may be ultimately held responsible.
We are subject to governmental export controls and economic sanctions laws that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
Some of our business activities may be subject to various restrictions under U.S., Israeli and E.U. export controls and trade and economic sanctions laws, including, among others, the U.S. Commerce Department’s Export Administration Regulations and economic and trade sanctions regulations maintained by the U.S. Treasury Department’s Office of Foreign Assets Control. U.S., Israeli and E.U. export control laws and U.S., Israeli and E.U. economic sanctions laws may prohibit or restrict the sale or supply of certain products, including encryption items and technology, and services to certain governments, persons, and entities and countries and territories, including those that are the target of comprehensive sanctions. In addition, various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our platform or could limit the ability of our customers to implement our platform in those countries. Although we take precautions to prevent our platform from being provided and accessed in sanctioned countries in violation of such laws and regulations, we cannot guarantee that such precautions will be fully effective. Our platform has in the past, and could in the future, be provided and accessed in sanctioned countries inadvertently in violation of such laws despite the precautions we take. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to civil or criminal penalties, government investigation, loss of export privileges or reputational harm. Further, obtaining the necessary authorizations, including any required licenses, for a particular transaction may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. Although we take precautions to prevent transactions with sanction targets, such as IP address blocking functionality, screenings of our users against government lists of restricted and prohibited persons, training our employees and the development of a global Trade Controls policy, we cannot guarantee that such precautions are or will be fully effective and we could inadvertently provide access to our platform to persons prohibited by U.S., Israeli and E.U. sanctions, which could result in negative consequences to us, including government investigations, penalties and harm to our reputation.
In addition, changes in our Work OS, or future changes in export and import regulations, may prevent our users with international operations from using our Work OS globally or, in some cases, prevent the export or import of our Work OS to certain countries, governments or persons altogether. Any change in export or import regulations, economic sanctions or related legislation, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our Work OS by, or in our decreased ability to export or sell subscriptions to our Work OS to, existing or potential users with international operations. Any decreased use of our Work OS or limitation on our ability to export or sell our Work OS could adversely affect our business, results of operations and financial condition.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and
 
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refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting. For example, as we have prepared to become a public company, we have worked to improve the controls around our key accounting processes and our quarterly close process, we have implemented a number of new systems to supplement our core enterprise resource planning system as part of our control environment, and we have hired additional accounting and finance personnel to help us implement these processes and controls. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. If any of these new or improved controls and systems do not perform as expected, we may experience material weaknesses in our controls.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our consolidated financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of annual management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which could have a negative effect on the trading price of our ordinary shares. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq. We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, and a foreign-private issuer in particular, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 20-F.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could harm our business, results of operations and financial condition and could cause a decline in the price of our ordinary shares.
 
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains estimates and forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible” or the negative of these terms or similar expressions. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

our ability to predict our revenue and evaluate our business and future prospects;

our ability to manage our growth effectively;

our ability to achieve and maintain profitability;

interruptions or performance problems associated with the technology or infrastructure underlying our platform;

our ability to attract customers, grow our retention rates, expand usage within organizations and sell subscription plans;

our ability to offer high-quality customer support;

our ability to effectively develop and expand our direct sales capabilities;

our ability to enhance our reputation and market awareness of our Work OS;

actions by governments to restrict access to our platform in their countries;

our ability to identify and integrate future acquisitions, strategic investments, partnerships or alliances;

our ability to attract and retain highly skilled employees;

our ability to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies;

the market and software categories in which we participate;

our ability to ensure that our Work OS interoperates with a variety of software applications that are developed by third parties;

the success of our strategic relationships with third parties;

privacy, data and cybersecurity; and

other statements described in this prospectus under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.”
The forward-looking statements in this prospectus are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We believe that these factors include, but are not limited to the factors set forth under “Risk Factors.” Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements,
 
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such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.
These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus forms a part with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
The estimates and forward-looking statements contained in this prospectus speak only as of the date of this prospectus. Except as required by applicable law, we undertake no obligation to publicly update or revise any estimates or forward-looking statements whether as a result of new information, future events or otherwise, or to reflect the occurrence of unanticipated events.
 
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MARKET AND INDUSTRY DATA
This prospectus contains estimates, projections and other information concerning our industry and our business, as well as data regarding market research, estimates and forecasts prepared by our management. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry and general publications, government data, and similar sources. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same source, unless otherwise expressly stated or the context otherwise requires. Forecasts and other forward-looking information with respect to industry, business, market and other data are subject to the same qualifications and additional uncertainties regarding the other forward looking statements in this prospectus. See “Special Note Regarding Forward-Looking Statements.”
Among others, we refer to estimates compiled by the following industry sources:

International Data Corporation, Worldwide Project and Portfolio Management Software Forecast Update, 2020-2024: Need for PPM Agility Drives Growth, December 2020;

International Data Corporation, Worldwide Collaborative Applications Forecast, 2020-2024: Connectedness Driven by COVID-19, July 2020;

International Data Corporation, Worldwide Sales Force Productivity and Management Software Forecast, 2020-2024: Flattening the Growth Curve by $9.1 Billion, June 2020;

International Data Corporation, Worldwide Software Change, Configuration, and Process Management Forecast Update, 2020-2024: Adaptive Software Demand Drives SCCPM Forecast Growth, December 2020; and

International Data Corporation, Worldwide Marketing Campaign Management Software Forecast, 2020-2024: Flattening the Growth Curve by $6.6 Billion, June 2020.
 
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USE OF PROCEEDS
We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $       million (or approximately $      million if the underwriters exercise in full their option to purchase additional ordinary shares), assuming an initial public offering price of $      per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus.
A $1.00 increase (decrease) in the assumed initial public offering price of $       per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $       million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses. Each increase (decrease) of 1,000,000 shares in the number of ordinary shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $       million, assuming an initial public offering price of $          per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses. Expenses of this offering will be paid by us.
The principal purposes of this offering are to obtain additional working capital, to create a public market for our ordinary shares and to facilitate our future access to the public equity markets. We intend to use substantially all of net proceeds from this offering for general corporate purposes, including advertising and marketing, technology development, working capital, operating expenses and capital expenditures. We may also use a portion of the proceeds to acquire or invest in businesses, products, services or technologies; however, we do not have agreements or commitments for any material acquisitions or investments at this time.
We intend to make a one-time donation of 1% of the proceeds from this offering to the monday Foundation. As of the date of this prospectus, the monday Foundation has not determined how it will deploy the donated funds following this offering.
We will have broad discretion in the way that we use the net proceeds from this offering. Our use of the net proceeds from this offering will depend on a number of factors, including our future revenue and cash generated by operations and the other factors described in “Risk Factors.”
 
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DIVIDEND POLICY
We have never declared or paid any dividends on our ordinary shares. We do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and expand our business. Our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant. The Companies Law imposes restrictions on our ability to declare and pay dividends. See “Description of Share Capital and Articles of Association — Dividend and Liquidation Rights” for additional information.
Payment of dividends may be subject to Israeli withholding taxes. See “Taxation and Government Programs — Israeli Tax Considerations” for additional information.
 
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and total capitalization as of March 31, 2021, as follows:

on an actual basis;

on a pro forma basis, giving effect to (i) the adoption of our amended and restated articles of association immediately prior to the closing of this offering and (ii) the Preferred Shares Conversion, as if the Preferred Shares Conversion had occurred on March 31, 2021; and

on a pro forma as adjusted basis, giving effect to (i) the pro forma adjustments set forth above, (ii) the issuance and sale of           ordinary shares in this offering at the assumed initial public offering price of $      per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses, and (iii) the intention to donate 1% of the proceeds from this offering to the monday Foundation.
You should read this information in conjunction with our consolidated financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.
As of March 31, 2021
Actual
Pro Forma
Pro Forma As
Adjusted(1)
(in thousands, except share amounts)
Cash and cash equivalents
$ 124,281 $ 124,281 $       
Preferred shares, no par value: 27,056,939 shares authorized; 26,440,239 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted
233,496
Shareholders’ equity (deficit):
Ordinary shares, no par value: 52,943,061 shares authorized, 12,451,895 shares issued and outstanding, actual; 80,000,000 shares authorized, pro forma and pro forma as adjusted; 38,892,134 shares issued and outstanding, pro forma;        shares issued and outstanding, pro forma as adjusted
Additional paid-in capital
114,176 347,672
Accumulated deficit
(355,318) (355,318)
Total shareholders’ (deficit) equity
(241,142) (7,646)
Total capitalization
$ (7,646) $ (7,646) $
(1)
A $1.00 increase (decrease) in the assumed initial public offering price of $      per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total shareholders’ (deficit) equity and total capitalization by approximately $      million, assuming the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses. An increase (decrease) of 1,000,000 shares in the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total shareholders’ (deficit) equity and total capitalization by approximately $      million, assuming an initial public offering price of $      per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses.
 
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DILUTION
If you invest in our ordinary shares in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per ordinary share and the net tangible book value per ordinary share after this offering. Our net tangible book value as of March 31, 2021 was $       per ordinary share. Historical net tangible book value per ordinary share as of any date represents the amount of our total tangible assets less our total liabilities, divided by the total number of ordinary shares outstanding as of such date.
Our pro forma net tangible book value as of March 31, 2021 was $      million, or $       per ordinary share. Pro forma net tangible book value represents the amount of our total tangible assets less our total liabilities, after giving effect to the Preferred Shares Conversion. Pro forma net tangible book value per ordinary share as of any date represents pro forma net tangible book value divided by the total number of ordinary shares outstanding as of such date, after giving effect to the pro forma adjustments described above.
After giving effect to the sale of        ordinary shares in this offering at an assumed initial public offering price of $       per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2021 would have been $      million, or $      per ordinary share. This amount represents an immediate increase in net tangible book value of $       per ordinary share to our existing shareholders and an immediate dilution of $       per ordinary share to new investors purchasing ordinary shares in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per ordinary share after this offering from the amount of cash that a new investor paid for an ordinary share.
The following table illustrates this dilution:
Assumed initial public offering price per ordinary share
$
Historical net tangible book value per ordinary share as of March 31, 2021
$      
Increase per ordinary share attributable to the pro forma adjustments described
above
Pro forma net tangible book value per share as of March 31, 2021
Increase in pro forma net tangible book value per ordinary share attributable to this offering
Pro forma as adjusted net tangible book value per ordinary share after this
offering
Dilution per ordinary share to new investors in this offering
$      
A $1.00 increase (decrease) in the assumed initial public offering price of $       per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per ordinary share by $      , and increase (decrease) dilution to new investors by $       per ordinary share, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses.
If the underwriters exercise in full their option to purchase additional ordinary shares in this offering, the pro forma as adjusted net tangible book value after the offering would be $       per ordinary share, the increase in net tangible book value to existing shareholders would be $       per ordinary share and the dilution to new investors would be $       per ordinary share, assuming an initial public offering price of $       per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses.
The pro forma as adjusted dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing.
 
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The following table summarizes, on the pro forma as adjusted basis described above as of March 31, 2021, the differences between the number of ordinary shares purchased from us, the total consideration paid to us in cash and the average price per ordinary share paid, in each case by existing shareholders, on the one hand, and new investors in this offering, on the other hand. The calculation below is based on an assumed initial public offering price of $      per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses.
Ordinary Shares
Purchased
Total Consideration
Average
Price Per
Ordinary
Share
Number
Percent
Amount
Percent
Existing shareholders
     % $       % $      
New investors
      
Total
     100% 100%
To the extent any of our outstanding options is exercised, there will be further dilution to new investors.
If the underwriters exercise their option to purchase additional ordinary shares in full:

the percentage of ordinary shares held by existing shareholders will decrease to approximately     % of the total number of our ordinary shares outstanding after this offering; and

the number of ordinary shares held by new investors will increase to       , or approximately     % of the total number of our ordinary shares outstanding after this offering.
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with “Selected Consolidated Financial Data” and the consolidated financial statements and related notes included elsewhere in this prospectus. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Overview
monday.com democratizes the power of software so organizations can easily build software applications and work management tools that fit their needs. We call our platform ‘Work OS’, and we believe we are pioneering a new category of software that will change the way people work and businesses operate.
Our platform consists of modular building blocks that are simple enough for anyone to use, yet powerful enough to drive the core functionality within any organization. Our platform also integrates with other systems and applications, creating a new connective layer for organizations that links departments and bridges information silos.
By using our platform, our customers can simplify and accelerate their digital transformation, enhance organizational agility, create a unifying workspace across departments, and increase operational efficiency and productivity.
We believe software should empower businesses, not limit them. However, organizations are often forced to use rigid, function-specific software and disconnected tools that prevent them from operating productively and effortlessly. These constraints lead organizations to use multiple tools to fit their needs, resulting in inefficient workflows, data and employee silos, broken communication channels and insufficient institutional knowledge. As a result, organizations manage and evaluate their operations with an incomplete view of their businesses, limiting their ability to grow and move efficiently.
Our Work OS turns this paradigm upside down. It allows organizations to create software applications and work management tools that suit their needs across virtually any use case. By connecting them to other systems and applications, we then eliminate corporate silos and facilitate cross-functional workflows. With our platform, organizations have a holistic view of their businesses and are able to work with more agility, become more productive and increase operational efficiency.
As of March 31, 2021, we served 127,974 customers across over 200 industries in more than 190 countries. Our customers use our platform for thousands of use cases, and our platform is currently available in 13 languages.
Key Milestones that Transformed Our Business
Since the launch of our product in 2014, we have positioned our Work OS for growth with the following key milestones:
 
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[MISSING IMAGE: tm211978d4-lc_timelin4c.jpg]
We have built our company in a way that allows us to quickly and reliably innovate and expand our offerings. For example, using insights gained from our business intelligence analytics tool, we were able to successfully build and deploy our CRM system within a month, reflecting the power and flexibility underlying our platform.
Our Go-to-Market Strategy
When we first started monday.com, we had a single go-to-market growth engine, which consisted of our self-serve funnel and customer experience function. As our platform’s functionality broadened to address new audiences, we also evolved our go-to-market strategy and established our sales and partners teams.
We employ an efficient go-to-market model, combining our extensive self-serve funnel with a direct sales approach, which consists primarily of our sales team, focused on small, mid-sized and enterprise customers, our customer success and partners teams, as well as our apps marketplace.
End-to-End Product Solutions
Historically, we have focused our go-to-market strategy horizontally, enabling the seamless adoption and rapid expansion of our platform. We recently augmented our strategy with our Product Solution go-to-market approach.
We customize the user experience across the customer lifecycle, from initial discovery through marketing campaigns to onboarding with pre-designed templates and workflows, leading to end-to-end Product Solutions. We believe that as we deepen our Product Solutions, we will be able to be more targeted in our sales and marketing efforts and help our customers expand the number of use cases on the platform.
Expanding Within our Existing Customer Base and Moving Upmarket
Our focus on seamless adoption of our platform starts with ensuring that any customer can easily and independently adopt our platform. This is accomplished through a self-serve funnel where any user
 
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can sign up and immediately gain value, regardless of their technical skills. Once customers adopt the platform and realize its value, their usage often grows organically, expanding across use cases and departments. As this expansion takes place virally, it is also accelerated through our sales-assisted motions and our partners network. Our customer success teams engage with our customers in an effort to help them grow and achieve their business objectives through our platform. This has created a successful growth cycle: the more value customers gain from our platform, the more new users and use cases are added by such customers, which in turn adds even more value to our customers. As a result, as of April 30, 2021, 96% of our enterprise customers use monday.com for at least two Product Solutions and 63% of our enterprise customers use monday.com for at least three Product Solutions.
In mid-2018, as we experienced rapid growth and demand for our platform through our self-serve funnel, we began investing in building out and scaling our sales, customer success and partners teams. We are still in the early stages of building out and scaling these teams, but we believe there is a significant expansion opportunity within our customer base to continue to grow our platform. In order to realize this opportunity, we have more than doubled our sales and customer success teams from 154 employees at the end of 2019 to 365 employees as of March 31, 2021.
We have already grown the number of enterprise customers on our platform by 247%, from 76 customers as of December 31, 2019 to 264 customers as of December 31, 2020, and by 219%, from 105 customers as of March 31, 2020 to 335 customers as of March 31, 2021. The ARR from such enterprise customers grew by 297% during the year ended December 31, 2020 compared to 2019 and by 261% in the three months ended March 31, 2021 compared to the same period in 2020, outpacing our overall ARR growth.
Our Apps Marketplace and Community of Partners
In order to keep pace with the accelerating demand for our platform, we further evolved our go-to-market engines in 2019 and 2020 by extending our platform to external developers through the launch of an innovative apps marketplace. Our apps marketplace is a distinct framework on our platform where developers can design and build software to expand the possibilities of monday.com, allowing customers to create highly customizable solutions to fit their needs. As a result, we have a growing community of partners across different channels, ecosystems and independent software vendors that add and expand their businesses by leveraging our apps marketplace.
Using our apps marketplace, developers and app builders can distribute their building blocks and solutions further promoting the utility and breadth of our platform. Accordingly, we have been successful in expanding our go-to-market strategy through the roll-out of our apps marketplace and we expect to continue to attract and convert customers through this framework.
Our Business Model
We generate revenue from the sale of monthly and annual subscriptions to our platform. We strive to provide each potential customer with a plan that suits their needs and supports their business objectives.
We offer four different subscription plans: Basic, Standard, Pro and Enterprise. Additionally, we recently started to offer a Free plan with limited features that focuses on small teams and is currently limited to a maximum of two users. The pricing of each of our paid plans is based on the number of users subscribed. When potential customers first engage with our platform, we offer them a free 14-day trial period of our Pro plan so they can experience the full functionality and benefits of our premium tier offering. Once customers realize the value of our platform, they often expand their plans by adding more users. Customers also often extend their contract terms from monthly to annual subscriptions, and a substantial majority of our revenue is derived from annual plans.
We bill our customers in advance and recognize revenue ratably over the term of the contract subscription period beginning on the date access to our platform is granted.
 
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The chart below provides an overview of our paid subscription plans:
[MISSING IMAGE: tm211978d4-tbl_roundpric4c.jpg]
Our Global Customer Base
We have a large customer base that consisted of 113,888 and 127,974 customers as of December 31, 2020 and March 31, 2021, respectively, representing an increase of 31% and 34% from 87,109 and 95,254 customers as of December 31, 2019 and March 31, 2020, respectively. We believe there is a substantial opportunity to continue to grow our customer base. Our customers range from teams of two users to organizations of 7,000 users, which use the platform for thousands of use cases and across more than 200 industries. Additionally, our customers represent approximately 38% of the Fortune 500 companies.
We are a global business with customers in more than 190 countries. Since inception, we have had a strong international presence. Our platform is currently available in 13 different languages, including English, Spanish, French, German, Japanese, Portuguese (Brazil), Russian, Dutch, Italian, Korean, Swedish, Traditional Chinese and Turkish.
For the year ended December 31, 2020 and the three months ended March 31, 2021, approximately 52% of our revenue was generated from customers outside of the United States. We are highly diversified, with no single customer accounting for more than 1% of our revenue and our top 100 customers accounting for less than 10% of our revenue, in each case for the years ended December 31, 2019 and 2020 and the three months ended March 31, 2021.
We define “customer” to mean a unique web domain-based account that is on a paid subscription plan, which could include an organization, educational or government institution, or distinct business unit of an organization.
Customers with More than 10 Users
We distinguish customers with more than 10 users from our broader customer base. They are the core focus of our sales and marketing efforts and the ARR growth rate of our customers with more than 10 users, which include enterprise and non-enterprise customers, has outpaced the rest of the business in each of our previous fiscal years, and our expectation is that such customers will continue to grow in the future. As of December 31, 2019 and 2020 and March 31, 2021, our customers with more than 10
 
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users accounted for 53%, 63% and 65% of ARR, respectively. The Net Dollar Retention Rate of these customers for the same periods was 116%, 119% and 121%, respectively.
Enterprise Customers
Our ability to successfully move upmarket is demonstrated by the consistent growth in the number of our enterprise customers. We have grown the number of enterprise customers on our platform, which we define as customers with more than $50,000 in ARR, by 247% from 2019 to 2020 and by 219% from March 31, 2020 to March 31, 2021. The ARR from such enterprise customers grew by 297% from 2019 to 2020 and by 261% in the three months ended March 31, 2021 compared to the same period in 2020, outpacing our overall ARR growth as a company.
Our Growth and Operational Efficiency
We have experienced rapid growth since we launched our product in 2014. Our revenue was $78.1 million and $161.1 million for the years ended December 31, 2019 and 2020, respectively, representing an increase of 143% and 106% in the years ended December 31, 2019 and 2020, respectively, and was $31.9 million and $59.0 million in the three months ended March 31, 2020 and 2021, respectively, representing a period-over-period growth of 85%. Additionally, we had a net loss of $91.6 million, $152.2 million, $19.9 million and $39.0 million for the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, respectively.
We have built our platform efficiently, having raised approximately $234.0 million of external capital, with $134.3 million in cash and cash equivalents and short-term deposits on our consolidated balance sheet as of March 31, 2021. In addition, we have an $80.0 million revolving credit facility (the “Revolving Credit Facility”), of which approximately $21.0 million was drawn as of March 31, 2021. From inception through March 31, 2021, we have used approximately $121 million of capital to finance our operations, generating more than $2 of ARR for every $1 of capital used in such time. We define capital used to finance our operations as the amount of proceeds generated from our financing rounds from inception through March 31, 2021, less cash and cash equivalents and short-term bank deposits as of March 31, 2021, plus borrowings under the Revolving Credit Facility as of March 31, 2021.
Key Factors Affecting Our Business
The growth and future success of our business depends on many factors, including those described below.
Adoption of Our Work OS
Our growth is dependent on the widespread adoption of our Work OS by organizations globally in lieu of, or in addition to, legacy systems. As we scale and continue to invest in the capabilities of our platform, we expect a growing number of organizations to adopt our Work OS and experience the benefits of monday.com, expanding the potential market for our platform.
Acquiring New Customers
The success of our business and our growth prospects are largely dependent on our ability to continue to acquire new customers. This, in turn, relies on our ability to reach teams and organizations through our marketing and sales efforts. To this end, we are making significant investments in our sales and marketing efforts to expand our reach and differentiate our platform from competitive products and services. We had approximately 87,109, 113,888 and 127,974 customers as of December 31, 2019 and 2020 and March 31, 2021, respectively. We see a significant opportunity to continue to add customers as we further develop our sales and marketing efforts and scale our platform.
 
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While we continue to leverage our widespread self-serve funnel, we also intend to increase our marketing spend to support our sales team’s effectiveness by providing targeted leads. Recently, we have leveraged multiple selling points within organizations to acquire new customers. While we expect our sales and marketing expenses to increase on an absolute basis, we also expect sales and marketing expenses to decrease as a percentage of revenue as we become more efficient at targeting and converting potential customers.
Expanding Usage Among Existing Customers
We believe our ability to expand usage among existing customers and move upmarket is a critical component of our go-to-market strategy, which is central to our growth and future success. We regularly seek to grow existing accounts by adding more users across additional departments in the organization. Moreover, we believe that there is a large opportunity for growth among many of our existing customers. Over time, many of our existing customers have increased their number of users as they have expanded their use of our platform across their operations. Some of our biggest enterprise customers started with a small team of five users, before expanding the usage throughout their organization.
Our ability to expand usage among existing customers will largely depend on the ability of our sales and customer success teams to demonstrate the value of our platform to customers and offer solutions that satisfy our customers’ evolving needs. We have made significant investments in our sales and customer success teams over time due to the importance of educating potential customers about the benefits of using monday.com and in order to address our market opportunity. We expect to continue to invest significant resources in building and improving our sales and customer success teams. Any investments we make in our sales and marketing organization will occur in advance of experiencing benefits from such investments, so it may be difficult for us to determine if we are efficiently allocating our resources in those areas.
As our platform grows and we continue to invest in improving the ability of our sales and customer success teams to provide more value and introduce new opportunities within an organization, we expect customers to continue to add additional users and expand to new use cases, which we expect will further accelerate our growth.
We measure our success in expanding usage among existing customers by analyzing the number of customers with more than $50,000 ARR on our platform, which we refer to as our enterprise customers. We view enterprise customers as critical to our growth. As of December 31, 2019 and 2020 and March 31, 2020 and 2021, we had 76, 264, 105 and 335 enterprise customers, respectively, representing a year-over-year increase of 247% and 219%, respectively. The ARR from such enterprise customers grew by 297% during the year ended December 31, 2020 compared to 2019 and by 261% in the three months ended March 31, 2021 compared to the same period in 2020.
Moreover, as of December 31, 2019 and 2020 and as of March 31, 2021, our customers with more than 10 users, which includes both our enterprise and non-enterprise customers, represented 53%, 63% and 65% of ARR, respectively. We believe these measures represent the improvements we have made to our platform to increase the value we deliver to our customers over time.
A key measure of our ability to successfully expand and grow revenue within our existing customer base is our net dollar retention rate (“Net Dollar Retention Rate”). Our Net Dollar Retention Rate for customers with more than 10 users was 116%, 119% and 121% for the three months ended December 31, 2019 and 2020 and March 31, 2021, respectively. Customers with more than 10 users are the core focus of our sales and marketing efforts; therefore, their Net Dollar Retention is a key metric we measure. We expect the percentage of ARR attributable to customers with more than 10 users and the Net Dollar Retention Rate for these customers to continue to increase. Additionally, our Net Dollar Retention rate for all of our customers was 100%, 105% and 107% for the three months ended December 31, 2019 and 2020 and March 31, 2021, respectively. We calculate Net Dollar Retention Rate as of a period end by starting with the ARR from customers as of the 12 months prior to such period end (“Prior Period ARR”). We then calculate the ARR from these customers as of the current period end (“Current Period ARR”). The calculation of Current Period ARR includes any upsells, contraction and attrition. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the net dollar
 
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expansion rate. For the trailing 12-month calculation, we take a weighted average of this calculation of our quarterly Net Dollar Retention Rate for the four quarters ending with the most recent quarter. Our Net Dollar Retention Rate may fluctuate as a result of a number of factors, including the level of penetration within our customer base, expansion of products and features and our ability to retain our customers.
As part of our growth strategy, we are focused on targeting potential customers with over 10 users and increasing the value we derive from such customers over time. The chart below illustrates this dynamic by presenting the ARR from each customer cohort over the periods indicated. Each cohort represents customers with over 10 users that made a purchase from us in a given year. For example, the year 2018 cohort represents all customers with over 10 users that made their initial purchase from us during the year ended December 31, 2018. Each customer is counted within a cohort once they surpass 10 users. For example, if a customer has five users as of December 31, 2017 and increases the number of users on its account to 10 users on December 31, 2018, such customer would fall within the year 2018 cohort. If a customer drops below 10 users, we continue to count them in the cohort for the year in which such customer surpassed 10 users. For a description of how our ARR is calculated, see “— Our Business Model — Our Customers.”
[MISSING IMAGE: tm211978d4-lc_incarrcus4c.jpg]
Newer cohorts have both larger ARR and a higher retention
Historically, customers would adopt and expand on the platform on a self-serve basis, independent of any assistance. In addition to our self-serve funnel, as of 2018, we began to invest in our sales,
 
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customer success and partners teams to help our customers obtain more value out of the platform. As a result of the investments described above, we have seen significant growth in the customer spend from our cohorts during the first 12 months of their subscriptions to monday.com. For example, the new ARR generated from our 2018, 2019 and 2020 cohorts was higher than the new ARR generated by our 2016 cohort by 6.7x, 16.0x and 27.1x respectively. Additionally, we have also seen the rate of expansion from our 2017 and 2016 cohorts accelerate in recent years due to our sales and customer success teams helping them gain more value out of the platform. For example, our 2016 cohorts grew 21% and 29% for the years ending 2019 and 2020, respectively, while our 2017 cohorts grew 21% and 33% for the periods ending 2019 and 2020, respectively.
Continued Innovation
Our success and continued growth are dependent on sustaining innovation in order to deliver a superior product and customer experience, allowing us to maintain a competitive advantage. Since our inception, continued technological innovations have accelerated our growth in new and existing accounts.
We intend to continue to invest in research and development to maintain our platform differentiation, create new vertical features to address the evolving demands of our customers and grow our community of developers and partners. In the short-term, we anticipate making continual investments in upgrading our technology to continue providing our customers a reliable and flexible platform that suits their needs.
As a result, we expect our research and development expenses to increase on an absolute basis in future periods. We foresee that such investment in research and development will contribute to our long-term growth but will also negatively impact our short-term profitability. For the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, our research and development expenses as a percentage of revenue were approximately 31%, 27%, 21% and 26% respectively.
As we improve the efficiency with which we innovate and address customers’ diverse and increasing needs, we expect to continue expanding the usage of our platform among existing customers and attracting new customers, which we expect will continue to drive our long-term growth.
Continued Investment in Growth
We believe our market opportunity is substantial, and we expect to continue to make significant investments across all aspects of our business in order to continue to attract new customers, expand within our existing customers, move upmarket and develop technology to address our customers’ evolving needs, thereby prioritizing long-term growth over short-term profitability.
We see a significant opportunity to expand usage of our platform on a global scale. Therefore, we have made, and plan to continue to make, significant investments to expand geographically, including establishing new branches in the United States, the United Kingdom and Australia. In connection with our efforts to establish new branches, we continue to make investments to develop and grow our local presence, including hiring and training local personnel, finding and leasing office space and increasing our local marketing spend to increase brand awareness in the local market we are attempting to penetrate.
Additionally, as we seek to enter underpenetrated markets, we partner with local sources such as social media accounts, content platforms and organizations in order to promote monday.com, which typically results in additional upfront expenses. We also intend to continue to invest in building additional products, features and functionality that expand our capabilities and facilitate the extension of our platform to new use cases. In future periods, we may also evaluate strategic investments in businesses and technologies to drive product and market expansion.
As a result, we expect our sales and marketing expenses to increase on an absolute basis in future periods. We expect that such investment in sales and marketing will contribute to our long-term growth but will negatively impact our short-term profitability. For the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, our sales and marketing expenses as
 
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a percentage of revenue were approximately 152%, 119%, 116% and 107%, respectively. We invest in sales and marketing often prior to generating revenue to drive long-term growth and efficiency.
These investments result in increases in operating expenses in advance of revenues attributable to such investments. In addition, such investments have led to decreases in our free cash flow. While we expect such investments will continue to adversely impact our free cash flow in the near term, we believe they will contribute to our long-term growth.
Impact of COVID-19
Given the nature of our business, the COVID-19 pandemic did not have a positive or negative material impact on our revenue and results of operations. We did not experience a material number of non-renewals of subscriptions during 2020, nor any material declines in revenue associated with potential declines in our customers' revenues, and we currently expect our existing customer base to continue to grow over time.
We anticipate that the overall demand for our Work OS will continue to grow as organizations learn about and experience the benefits of our platform and continue to rely on our platform for workplace solutions. Further, we see potential for an increase in demand for our Work OS over time as more organizations globally transition to remote work, which may result in increased reliance on Work OS to digitize their work processes previously performed in office settings.
Our Equal Impact Initiative
We believe that it is our responsibility as a company to use our unique expertise to create positive social impact across the globe. On            , 2021, we established the Equal Impact Initiative to further our mission of closing the digital divide between the for-profit sector and the nonprofit sector. We aim to aid the digital transformation of nonprofit organizations so they can make a greater impact.
In order to carry out our Equal Impact Initiative, we will establish the monday Foundation, a 501(c)(4) social welfare organization under Delaware law. The monday Foundation will be charged with helping us carry out our social responsibility mission. We intend to fund the monday Foundation as follows:

Equity pledge.   Following the closing of this offering, we intend to issue the monday Foundation a warrant to purchase        ordinary shares, with an exercise price of $0.01 per ordinary share. Commencing two or more years following the closing of this offering, and for a period of approximately ten years, we intend to issue additional ordinary shares or warrants exercisable for ordinary shares to the monday Foundation in order to continue to fund its charitable initiatives to promote the Equal Impact Initiative. As of the date of this prospectus, we have not determined the amount of ordinary shares and/or warrants exercisable for ordinary shares that will be issued to the monday Foundation, as such decision will largely depend on the funding requirements and performance of the monday Foundation on an ongoing basis. However, we have determined that we will limit any equity contribution to the monday Foundation to no more than 1% of our outstanding ordinary shares on an annual basis, measured as of the end of each fiscal year, with any unissued amount up to a maximum of 1% in the aggregate measured as of the end of the prior fiscal year carried over to subsequent fiscal years.

One-time grant.   We intend to donate 1% of the proceeds from this offering to the monday Foundation. See “Use of Proceeds.”
We expect that our issuance of equity and equity-linked securities to the monday Foundation, including ordinary shares and warrants exercisable for ordinary shares, will result in dilution to our existing shareholders’ ownership over time. While we are under no legal requirement to fund or continue to fund the monday Foundation, our Co-Chief Executive Officers are committed to doing so for the foreseeable future, and Mr. Mann, one of our Co-Founders and Co-Chief Executive Officers, will have certain veto rights over decisions related to the issuance of funds and securities to the monday Foundation pursuant to his founder share.
 
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Additionally, as part of our Equal Impact Initiative, we intend to offer monday.com subscriptions and product support, digital infrastructure, education, services and volunteer support to the nonprofit sector, including the following:

Product match.   We intend to offer up to $1 worth of free or substantially discounted monday.com subscriptions to nonprofit organizations, including product support, for every $1 of revenue we generate. We do not expect that these discounted subscriptions or donations will have a material impact on our results of operations.

Employee time.   We intend to provide every employee with the opportunity to volunteer 1% of their paid work time to any approved charitable or community initiative. We do not expect that such allocation of employee time will have a material impact on our results of operations.
The monday Foundation will operate independently from the Company, and the Company will have no direct control over the affairs of the monday Foundation. As such, the monday Foundation may not operate as intended, which could adversely impact us. See “Risk Factors — Risks Related to our Equal Impact Initiative and the monday Foundation” — The novelty of our Equal Impact Initiative makes its efficacy unpredictable and makes us susceptible to unintended consequences.”
Components of Results of Operations
The following briefly describes the components of revenue and expenses as presented in our consolidated statements of operations.
Revenue
We derive revenue from monthly or annual subscription agreements with our customers for access to our cloud-based Work OS platform. Our customers do not have the ability to take possession of our software.
Cost of Revenue
Cost of revenue consists of merchant and credit card processing fees, hosting fees, amortization of capitalized software development costs, subcontractors, salaries and related expenses, share-based compensation and allocated overhead costs.
Gross Profit and Gross Margin
Gross profit, or revenue less cost of revenues, and gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by various factors, including the timing of our acquisition of new customers, renewals of and follow-on sales to existing customers, costs associated with operating our cloud-based platform, and the extent to which we expand our operations and customer support organizations. We expect our gross margin to remain relatively consistent over the long term.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Sales and marketing expenses are the most significant component of our operating expenses and consist of marketing and advertising expenses and commission paid to our partners. In addition, personnel-related expenses are a substantial component of our operating expenses and consist of salaries, benefits and share-based compensation expenses. Operating expenses also include an allocation of overhead costs for facilities and shared IT-related expenses, including depreciation expenses.
Research and development expenses
Research and development expenses include salaries and related expenses, share-based compensation, subcontractor costs and allocated overhead costs.
 
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We expect our research and development expenses to increase on an absolute basis in future periods. We foresee that such investment in research and development will contribute to our long-term growth but will also negatively impact our short-term profitability. However, we may experience variations from period to period with our total research and development expense as a percentage of revenue as we develop and deploy new innovations that target new use cases. For the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, our research and development expenses as a percentage of revenue were approximately 31%, 27%, 21% and 26%, respectively. In the long-term, we anticipate that research and development expense as a percent of revenue will decline.
Sales and marketing expenses
Sales and marketing expenses consist primarily of salaries and related expenses, share-based compensation, online and offline marketing and advertising expenses, channel partners’ commissions and allocated overhead costs.
Within our sales and marketing expenses, channel partners’ commissions include commissions granted to third parties that provide customer referrals to our platform. We only grant commissions to our channel partners following the successful onboarding of a new customer. For the years ended December 31, 2019 and 2020 and the three months ended March 31, 2020 and 2021, our channel partners’ commissions as a percentage of revenue represented approximately 4%, 4%, 2% and 6%, respectively.
We expect our sales and marketing expenses will increase in absolute dollar amounts as we continue to make significant investments in our growth, particularly in online and offline marketing and advertising expenses. We also expect to hire additional employees as part of our effort to grow our sales teams. As our business scales through customer expansion and market awareness of monday.com, we anticipate that sales and marketing expenses as a percent of total revenue will continue to decline.
General and administrative expenses
General and administrative expenses consist of salaries and related expenses, share-based compensation, professional service fees and allocated overhead costs.
We expect our general and administrative expenses to increase in absolute dollars as we continue to grow our business. We also expect to incur additional expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for directors and officers insurance, investor relations and professional services. We expect that general and administrative expense as a percent of total revenue will decline over the long-term as we benefit from the scale of our business.
Financial income (expense)
Financial income (expense), net, consists primarily of interest generated by our cash deposits at commercial banks, offset by interest expenses and other fees related to the Revolving Credit Facility, bank charges, and foreign exchange gains and losses.
Income tax expenses
Income tax expenses consist primarily of income tax related to foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on deferred tax assets because we have concluded that it is not more likely than not that the deferred tax assets will be realized.
 
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Results of Operations
The following table sets forth the consolidated statements of operations in U.S. dollars and as a percentage of revenue for the period presented.
Year ended December 31,
Three months ended March 31,
2019
2020
2020
2021
(in thousands)
Revenue
$ 78,089 $ 161,123 $ 31,929 $ 58,972
Cost of revenue(1)
11,978 22,488 4,591 7,924
Gross profit
66,111 138,635 27,338 51,048
Operating Expenses:
Research and development(1)
24,637 43,480 6,651 15,581
Sales and marketing(1)
118,534 191,353 36,945 63,048
General and administrative(1)
15,458 54,339 3,745 10,266
Total operating expenses
158,629 289,172 47,341 88,895
Operating loss
(92,518) (150,537) (20,003) (37,847)
Financial income (expense), net
1,590 526 349 (406)
Loss before income taxes
(90,928) (150,011) (19,654) (38,253)
Income tax expenses
(683) (2,192) (209) (699)
Net loss
$ (91,611) $ (152,203) $ (19,863) $ (38,952)
(1)
Includes share-based compensation expense as follows:
Year ended December 31
Three months ended March 31,
2019
2020
2020
2021
(in thousands)
Cost of revenue
$ 970 $ 2,720 $ 299 $ 1,531
Research and development
9,396 12,142 1,025 4,537
Sales and marketing
3,283 10,068 1,051 4,034
General and administrative
8,190 39,415 851 4,438
Total share-based compensation expense
$ 21,839 $ 64,345 $ 3,226 $ 14,540
(2)
Share-based compensation during the year ended December 31, 2019 and 2020 included compensation expenses of $13.1 million and $10.5 million, respectively, related to secondary sales of ordinary shares by certain of our employees.
 
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Year ended
December 31
Three months
ended March 31,
2019
2020
2020
2021
Revenue
100% 100% 100% 100%
Cost of revenue
15 14 14 13
Gross profit
85