How Does Notion Make Money? Dissecting Its Business Model (2024)

Executive Summary:

Notion is a productivity software tool that helps individuals and teams organize their life and manage their projects.

Notion makes money by charging a monthly or annual subscription fee to both individual consumers and businesses.

Founded in 2013, Notion is now one of the fastest-growing software products out there. The company itself is valued at $10 billion.

What Is Notion?

Notion is a productivity app that helps individuals and teams organize their life and manage their projects.

The platform calls itself the all-in-one workspace and allows its business and individual users to conduct all types of tasks.

Members have replicated various use cases within the app, including creating:

  • Company and product roadmaps
  • An internal wiki detailing all that’s important
  • Habit, financial, or subscription trackers

… and so much more. One of Notion’s biggest strengths is the community it has amassed. Its users create templates, which are then advertised on the firm’s own template gallery.

Notion even features a variety of use cases its business customers have built. The firm has been able to attract customers such as MatchGroup, Monzo, Pixar, and hundreds of others.

One aspect that makes Notion so powerful for individuals and businesses alike is the integrations it offers. Users can plug Notion into other software products like Asana, Jira, GitHub, Slack, and many more.

Notion itself can be accessed in a variety of ways. Members can use the product via the browser (both by logging in or downloading its plugin) and by downloading its mobile app (available for Android and iOS devices).

Detailing Notion’s Founding Story

Notion, headquartered in San Francisco, California, was founded in 2013 by Ivan Zhao and Simon Last.

To say that CEO Zhao is living and breathing computer science is probably quite an understatement. His transformative years were spent in China, where he was born and discovered his love for programming.

He grew up learning how to code and even participated in competitions such as the International Olympiad in Informatics.

When Zhao was attending high school, his mother decided to move the small family to Vancouver, Canada where he wound up attending the University of British Columbia.

Being already a competent programmer, Zhao actually focused his studies on cognitive science and art. He even began helping his art student friends to create portfolio websites and subsequently realized that “those people have taste; they just don’t have good tools.”

Zhao, after reading a 1962 paper by Douglas Engelbart called “Augmenting Human Intellect: A Conceptual Framework”, came to the conclusion that he wanted to build tools that would help humans to be more creative and imaginative in their work.

Right after graduation, he started working for the e-book startup Inkling, but ultimately was too enamored with the idea of visually oriented programming that he decided to quit after a year.

One of the first people he recruited was Simon Last who at the time was still enrolled at the University of Maryland, College Park. After Last was offered an internship, he actually decided to drop out of college and joined Zhao as a full-time co-founder.

Soon after, in 2013, the two managed to raise around $2 million in seed funding from angel investors, including family and friends. For the first two years, they worked on a no-code tool called Concept that after being released to the public no one seemed to want to use.

At the time, in 2015, Zhao and Last employed a small team of two more engineers, which they consequently had to let go. In order to extend their runway, they moved from San Francisco to Kyoto in Japan where they coded for 18 hours a day.

Finally, in March 2016, they released the first version of what is now known as Notion. To attract users, they kept the product free. Zhao’s mother, as a result, had to loan him $150,000 to keep the young company and its founders afloat.

A few weeks later, they listed Notion on the discovery platform Product Hunt to get some buzz going. Naval Ravikant, the founder of AngelList and one of Notion’s early investors, also activated his seven-digit Twitter following.

In those early days, Zhao was doing a lot of double shifts and helped the customer support team. By being directly engaged with users, he would gain a substantially better understanding of the product itself.

Directly engaging with users also meant that Zhao would often meet with startup founders who would become one of Notion’s early business adopters. Startup accelerator Y Combinator, in particular, proved to be an extremely valuable customer acquisition channel.

Another reason for Notion’s rapid ascend was the simultaneous downfall of Evernote. The OG note-taking software had alienated many of its users by jacking up prices, even charging money on features that were previously free.

In March 2018, after releasing Notion 2.0 (which also included Android and iOS apps), The Wall Street Journal journalist David Pierce wrote a review praising Notion as “the only app you need for work-life productivity.”

Two other key things went down that year. First, Notion began charging users for the product, which given the team’s small size meant quasi-instant profitability.

And second, Zhao recruited Akshay Kothari, who sold the news aggregation app Pulse to LinkedIn for $90 million back in 2013 and was one of Notion’s early investors, as Notion’s Chief Operating Officer. Ironically, Kothari previously tried to recruit Zhao to join him at Pulse – to no avail.

Investors would soon take notice as well. In July 2019, Notion raised $18.2 million at an $800 million pre-money valuation. And just a mere 9 months later, they topped that up with yet another $50 million fundraise, which valued Notion at $2 billion.

A lot of the growth that Notion registered came by virtue of influencers like Ali Abdaal who featured the tool in many of their videos.

The pandemic, which forced many companies to rethink their remote organization, certainly played a key role, too. Notion became so popular that users in various countries would begin to organize meetups.

South Korea, in particular, seemed to eat the tool up like crazy. As a result, Notion even introduced a Korean version back in August 2020.

Over the course of the coming months, the team continued to refine the product and even made its first acquisition when Notion purchased, an Indian startup that builds connectivity and integrations with over 200 services, in September 2021.

And just a month later, Notion raised yet another round of funding. This time, investors injected $275 million into the business, valuing it at $10 billion (pre-money).

The capital injection as well as the fact that Notion was profitable enabled the firm to go on the offense during 2022 – a year when many companies had to lay off a significant portion of their workforce.

Notion not only acquired two more companies, namely Cron (06/2022) and Flowdash (07/2022) but also began to advertise its products on bus stops and other more traditional marketing channels.

Today, Notion boasts well over 30 million users while employing 100+ people from its headquarters in San Francisco.

The Notion Business Model Explained

Notion operates under a freemium business model, meaning the core product can be accessed at no cost while premium features incur fees.

As I’ve outlined above, Notion initially started out by not charging users at all. The approach was simple: maximize registrations via product-led and community-led growth.

Notion segmented its initial target market into two groups, namely individual consumers and small and midsize businesses (< 100 people).

By exactly knowing who used the product for what purpose, the firm was able to maximize its limited resources (it had less than 20 employees 3 years after launching the product).

This was particularly evident when looking at Notion’s 1.0 release on Product Hunt. Two of the software’s most prominent features, namely Tasks and Wikis, were specifically aimed at startups.

Another key feature to get users comfortable with the software as fast as possible was to utilize personalization. Notion would take members through a 2-minute quiz to assess what purposes they wanted to use the tool for. This heavily minimized friction and thus boosted adoption.

Having a world-class product that was free was then directly tied into the firm’s approach to community building. Early on, the founders and employees would directly engage with users on social platforms like Twitter or Reddit.

This then sparked the creation of various communities, such as Notion’s subreddit (over 150,000 members) or dedicated Facebook groups, where users would engage with each other.

And Notion fully embraced its community. The firm not only helped to organize meetups around the world but also created the Notion Ambassador program.

Ambassadors, who teach Notion within their own communities, would then get access to early product releases, be able to use Notion’s private Slack channel, and have one-on-one sessions with Notion’s own employees.

Additionally, Notion creators receive additional exposure by being featured on the firm’s template gallery. And Notion Certified Exerts are also promoted on its site, thus inviting potential clients to work with them.

That community-driven approach then allows the firm to sell into businesses as well. Commonly referred to as bottom-up sales, the approach has been successfully utilized by the likes of Figma and Slack.

Users on individual plans essentially became advocates within their own organizations, which prompts their employers to adopt said tools.

Notion also used freebies to incentivize businesses to join. Startups admitted to Y Combinator, for instance, would receive $1,000 in free credits.

Handing out monetary incentives certainly makes sense in a B2B setting. Business customers tend to be much stickier as they build their processes around a certain tool. The opportunity cost of replacing those tools might simply be too immense as the company scales.

Interestingly, Notion has changed its course on its freemium business model strategy a few times. After being completely free first, the company moved to paid plans only sometime in 2018.

Then, in May 2020, it reintroduced a free personal option. The firm had just raised close to $70 million over the past 9 months, so it likely used that cash to boost growth.

With that being said, let’s take a quick look at how Notion actually makes money.

How Does Notion Make Money?

Notion makes money by charging a monthly or annual subscription fee to both individual consumers and businesses.

The above-mentioned Free plan allows users to utilize its collaborative workspace, integrate with third-party tools like GitHub, invite up to 10 guests, and more.  

Apart from its Free tier, Notion offers three other plans, namely:

  • Plus: $8 per month (when billed annually)
  • Business: $15 per month (when billed annually)
  • Enterprise: pricing available on request

Each tier naturally provides subscribers with additional features. Plus, for example, is aimed at small groups and offers premium features such as unlimited file uploads.

And as you can see, Notion has since expanded from its focus on SMBs and now even offers a plan for large-scale enterprise customers.

As I’ve outlined above, enterprise customers are not only very sticky but also demanding, so it’s key that Notion continues to extend its feature set beyond databases, note-taking, and so forth.

Notion Funding, Revenue & Valuation

Notion, according to Crunchbase, has raised a total of $343.2 million across 5 rounds of venture capital funding.

Notable investors include Sequoia Capital, Index Ventures, Coatue, Shine Capital, Offline Ventures, and many others.

Notion is currently valued at an eye-popping $10.3 billion after raising $275 million in Series C funding back in October 2021.

Given that Notion remains in private ownership, it is not obligated to disclose revenue figures to the public.  

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.