Cofounder and chief executive Stewart Butterfield has said that if investors believe Slack is worth $2.8 billion, it is worth $2.8 billion, by definition. And while he's right, today he laid out a few other reasons to explain how Slack has managed to create a company that appears to have real value not only to investors just a year after launching, but also to users--numbers of which doubled in the first quarter alone, to 500,000 daily.
* Luck: Butterfield originally started the company that became Slack as a maker of a massively multiplayer game, which failed to take off. "It was a fucking horrible position to be in," he recalled at MIT Technology Review's EmTech Digital conference June 2. "We stopped with $5 million left and the investors didn’t want the money returned." After laying off all but eight people, he pivoted to a new business.
"We had incredibly lucky timing," Butterfield said. "A few years ago it wouldn’t have taken off like it did. Most people had not used messaging applications until three to five years ago."
* Fear: Butterfield has been buffeted by multiple economic disruptions, leading him to raise money for Slack that he doesn't expect to need to spend in the near future. His father was real estate developer who went bust when interest rates hit 18% in the 1980s. Butterfield himself endured the dot-com crash in 2000, during which time he also made an ill-timed investment in a seemingly promising company called Lehman Brothers.
So he has an acute sense of what could happen when, not if, the economy or the tech startup scene turns south. That's why he has raised about $300 million: "I am going to preserve option value," he said simply. "Having a couple hundred million dollars in the bank when the stuff hits the fan is a great place to be."
* Simplicity: As email has become a cumbersome mess for many people, messaging has come to the fore. But messaging isn't new, so Slack didn't have to invent an entirely new communication system. "We were very directly inspired by IRC," or Internet Relay Chat, the foundation for early Internet chat services. Messages can be addressed to a channel, not just individuals, and channels can be private, Butterfield said.
Slack also made its services, which cost $80 per user per year, easier to use than some other corporate messaging systems. But more than that, the design was intended to avoid the problems of email. "If you’re 500 messages behind in Slack, it’s no big deal," Butterfield said, whereas if you’re 500 messages behind in email, you feel like you can’t get anything else done.
That simplicity extends to billing. About 48 hours before Slack was planning to starting charging customers that had been using its service for free, Butterfield said, the team realized that one customer was Wal-Mart Labs, which had 700 accounts but only 450 people actually using it. "We decided not to make you pay for people who are not using it," Butterfield said, so customers like being refunded when an employee goes on vacation, for instance.
Not least, Butterfield said Slack has no plans to extend its service to consumers, who require much different features, such as the ability to block people. However, Slack is starting to form an applied research group to look at creating a knowledge base business drawn from all the data in all those messages, using machine learning to do language processing.
One last aside: Slack has no plans to embrace the idea of holocracy, getting rid of managers. "Wishful thinking," Butterfield said. While it's much harder to get work done now that the company has 175 employees, "going Lord of the Flies seems like it wouldn’t solve the problem."
