Prompt Cast
The History and Success of Slack: From a Hippie Commune to a $19.5 Billion IPO
TLDR This episode of Acquired explores the fascinating journey of Slack, from its origins on a hippie commune in Canada to becoming the largest enterprise IPO in history. The podcast covers the creation of Flickr, the failure of Glitch, and Slack's rise to success through its freemium model and unique approach to user acquisition and retention.
Timestamped Summary
00:00
This episode of Acquired covers the history of Slack, starting from its roots on a hippie commune in Canada to its evolution into the largest enterprise IPO in history.
07:37
Stewart Butterfield, the co-founder of Slack, had a unique upbringing on a hippie commune in Canada, changed his name at 12, studied philosophy, and had his first computer at age seven, which sparked his interest in coding and the internet.
15:06
In 2002, the founders of Ludicorp, including Stewart Butterfield, decided to create a game called Game Never Ending, but due to lack of funding and resources, they pivoted to creating a photo sharing service called Flickr in December 2003.
22:00
Cal Henderson, a hardcore fan of Game Never Ending, hacks into Ludicorp's email servers and impresses the founders with his talent, leading them to convince him to help build Flickr; within 45 days, Flickr is ready to launch and receives overwhelming positive feedback from bloggers and the press, leading to its acquisition by Yahoo for between $22 to $25 million.
29:29
After the acquisition of Flickr by Yahoo, Stuart Butterfield and the rest of the team stay for a three-year earn out, but eventually leave due to the turmoil at Yahoo, leading to the end of Stuart and Caterina's marriage; Stuart takes some time off before reuniting with the team to start a new company called Tiny Speck and create a game called Glitch.
36:04
After raising millions of dollars and building a team of 40 engineers and designers, Stuart Butterfield and his company Tiny Speck launch their game Glitch in 2011, but it quickly flops and they are forced to lay off all but the four co-founders.
42:56
After the failure of Glitch, Tiny Speck creates a website called hire a genius to help former employees find jobs, uploads the code and art from Glitch to the public domain, and starts working on a new project called Slack, which is inspired by the success of hip chat.
49:36
After a week of brainstorming, the team decides to pivot and create a team chat communication product called Slack, which they pitch to investors as a productivity software, and they eventually bring on Metal Lab to redesign the UI.
55:54
Slack gains traction and builds buzz through word of mouth and Twitter, officially launching in August 2013 with 8,000 companies signing up for the waitlist on the first day, reaching 15,000 companies within two weeks, and quickly generating $1 million in ARR within a couple of weeks of launching paid plans.
01:02:40
Slack's freemium model, which allowed teams to use the full product for free, was a critical factor in its success and differentiated it from competitors like HipChat, ultimately leading to its acquisition of HipChat and rapid growth in paid ARR.
01:09:39
Slack's decision to pursue a direct public offering (DPO) instead of a traditional IPO allowed them to leverage their existing brand awareness and raise capital without diluting the company or facing the same challenges as companies like Uber and Lyft.
01:16:17
Slack's stock price closed at $38.62 on its first day of trading, giving the company a market cap of $19.5 billion, and venture firm Excel owned close to a quarter of the company at the time of the IPO.
01:23:45
Slack's cact LTV ratio is about 13 times, meaning that the cost to acquire a customer is more than paid for by the lifetime value of that customer, and while Microsoft Teams is a serious competitor, Slack is likely to win over customers who aren't currently Microsoft customers.
01:30:37
Slack's deep understanding of user acquisition, conversion, activation, and retention, as well as their focus on getting teams to reach the 2000 message threshold, has contributed to their success and sets them apart from traditional enterprise software companies.
01:37:16
Slack's strategy of offering a free product to acquire customers, while expensive to maintain, has allowed them to achieve high growth rates and a low cost of sales, compared to Zoom's externally viral approach.
01:43:49
Slack's potential for growth lies in both expanding their market share in the chat communication market and developing new monetized features and products, as well as potentially acquiring other companies, while the risk is that they could be overtaken by competitors like Microsoft Teams.
01:50:41
The hosts speculate that there will likely be large acquisitions in the productivity space by both traditional players and upstart companies like Microsoft, Salesforce, Google, Slack, and Zoom.
Categories:
Technology
Business
