Why Slack is worth $1bn: it's trying to change how we work

Mobile Business

There are two types of people in the world: those who have never heard of Slack, and those who can’t imagine life without it.

The latter group explains why the workplace chat app has just received $120m investment valuing it at $1.12bn. Not bad for a product launched just over a year ago.

What is Slack?

At its simplest, Slack is a chat app aimed at businesses rather than individuals. It works best for small to medium-sized teams, who create a joint account and can then talk with each other on IRC-style channels, send direct messages, and create private groups.

Why is Slack different from normal chat services?

Much of the reason why the app is popular is simply a matter of polish. A team can be up-and-running in a matter of seconds, the free apps for desktop and mobile are stable and well designed, and the web interface is full-featured enough that users who can’t install software – typical in many businesses – can still use the service.

But the app also distinguishes itself from the competition in the extent to which it lets users customise it to meet their needs – and the ease with which that can be done. Linked social media posts can be embedded, images can be downloaded and stored, and “slackbot” can be set up to answer common questions or perform complex tasks automatically.

At its heart, Slack wants to be the repository for everything a company uses, tying together disparate apps like Dropbox, Google Docs, Twitter and many others. Users come for the chat, and stay because everything else works so much better through the app.

Where did it come from?

Slack began in 2009 as Tiny Speck. Set up by the Flickr founder, Stewart Butterfield, the goal was very different - the creation of an online game called Glitch. That opened its doors in 2011, as a casual, massively multiplayer game, played using the Flash plugin. But a combination of a bug-plagued launch, unclear goals, and a failure to embrace mobile gaming just as it was taking off doomed Glitch, which shut down in December 2012.

Out of the ashes came Slack. Originally created for internal use at Tiny Speck, to help co-ordinate the creation of Glitch, the team realised it could be popular among a wider audience.

If that story sounds familiar, it should: it’s almost the same as the genesis of Flickr. That came out of Butterfield’s first attempt at making a game, called Game Neverending. When that failed, a core set of features were pulled out, and released as the photosharing service, eventually sold to Yahoo for more than $20m in 2004. It seems Butterfield is doomed to repeatedly fail to make games, and instead create hugely successful web services.

Surely something has gone wrong for Slack?

The company has had its share of teething problems. In October, Valleywag revealed that the service’s security model is deliberately leaky: anyone could enter an email address from a major company, and see a list of all the teams running within. They couldn’t access the actual chat channels without being in control of the email address, but eavesdroppers could still discover that Twitter had a team called “iOS Flock”, Apple had a team called “Games Editorial”, and Google had a team called “Tribe Wearables”. Not the most thrilling information, but it was still made public when it should have stayed private.

What’s next for Slack?

The company has 30,000 teams signed up, but only 73,000 individual subscriptions to its premium tier, which lets users search their complete message history and hook up an unlimited number of external apps to the service. That’s earning it $1m a month in revenue, but it’s got some way to go to justify a $1bn valuation.

Butterfield says that the “as the leader of a brand new product category, we have a huge advantage right now. These next six to 18 months are going to be critical for growth and this funding round gives us unlimited flexibility to ensure that Slack’s momentum will continue to pick up steam.”

Tiny Speck’s Stewart Butterfield on Glitch, APIs and mobile apps

Powered by Guardian.co.ukThis article was written by Alex Hern, for theguardian.com on Monday 3rd November 2014 12.59 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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