How Slack grew from $0 to $17 Billion in 5 years

slack picture growth

Slack’s growth story has been nothing short of amazing.

If you’ve been living under a rock, in short, Slack is a collaboration hub where teams can communicate and work together using groups and a live chat system. Slack is actually an acronym for “Searchable Log of All Conversation and Knowledge”.

Slack’s growth strategy has led it to billions without the need of an early sales team.

You might not know however that Slack was a pivot from the now-defunct MMORPG game called Glitch.

The Roots — Glitch 

Starting in 2009, Flickr co-founder Stewart Butterfield and his company Tiny Speck were hard at work on their game.

Their focus was to create an imaginative and fantasy-like world that people could “live” in. As Butterfield said himself:

“Those moments of play that we do get in meta-life, like playing music, or golf, or word-play, or flirting–those are some of the best parts about being alive”

Raising over $16 million in two rounds, Glitch was on the course of releasing a unique MMORPG into the market. However, even with the funding, Tiny Speck could not gather enough traction and enough new players.

Unlike other standard MMORPG’s at the time, Glitch was non-violent and surreal and thus could not appeal to the mainstream audience of MMORPGs at the time.

We all know however Butterfield’s success didn’t come from this game.

Source: A 2D Fantasy World with imaginative characteristic design

The Pivot To Tiny Speck (Slack) — 2013

During Tiny Speck’s development, Butterfield’s team was spread over New York, San Francisco, and Vancouver. In order to communicate, they originally used IRC (Internet Relay Chat). However, they wanted more functions to the tool and found it lacking.

What better way to solve the problem, then to invent their own tool. 

Originally Butterfield had no intention of commercializing it but realizing he had something more than just an internal tool in his hands, he pivoted from Glitch once he knew his game wouldn’t take off.

In order to keep improving the product, Tiny Speck needed more users. Butterfield and his team started with the first step towards their success, asking their network and calling in favors from friends at other companies.

“We begged and cajoled our friends at other companies to try it out and give us feedback. We had maybe six to ten companies to start with that we found this way.” — Stewart Butterfield

For Rdio for example, Tiny Speck started off with a small group initially but then spread to larger teams and eventually to the rest of the company.

The lessons learned from testing the product with a larger team allowed Butterfield to adapt and make changes to suit bigger teams as Tiny Spec developed.

These changes pushed Tiny Speck into its eventual public release. 

Launch of Slack — 2014

Source: www.slack.com

Although initially a ‘beta’ release, Butterfield didn’t want Tiny Speck to be viewed that way.

This is where Butterfield used his own experience to grow the initial user base.

Most interestingly, it wasn’t some flashy growth hack. 

It was PR. 

With the help from a press blitz, they welcomed people to try Tiny Speck through a request an invitation. On the first day, it received 8000 requests and consequently the next few weeks the number went up to 15000.

Within a few months of their launch, Tiny Speck officially changed its name to Slack Technologies. 

Slack then raised $42.8M in its Series C round with more than 60, 000 daily active users and 15, 000 paid users just a few months after its public launch.

With this extra funding and their first few thousand users, it began its climb into the millions.

The Mountain Climb Begins 

Slack was doing well but it realized there were a few moving pieces it needed to nail in order to hit incredible growth rates.

Although Slack had created its ‘own market’ and had a first mover’s advantage, they still needed to grow like a normal company.

To break it down, here were the main key factors leading to Slack’s success in its incredible growth phase.

  1. North Star Metric
  2. Perfecting User Experience (Onboarding) 
  3. Growth through Freemium And Pricing 

Perfecting User Experience

Perfecting user experience was on the top of the list for Slack from day one.

This meant listening to all user feedback to ensure the product did what it was meant to do and most importantly, be sticky.

Slack had to convince teams in order to learn how to make the product sticky.

“For most companies, the hard thing is making the product work well enough to convince a single person at a time to switch to it. We have to convince a team, and no two teams are alike.”

If one engineer at a startup tries Slack and says, ‘I hate it. I am not going to use this,’ that’s it for us. We won’t get evaluated.”

Given this, Slack’s beta period was spent on creating materials to explain what Slack did, how it worked and what it was meant to do. This included resources for team administrators.

Slack also worked on having a simplistic yet awesome UI/UX

Their primary motive has been to make the product so intuitive that their users can use it without any real guide or tutorial. If you’ve used Slack, you know how easy it is to be onboarded and you can immediately hit the ground running.

There is an entire article dedicated by the actual designers (MetaLab) on how they designed Slack’s design principles.

Some early design iterations created by MetaLab for Slack. Image via MetaLab.

The North Star Metric — 2000 Messages

The North Star Metric (NSM) is essentially the name for the one metric that matters. For example, Airbnb’s NSM is nights booked whilst Facebooks was Daily Active Users (DAU).

Butterfield knew in order to grow Slack exponentially, he needed to find his own North Star Metric.

Although most of the time was spent focused on qualitative feedback especially during the beta days, it didn’t take him long to find Slack’s own North Star Metric.

And it wasn’t users or revenue. It was messages sent. 

2000 messages to be exact. 

The Slack team found that it took around 2000 messages from the user side’s team to see the value and potential of Slack and most importantly, retained them from churning.

“But it hit us that, regardless of any other factor, after 2,000 messages, 93% of those customers are still using Slack today.”

Growth Through Pricing and Freemium Models

Although a common pricing strategy, many older SaaS companies do not offer freemium as a model.

Slack, however, executes it well by focusing on a limited amount of features but the essential ones that win teams over.

Source: https://slack.com/intl/en-au/pricing

If it was popular with a team, Slack’s paid plans were so inexpensive that managers could expense Slack just for their own team which made it easier to break through organizations, especially at an enterprise level.

Since it was initially free, it was easy for one member of a team to start utilizing it and like a seed, grew into an organization one person at a time.

One of the most amazing statistics it has is it’s trial to paid conversion rate. At an amazing 30%, it is one of the highest CRs in the industry.

Slack wasn’t just a solid team communications tool — it was cool.

“Never before have we witnessed so much user love for an enterprise software platform. Life is a lot better with less email.” — John Doerr, Kleiner Perkins

2016 — Present: Slack Goes Mainstream — Builds a Bot and App Ecosystem

Slack’s daily active users have grown ever since their initial growth from 2014–2016.

Source: https://usefyi.com/slack-history/

Slack knew however that they could not simply rely on its core features as its way of winning and keeping businesses.

They needed to innovate further. 

Slack started growing its app and bot ecosystem in order to create the “modern collaboration ecosystem” and to keep their userbase happy, especially developers.

As an example, Protobot was made by Amir Shevat, director of developer relations at Slack.

Released in the Slack App Directory, Protobot helps you teach, test and quickly deploy chatbots on Slack as well as other social messenger platforms such as Facebook Messenger.

Source: https://venturebeat.com/2016/07/13/this-ambitious-slack-bot-wants-to-bring-together-the-entire-developer-ecosystem/

This move wasn’t just for the sake of testing bots.

It kick-started an entire bot ecosystem that allowed Slack to increase capabilities of its software and ultimately join a community together of bot makers.

In another example, Slack formed an $80 million venture fund formed exclusively around apps. It already spent $2 million funding companies with apps that work on Slack, typically awarding around $100,000 per company.

These moves have helped Slack further by helping develop a community of bot and app makers, similar to Salesforce’s ecosystem.

IPO and more!

Slack is at the forefront of its industry and will be for many years. With it’s recent DPO (an IPO but not going through conventional methods), Slack is now a public company which means there will be more scrutiny on its business.

Source: https://www.chicagotribune.com/business/ct-biz-slack-not-an-ipo-20190620-p6m7z223v5b5vpvktosx2tzvli-story.html

With Microsoft Teams a looming threat, Slack will need to continually innovate and retain its community and potentially go beyond the collaboration system to match Microsoft’s enterprise ecosystem of products.

Richard

RIchard is one of the co-founders of Yought. In his spare time, he likes eating sushi and reading up on the latest tech trends. Follow him at @richardfliu
Richard

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