Slack is one of the cool kids.
We have a lot of love for it because we use it here at BAMF.
But, what a lot of people don’t know is that it’s the story of pivots, quality, and a focus on making customers’ lives better.
It’s an SaaS growth story that you need to pay attention to.
Today, we take a look at the Slack story and how co-founder Stewart Butterfield managed to pivot twice and revolutionize photo sharing, messaging, and the way we view SaaS.
What is Slack?
When Slack first came out in 2013, explaining what it did was a little complicated.
It was a messaging platform, sure, but it did more than facilitate communication.
Apart from being able to help people in one company chat with each other, it also organized chats in channels, allowed for deep app integration, native file viewing, and unlimited message history.
It was built to be deeply integrated with apps. Say you uploaded a file into Dropbox, it can automatically update a channel on Slack and inform people about the upload, the group can now comment on the file after viewing it within the Slack app.
This streamlined a lot of office communications.
Slack also helped keep track of automation, you could now have the messaging app itself ping you if you for example have a new lead coming through your pipeline.
Oh, and did we mention?
The search functionality that they have is just bomb.
It just makes all the difference, especially in business communication.
There was just so much you could do with it, that it revolutionized enterprise communication.
And, that’s when it started making waves.
The Slack Story: A Little Background
It’s hard to talk about Slack without talking about Flickr.
They both share a common co-founder, Stewart Butterfield, a visionary who was the master of pivoting.
If you remember, Flickr used to be one of the top photo-sharing applications in the early 2000s, and it pioneered a lot of new technologies. Including open APIs which are now the norm with future-facing companies.
Now, Flickr used to be a unique photo-sharing feature in a video game that he created called Game Neverending.
When they found out that the game had no future financially, they decided to grab that feature and bring it to the world.
The result?
A quick pivot commercial success.
It wasn’t long before they decided to sell to the tech giant, Yahoo! for over $20 million.
However, stifled innovation and misplaced strategy from the new parent company proved to be too detrimental to everyone, and people started to leave.
When Butterfield left Yahoo!, he decided that he wanted to launch another video game called Glitch.
It, too, was a financial failure.
But, here’s what happened next.
Stewart Butterfield, Eric Costello, Cal Henderson
and Serguei Mourachov, grabbed the messaging platform that was part of Glitch, and pivoted to launch Slack.
It seems as if pivoting was really working for them.
How Did It Grow?
Slack is testament to the fact that the freemium model works.
Anyone can join Slack for free, all you need is an email address and an invite to whatever workspace you want to work in.
If you want access to more advanced features such as their unlimited search and history functions, you’ve got to upgrade to their pro plan which is around $6.67, they also have a business plan that’s pegged at $15 a month.
In their first 24 hours, they managed to get 8,000 signups.
Two weeks later, it was up to 15,000.
But, here’s the thing.
This wasn’t even a full release, it was still a preview while they were still trying to learn what their prospects’ pain points were.
They knew that if they wanted to be a success, they needed to get as much feedback and study their market closely.
In early 2014, they had more than 120,000 daily users and only 38,000 paying customers.
By October, their valuation was at more than a billion dollars, and they were dominating the cloud-based messaging service.
In 2017, they were spending 99 percent of their revenue on sales and marketing, in 2019 that dropped to about 58 percent.
And, it has been growing ever since.
Slack Today
The thing about Slack is that they never slacked off.
They didn’t just work hard to develop a product that was loved by everyone but they also made sure that they were making waves with their sales and marketing.
It was a fight for market share and they did everything in their power to make sure that they were dominating the race.
In December of 2020, Slack was finally acquired by CRM leader Salesforce for $27.7 billion.
Imagine that.
In just about 7 years, they managed to turn a video game pivot into a company that was worth as much as the GDP of a small country like Estonia.
They’re institutional sponsorship ranges from small mom-and-pop businesses to leaders such as IBM.
And, it looks like they’re just getting started.
With the focus shifting to moving operations online, they are set to grow more into the coming years.
The Secrets of Its Success
However, there wasn’t any magic involved with its growth.
It all boiled down to a couple of factors that any SaaS or B2B company could employ in their own organizations to achieve massive growth.
Fair Billing
Fair billing is one of the biggest characteristics of Slack.
- When Slack detects that an account is inactive, it automatically stops charging you for that account because it believes in a fair billing policy.
- When the service goes down, it will make sure that people get free credits.
- They’re free version is more than enough for casual users.
The founders realized in the beginning that you didn’t have to charge people for every single thing that they did on the platform.
And, that helped them grow a large user base in the beginning.
Integrations
The founders also knew that they couldn’t do everything, but what they could do was integrate everything into their own platform.
Different organizations had different requirements, and it was impossible to keep adding features without becoming too bloated. They focused on instead getting apps to run with the features that they already have.
Now regardless if you use Google or Dropbox or any other popular solution, they make sure that it runs with their app.
Quality
The Slack story is focused on the quality of your communications.
In fact, they’re so focused on it that they provide you with a 99.99% uptime guarantee for their Business+ plan that they’ll send you over credits you can use in the future in case the service doesn’t hit those numbers.
Their rollout of new features has been slow but deliberate, focusing on only the things that will fuel communication.
It’s this focus on their competency that’s led to crazy growth over the past decade.
Slack’s Current Challenges
Slack’s product is so niched out that its only real challenge is tech giant Microsoft …and itself.
Here’s why.
Slack’s revenue could be larger, but it is focused on increasing the value that it gives to its customers.
It maintains a fairly minimal subscription fee, gives out free credits that eat into its pockets, and makes sure that customers are “paid” if ever their service goes.
For them, it’s a small price to pay to make sure that they provide services of consistent quality.
Takeaways
We love Slack’s story because it reminds us that you can always pivot.
Butterfield started two video games that were commercial failures turned into pivoted successes.
Now that’s remarkable.
But, beyond that was the focus on the customer.
They tested and made sure they were taking feedback.
They didn’t need to add bells-and-whistles, but they did make sure that they were killing it with their core competencies.
And, they also made sure that the pricing was as fair as possible.
It’s this continuous and obsessive pursuit of quality in the small details that led Slack to be one of the market leaders when it comes to office communications.
The Slack story is a story of how innovation in SaaS, a focus on the customer, and targeted marketing can make all the difference in B2B.
