Slack’s App Focus Will Be Key For Post-IPO Success

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According to a Markets and Markets report published recently, the global enterprise collaboration market is expected to grow from $34.57 billion in 2018 to $59.86 billion by 2023, translating to an annualized growth rate of 11.6% over the five year period. Enterprise collaboration startup Slack has finally announced its plans to go public.

Slack’s Offerings

San Francisco-based Slack was founded in 2009 by Flickr founder Stewart Butterfield and other Flickr executives including Serguei Mourachov, Eric Costello, and Cal Henderson. Initially founded as a multi-player game developer, Slack pivoted itself as an enterprise chat app provider. Today, Slack offers group messaging apps for organizations and helps improve their workforce productivity. Its platform can transfer messages from emails to Slack messages, help users collaborate through a simple drag and drop method to share files, and provide search capabilities to find messages, notifications, and files within the Slack archive. Slack’s enterprise focused app has earned customers like IBM, Oracle, Target, BBC, Workday, and E-Trade.

Slack follows an API strategy, allowing users to build apps to manage notifications, workflows and conversations. Users can follow simple UI instructions to add features to their apps. These apps can be then used by workspaces for other collaborators of the workplace to use. Today it has a library of more than 1,500 apps available on its App Directory. Slack believes that it has an app for anything that a user needs help on. The apps help users connect services like Zendesk, Salesforce, Jira, and more to Slack, including the user’s own proprietary tools. Ready to use apps provide capabilities ranging from communication to analytics, financial management and productivity enhancement.

Slack’s Financials

Slack operates on a freemium model. Its basic version is available for free and premium products are priced at $6.67 per user per month to $15 per user per month. The premium services offered include capabilities such as unlimited archival of messages, unlimited integrations, simple usage statistics, customer support, and Google authentication. It has more than 10 million total users of which more than 3 million are estimated to be paying users.

Slack does not disclose its financials but reports published last year suggest that for the year ended January 2018, it had earned revenues of $221 million. Slack estimated revenues to grow 76% percent to $389 million for the year ended January 2019. Its profitability figures are not known.

Slack has been venture funded so far and has raised $1.3 billion from investors including T.Rowe Price, Wellington Management, Dragoneer, General Atlantic, Thrive Capital, Social Capital, GV, Kleiner Perkins Caufield & Byers, Accel, SV Angel, Andreessen Horowitz, DST Global, Horizon Ventures, Index Ventures, IVP, Jeff Weiner, and Slow Ventures. Its last round of funding was held in August last year when it raised $427 million at a valuation of $7.1 billion. That is a significant growth over the $5.1 billion valuation that Slack had reported when it raised funds in 2017.

Slack’s Growth Focus

Slack has its work cut out given that most tech giants are fighting for their standing in the enterprise collaboration market. Microsoft has more than 200,000 customers for its Teams offering. Facebook Workplace, which launched nearly three years ago, has acquired nearly 30,000 customers. Earlier this year, Alphabet announced its plans to enter the segment with the release of Hangouts Chat, a service available to all G Suite users. Not only do these vendors come with bigger purse strings, but some of them can target enterprise customers by bundling the collaboration tool with other enterprise offerings. We will be watching closely how they play their developer eco-system to defend their position over the upcoming months.

To deal with competition, Slack announced the acquisition of the intellectual property of Atlassian’s chat tools. Terms of the deal were not disclosed. The addition of Atlassian’s HipChat and Stride to Slack’s platform will help Slack make bigger inroads into the enterprise segment.

Additionally, Slack already has tie-ups with companies like Oracle. Its tie-up with Oracle allows it to integrate the communication platform into Oracle’s enterprise software. Recently, Oracle announced new integrations with Slack that will help sales and customer service professionals improve collaboration and increase productivity. The new integrations between Slack and Oracle Customer Experience (CX) Cloud leverage Slack’s platform features to build and support integrations in sales and service applications.

Earlier this year, Slack announced plans to go public. However, it is not following the traditional IPO route and instead plans to list directly on the stock exchange – similar to Spotify’s listing last year. In a direct listing, the company registers the shares of its existing holders on the exchange, allowing shareholders to sell their shares on the market. It is different from an IPO where the company registers its shares and raises more capital by selling them to investors at a pre-determined price. Analysts believe that when Slack lists, it could be valued at $13.1 billion. Slack has privately filed its documents with the SEC for the listing.

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Photo credit: Scott Schiller/Flickr.com.