How Slack Became the Fastest Growing B2B SaaS Business (Maybe) Ever

Defining Their Own Market

“When we asked the other 70 to 80% what they were using for internal communication, they said, ‘Nothing.’ But obviously they were using something. They just weren’t thinking of this as a category of software.” [3]

“If you’re building a sales team for your startup, you know you will absolutely make a decision about what CRM to use. It’s a no-brainer. If you’re a software development team, you are absolutely going to choose a system for source control. That’s a known category.” [3]

“Just as much as our job is to build something genuinely useful, something which really does make people’s working lives simpler, more pleasant and more productive, our job is also to understand what people think they want and then translate the value of Slack into their terms.” [6]

“Our position is different than the one many new companies find themselves in: we are not battling it out in a large, well-defined market with clear incumbents (which is why we can’t get away with “Other group chat products are poisonous. Slack is toasted.”). Despite the fact that there are a handful of direct competitors and a muddled history of superficially similar tools, we are setting out to define a new market. And that means we can’t limit ourselves to tweaking the product; we need to tweak the market too.” [6]

“We are unlikely to be able to sell ‘a group chat system’ very well: there are just not enough people shopping for group chat system (and, as pointed out elsewhere, our current fax machine works fine). … That’s why what we’re selling is organizational transformation.” [6]

“Being successful at selling horseback riding means they grow the market for their product while giving the perfect context for talking about their saddles. It lets them position themselves as the leader and affords them different kinds of marketing and promotion opportunities (e.g., sponsoring school programs to promote riding to kids, working on land conservation or trail maps). It lets them think big and potentially be big.” [6]

“We’re selling a reduction in information overload, relief from stress, and a new ability to extract the enormous value of hitherto useless corporate archives. We’re selling better organizations, better teams. That’s a good thing for people to buy and it is a much better thing for us to sell in the long run. We will be successful to the extent that we create better teams.” [6]

“Life is too short to do mediocre work and it is definitely too short to build shitty things.”

“It is especially important for us to build a beautiful, elegant and considerate piece of software. Every bit of grace, refinement, and thoughtfulness on our part will pull people along. Every petty irritation will stop them and give the impression that it is not worth it.” [6]

“Putting yourself in the mind of someone who is coming to Slack for the first time — especially a real someone, who is being made to try this thing by their boss, who is already a bit hangry because they didn’t have time for breakfast, and who is anxious about finishing off a project before they take off for the long weekend — putting yourself in their mind means looking at Slack the way you look at some random piece of software in which you have no investment and no special interest. Look at it hard, and find the things that do not work. Be harsh, in the interest of being excellent.” [6]

“For example, when you paste a link into a Slack chat, it automatically pulls in the title of the webpage and a snippet of content, potentially including an image. If it’s a YouTube video, you can play it right within the chat. If it’s a link to a tweet, it displays the whole tweet. And you can search all of that information. This elegant sophistication might give companies more confidence to invest time and money into it.” [1]

“Let’s face it, Email is clunky and starts to come apart when you’re trying to communicate announcements, updates or just check-in in an ad-hoc manner with teammates. Throw in all of the things that are happening in Wiki, JIRA, Asana, Trello, Dropbox and other channels at the same time, while trying to manage multiple threads of conversation and you have a herculean task on your hands.

Laser Focus on Core Features

“All of the founders here are past the stage where we have a lot of ego about building something our way. We set ourselves an incredibly high quality bar, and we’re just not going to be happy if we don’t reach it. … We don’t cut corners, and we try to focus on the few things that are most important to our product vision.” [3]

“We had a lot of conversations about choosing the three things we’d try to be extremely, surprisingly good at. And ultimately we developed Slack around really valuing those three things. It can sound simple, but narrowing the field can make big challenges and big gains for your company feel manageable. Suddenly you’re ahead of the game because you’re the best at the things that really impact your users.” [3]

Gaining Initial Users

“Rdio, in particular, was much bigger than us. They used it with a small group of front-end developers for a while but then it spread to the whole engineering group and then to all 120 people in the company. … Suddenly we saw what the product looked like from the perspective of a much larger team, and it was pretty gnarly.” [3]

User Feedback

“Whenever [team members] hear something new that seems like it’s actually a really good idea — or it’s a pretty good idea but it’s very easy for us to implement — it gets posted to a channel where we discuss new features. That’s an ongoing, daily thing. There have already been 50 messages posted today.” [3]

Bottom Up Word of Mouth

“It’s probably true that no one is going to go for a giant switch over from SAP to WorkDay, even though it would probably save them money, because that involves hundreds of thousands or millions of dollars that gets decided top-down during a budgeting process.” [11]

“We bet heavily on Twitter. Even if someone is incredibly enthusiastic about a product, literal word of mouth will only get to a handful of people — but if someone tweets about us, it can be seen by hundreds, even thousands.” [3]

Freemium

Onboarding

“However, because one active team has an average of eight or nine members, we have close to 250,000 daily active users. We have more daily active users than teams that were ever created. So we lose a bunch, but the ones that we get to really try it out stick with it.” [3]

Slack’s “Magic Number”

“You have to figure out what conversion means in your case. What does retention mean? What does activation mean? For every business, it’s going to be slightly different because of the nature of the product and the kinds of people who use it.” [3]

“Based on experience of which companies stuck with us and which didn’t, we decided that any team that has exchanged 2,000 messages in its history has tried Slack — really tried it. For a team around 50 people that means about 10 hours’ worth of messages. For a typical team of 10 people, that’s maybe a week’s worth of messages. But it hit us that, regardless of any other factor, after 2,000 messages, 93% of those customers are still using Slack today.” [3]

“Hooks”

“Slack leads users repeatedly through a cycle called a ‘hook.’ The four steps of the hook include a trigger, action, reward, and investment, and through successive passes through these hooks, the new habit is formed.” [5]

“By focusing on only the triggers that matter and by making it easier for users to respond through any number of devices, Slack increases the likelihood of the user taking the key action — opening the app.” [5]

“Slack understands the power of getting users to invest. In fact, whereas most enterprise tools offer limited features during free trial periods, Slack holds almost nothing back. The company wants to maximize usage and therefore opportunities to form the Slack habit.” [5]

“Slack makes the path from new to habituated user as smooth and as swift as possible. It effectively triggers checking the app, delivers immediate social and information rewards on an intermittent basis, and prompts users to invest by adding colleagues, content and eventually cash.” [5]

Acquisitions

“Our mission at Slack is to make people’s working lives simpler, more pleasant, and more productive. Spaces is clearly aligned with this, and after spending some time together, we reached the conclusion that integrating our products made too much sense to pass up. So in the coming months, we’ll be working on doing just that.”

“We’re not trying to convince people to use Slack instead of Google Docs. We don’t think it should be competitive, but complementary … If you’re writing a term paper or an article, I don’t think Spaces will replace what you’re using right now. But if you’re collecting story ideas of a certain individual or company, like references and documents, and organizing that information, Spaces would be great.”

“And as someone who has used a number of these services for work, I think that Screenhero definitely stands out for its simplicity and power. With very little lag, it’s easy to forget that the person controlling your screen is potentially thousands of miles away, and the quality of the voice services on top of that add to the slightly unnerving feeling that there are little people in your computer.” [13]

“This is not the typical ‘Our Incredible Journey’ acquisition, where the product disappears — everything will survive and thrive, just immersed in Slack … Slack integrates with hundreds of other services, but there are some core features that work best when built directly into the platform.” [16]

“We were under no pressure to sell from anyone, but we were using Slack; we were spending more time in it. The product is great, and so is the team. It seemed like a natural fit.” [13]

Potential Concerns and Future Growth

“It’s definitely an influence. Not just on me, but there are four other people working with me who were on the original Flickr team and it was very frustrating for all of us. Flickr was just nine people out of Yahoo’s 11,000 when it was acquired, and because we were such a small piece it was difficult for us to hire people. It’s not that Yahoo was bumbling, it was just too big. I’m 41 years-old now, and I’m not sure I’ll have this large an opportunity again. We’ve got no motivation to sell when there’s so much opportunity in front of us.” [11]

“Yes, HipChat has many similarities, and we used to use IRC, which was where the original inspiration for Slack came from. So I shouldn’t suggest that no one is doing something similar. But what I really mean is that when you ask businesses what they use, 80% say nothing while 20% say something in the category. I’m sure some people use Yammer, but I don’t know anyone who uses it over a sustained period of time. But the overwhelming majority of people coming to us came from using nothing, as opposed to us trying to get them to switch from something else.” [11]

“Our trajectory is completely different than Yammer’s was when it sold. Yammer was five or six years old already, but this is just eight months after launch for us and we’ll hit their numbers within a year and then go past it. And you’ll notice that [Yammer founder and former CEO] David Sacks thinks this is a good investment, even at this price.” [11]

“Slack is NOT the fastest-growing enterprise SaaS company of all time. At least not yet. It can’t be. Because it is ‘only’ doing ~$10m in ARR. There’s still quite a bit to prove. However, going from $0 to $10m+ ARR in 12 months or so from Let’s Start Charging is pretty darn impressive. $1.2 billion impressive? We’ll see.” [9]

“The biggest argument against that is many times, the self-service / high affinity portion of services like Slack max out and peter out. Yammer went enterprise — truly enterprise — to go bigger. Will Slack need to do this? Sounds like it. Can they continue this growth trajectory as they tap out the early adopters? Not sure.” [9]

“Slack claims to be adding $1 million in annual recurring revenue (ARR) every month, with “near perfect” retention rates. ARR doesn’t mean actual revenue. But it’s a good indicator of a cloud software company’s health since it represents the value of the total subscription contracts expected to recur for the next 12 months. Based on those metrics, Slack would have made a little over $12 million last year. … That amount of revenue doesn’t seem like enough to justify Slack’s billion-dollar valuation, but it does show that companies are willing to pay for its service. And that’s what the VCs are counting on.” [7]

--

--

Imagination is the key to unlock the world. I am trying to unlock mine.

Love podcasts or audiobooks? Learn on the go with our new app.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store