Courtesy of Softbank, the Japanese telco with a $93 billion (yes, BILLION) Vision Fund, just bankrolled Slack to the tune of $250 million. From Bloomberg:
Investors in the round are expected to value the San Francisco-based company, which sells software for workers to communicate with their colleagues, at more than $5 billion
What looks like an insane valuation for a feature you have to embed into business processes appears more like an attempt to lock out any of the myriad contenders in the collaborative messaging space. This is, as one person speculated, similar to how Uber got into what might seem like an unassailable lead over other ride-share businesses around the world.
For those unfamiliar, Uber went through a series of increasingly jaw dropping rounds that ended up valuing the company at $70 billion. Even allowing for a $10 billion valuation haircut following Uber’s recent troubles, that still places Uber comfortably ahead of Ford Motor Company (market cap $44 billion) and ConocoPhillips ($56 billion.) That gives an indication of how frothy the market can get but, more to the point, such large influxes of cash insulate a company from headwinds while keeping investors excited about the future.
In Slack’s case, Bloomberg talked about future valuations and exits in the $9 billion range. I don’t see that anytime soon, unless Slack comes out with at least three quarters of close to triple digit growth. Absent of direct conformation, we cannot know where Slack is at today although a recent compilation of user stats makes for interesting reading.
There are claims of as many as 1.5 million paying users at an ARR of $100 million. Personally, I’m not buying one of those figures but I don’t know which one because the math doesn’t add up.
Let’s get back to the $250 million. This comes on top of $200 million raised in April 2016 and represents Slack’s 10th round, bringing the total raised to $790 million. Of that figure, $720 million has been raised since October 2014. In short, Slack has a massive war chest to ride out pretty much any competitive threat. For the time being.
Will it succeed and will it become the de facto messaging app for business? That is hard to tell. There are many factors playing into that scenario, not least of which is that old chestnut – security.
Then there is the question of functionality. At the end of the day, Slack is a messaging app, albeit a pretty one. But if the trajectory we’re seeing is an indicator, then intelligent chatbots are far more likely to prove popular. We already see this.
For example, there has been an explosion of bot driven messaging in technology offerings. I can’t think of a single app I am currently using that hasn’t had the bot treatment. Gmail on mobile now suggests responses to emails based upon the content and context of the messages received. Most of the time, it works very well and especially where short acknowledgments are required. That makes Gmail super efficient.
Slackers will argue that the ability to act as a real-time notification platform for teams gives it an edge. I’d argue that only works when people use it.
Regardless of how gorgeous Slack may seem on the surface, adoption is still a gating factor. This is true of any technology but especially so in the messaging space where competing with email as the de facto method of communication remains a battle to be won. In our case, we struggle to get everyone on board with Slack. Why? many of our team are fed up of incessant notifications. Unless you are very careful, Slack can quickly devolve into an unmanageable water cooler.
I’m not alone. I participate in a bunch of Slack channels and they all suffer from the same problem – a lack of discipline, too much noise and an imposition on my ability to understand what’s going on. These are solvable but that’s not what Slack does.
Far be it of me to douse the enthusiasm of investors for Slack. As a user, I see the potential very clearly. I’m just not convinced that it is much more than a set of well designed features that kind of solve some day to day problems. However, it is faring better than most, so I assume that current investors are acting defensively while at the same time maintaining the frothy buzz around one of Silicon Valley’s darlings. As a buyer you might not care so much but of you are betting for the long hail then…..?
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