Investing is a competitive game in which a few big winners make all the difference to a firm’s success. When a company as successful as Slack goes public, it’s always tempting for an early-stage investor to claim some credit. Whether in a blog post like this one, or some carefully-placed input to a friendly reporter, the investor might imply they had seen it coming from the beginning, or stuck by the founder when no one else would, or otherwise played some important role in achieving the company’s now obvious success.
This is not that kind of blog post. Slack’s success is something no one could have seen from the beginning, and Stewart Butterfield and his team deserve all of the credit. We’re profoundly grateful he gave us the opportunity to invest.
On March 4, 2011, Stewart came in to our offices to pitch the Series B round for his new company, Tiny Speck. We knew Stewart already — my partner Marc Andreessen had been one of his first angel investors, and our fledgling firm had already invested in the Series A. It was obvious within five minutes that this wasn’t going to be your standard Series B pitch, as Stewart played us a short trailer for an exotic, beautiful game called Glitch. Unlike mass-produced commercial games built for rapid monetization and “played for the purpose of winning”, Glitch would be “an infinite game played for the purpose of continuing the play” — all taking place inside the minds of eleven giants. The first time Stewart had set out to build an infinite game, it had turned into Flickr. With this talented a set of founders, who knew where things would lead this time? We signed up to lead the Series B.
Glitch turned out to be a uniquely gorgeous and absorbing game but, despite the team’s heroic efforts to ignite growth, a commercial failure. As Stewart memorably put it in an October 2012 note to his board (me and Accel’s Andrew Braccia), “I do not feel that we are pouring gas on a fire here: more like pouring good whisky on a drugstore heating pad. It is unlikely to burst into flames.” It is a mark of the good human being that he is that, having made the heartbreaking decision to shut down the game and lay off all but eight of 40 employees, Stewart set up a website called Hire A Genius and worked tirelessly to help every one of them to find another job.
There was of course a reason that Stewart had kept the four founders and another four key employees together. He still had about $4M in cash and a new idea for team collaboration software. Despite the disappointing outcome of Glitch, neither Andrew nor I had any hesitation in telling him to use the remaining cash to pursue the new idea, given the quality of the team.
In early 2014, about 15 months later, the company had a new name and a product in market and was ready to raise a new round of funding. When we were offered the chance to jointly lead the new round, a16z and Accel stepped up together with what we felt was an aggressive joint offer. However, we couldn’t see our way to matching a considerably more aggressive offer from Mamoon Hamid at Social+Capital. While we loved the team and were very supportive of the new direction, we both felt the space was super-crowded. We also wondered whether Stewart was really prepared for the grind of building a company that could capture enterprise customers in addition to his enthusiastic early adopters, who were largely fast-growing tech startups. Perhaps living through the struggles of Tiny Speck had made both of his original investors too cautious. Both Accel and a16z invested “pro rata” to maintain our ownership, but to his credit, Mamoon led the investment.
In the five years since then, Stewart and team have proved our conservatism wrong – and how! They have built a fast-growing business that successfully serves customers ranging from the most disruptive and innovative startups to the largest and most demanding enterprises, with a product that is both powerful and elegant. Stewart has built an excellent team that includes members of the original talented Tiny Speck crew as well as experienced veterans from leading software companies. They have achieved business success while maintaining an inclusive, empathetic culture that values diversity and equity and understands its responsibilities to the community.
Today, Slack starts life as a public company. Looking back on the last nine years, what strikes me most is how improbable the whole story is. Stewart and team almost made it look easy, but there’s nothing easy about building an enterprise software company to public company scale. Very few founders achieve it, and I can’t think of anyone else who’s achieved it after making such an unlikely pivot. That Stewart and team did it is a testament not just to their product genius but also to their strong values, hard work, and sheer determination.
Congratulations to Stewart, Cal, and the entire Slack team. The credit is yours alone. We are incredibly privileged to have had the chance to accompany you on this extraordinary journey. Thanks again for the opportunity, and good luck with what lies ahead.
The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation.
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/.
Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.