Business Technology

Saturday 27 May 2017

You don't have mail: how start-up Slack reinvented chat to build €4bn company

Stewart Butterfield built messaging and communication app Slack from a startup to a €4bn company within three and a half years. At the opening of the firm's Irish office, he talks about IPOs, the future of email and why his employees leave work at 6.30pm to ensure some work-life balance. He spoke to our Technology Editor

Stewart Butterfield has hailed Slack’s new Dublin office as the high-growth San Franciso-based tech giant targets European growth. Picture: Adrian Weckler
Stewart Butterfield has hailed Slack’s new Dublin office as the high-growth San Franciso-based tech giant targets European growth. Picture: Adrian Weckler
Adrian Weckler

Adrian Weckler

There's a cruel ritual that happens to executives and workers in Aviva's Hatch Street office every day. They ride the elevator to the fourth floor where they get out and look across the glass Atrium at the plush, newly laid-out office of the newest tenant in the block: Slack.

As they settle their own mugs down in their sub-divided cubicle desks, they glance over to see some of the couches, comfortable tables and cosy hideaways that Slack staff are given to help them concentrate on getting stuff done.

It's almost sadistic.

But it's a by-product of the effort that Slack has gone into to kit out one of Dublin's snazziest new offices, says the company's co-founder and ceo, Stewart Butterfield.

"Honestly, I think this is the best office we have," he says with heavy, jet-lagged eyes. Butterfield is in Dublin for the office's official opening, but had things gone originally to plan, he might have been over months sooner.

Slack, which makes the messaging service that has been dubbed an 'email-killer' for teams at work, put off its expansion for the guts of a year while waiting for a suitable space to become available.

It had chosen Dublin over Amsterdam, London and other European cities partly to "steal" good staff from other companies, but it wanted to make sure its new place was located somewhere that could be used as a good base for recruiters. So it waited for what Butterfield felt was the right space. Now installed, it is recruiting quickly.

"Dublin is ahead," he said. "It's part of Europe, has a good ecosystem and good people to hire - and when we hire them, they often have connections to people we can steal."

Butterfield means this quite literally. One of the company's newest executives is Johann Butting, head of sales for Europe, the Middle East and Africa. Butting was lured from Dropbox, whose Dublin office is on the floor right above Slack's.

In fairness to Butting, it's not hard to see Slack's appeal. In the three-and-a-half years it has been up and running, Slack has surged past four million daily users with astronomical growth levels giving it a valuation of almost €1,000 per daily user. (Butterfield says that 1.25 million of those four million daily users are premium, paying customers). Having spread virally among company workers, it is now relied upon by big firms like IBM as well as thousands of small companies and 30pc of its user base, Butterfield says, is in Europe.

Ironically, its meteoric growth means that Butterfield is shelving an IPO for the time being. "It definitely won't happen this year," he says. "We're growing a little too quickly. That means we're not predictable enough yet. Some investors want predictability. But to get that, we'd have to slow down. And, of course, I'd prefer if we keep growing quickly."

It's not like Slack needs the money, though. Venture capital firms have fallen over themselves to get a piece of it, with $539m (€502m) invested in Slack over the past four years at a current $3.8bn (€3.54bn) valuation.

The main reason for an IPO with Slack, he says, would be for the purpose of hiring and retaining staff with equity. However, until the company's growth settles down, there is "no timeline" for such an IPO.

"To a certain extent, it depends on how the world unfolds over the next couple of years." Butterfield says this with a wry smile. Like most big US company executives, he is less than ecstatic about the recent election of Donald Trump.

"Being a US-headquartered company, I expect, will be at a disadvantage over the next several years," he says. "I don't think anyone's rushing to improve their trade relations with the US, given our country's stated policies. The TPP [Trans Pacific Partnership trade agreement] is not going to happen, NAFTA might get ripped up. I can't imagine that Trump's team will be a great party for the EU to negotiate with, or for any trade partner to negotiate with. So there's a little bit of anxiety there. There's already trepidation from other parts of the world around the use of US hosted servers, so this is just going to exacerbate those concerns."

This will partially drive Slack to base its own data centre operations in Europe, Butterfield says. However, Ireland may miss out. "At some point, we're going to open a data centre in Europe. We'll probably just go with Germany because that's where it seems a lot of the policy is made."

As for Brexit, Butterfield says that it "doesn't really make any difference to us".

Slack's success is down to its ability to make work presence even more immediate and accessible than it is with email. While this takes friction out of communication processes, it also might suck workaholic bosses further down their project-obsessed rabbit holes, bringing junior staff with them.

Does Butterfield think there's a mounting structural work-life balance problem at play in modern offices?

"Yes, definitely. Then again, I remember reading a piece in 2002 in the 'Wall Street Journal' about how work life balance was being destroyed by the BlackBerry and the same was said about email in 1990. So I don't think that Slack exacerbates that.

"It's a tool that can be used in different ways. Part of our mission is not just to provide that tool but to give people some guidance on how that can be used effectively. Saying that you're going to be instantly available at any time might definitely be using it ineffectively. So I think that it shouldn't have an impact one way or the other."

The proof, says Butterfield, is Slack's own office in San Francisco. Butterfield and other senior executives set the tone, with relatively regular working hours.

"If you go to our San Francisco office, which has 400 people, it's pretty much abandoned by 6.30pm," he says. "Which would be normal in many places but not in San Francisco. But it's not a simple question. I mean, I definitely work a lot. But I also understand that I probably have between three and seven hours a day of actual useful, creative work. Actually, I'm lucky if I get 90 minutes of actual creative work done every day. Lots of the rest of the time is spent looking things up or listening to things."

Slack is often described as an 'email killer'. Butterfield disagrees with this synopsis. While touting Slack's email-replacement prowess for internal company use, he does not think that email's days are numbered.

"Email's not going to go away," he says. "Use of Slack and tools like it will replace a lot of internal communication, but it's still the lowest common denominator in a positive way. For example, it crosses organisational boundaries and everyone has it. There are just so many things that email does. That's actually one of the problems [for competitor systems]. It gives you a receipt for your transaction, reports, all sorts of things. Although I don't use email for internal company communications, I still spend about two hours a day using email with people who are outside the company."

Does Butterfield worry that big companies like Microsoft, which is about to launch a direct competitor to Slack (called 'Teams') will squish the startup?

"In terms of Microsoft Teams, I'm not worried about it for now, but probably will be in the future. Basically, Microsoft is aiming Teams at larger companies and it won't work for them.

"Our biggest customer is IBM and they have about 40,000 people using it on a daily basis. That has been a painful process of discovery for us. And there are many things we've learned that we haven't told Microsoft, that they'll have to figure out at some point. For example, they're also offering Sharepoint and Yammer and Skype for Business, so it's going to be really difficult for people to understand which they should use. It's also available only in the higher-end bundles of Office 365 which means that it's naturally limited to a tiny subset of businesses while we have all the rest to ourselves.

"Now I think all of those things will get fixed over time. But it'll take a couple of years for them. I don't know that they realise how complex that's going to be. The bigger the threat we are perceived to be by them, the more likely they are to take some hard decisions about their product side and not provision Yammer and Sharepoint and maybe take Teams out of the bundle. But hopefully by the time they make that decision, it'll be too late."

Slack's biggest challenge may be its lead over other companies. "We don't have any effective competitors," says Butterfield. "I mean, there are some companies there. Cisco has a product that no-one really is using. It's handy in one way, but it's also very motivating to have a real competitor. So it's up to me to instil the message that we have a year, maybe 18 months before we really have to lock horns with anyone. The further ahead we can get in that time, the better."

A beginner's guide to Slack

For the uninitiated, Slack is a messaging system that is more immediate and inclusive than traditional email systems.

It borrows some ideas from project-management software, in that it is mostly based on defined working groups.

It is built to take in and show documents, slides or presentations from other applications, too, meaning less time hopping between apps.

It also allows users to make voice and video calls to each other, individually or on a conference basis.

Many who try it for work projects end up swearing by it. It's free to download and use, with monthly per-user fees for extra features such as more storage or guaranteed service level agreements.

'I miss Flickr but cost to save it would be too high'

While Slack has made Stewart Butterfield into one of Silicon Valley's most famous 'up and coming' tech CEOs, the Canadian had previously built one of the most important web services of its time - Flickr.

Launched in 2004, the photo-sharing site (and app) was the first online service to really use the web for its full 'cloud' potential as a repository for photos. It was sold to Yahoo in 2005, with Butterfield leaving it behind in 2008.

With Yahoo in an increasingly perilous state, does Butterfield miss his old service? And would he think about rescuing it?

"Yeah, I do miss it," he says. "But I kind of gave up hope on it a while ago, just because Yahoo's in pretty rough shape. Occasionally people tweet me saying I should buy it and save it. But I don't think they realise quite what would be involved in that. It would definitely be many tens of millions of dollars, maybe hundreds of millions, just to take it over and buy all the server capacity. Then there'd be a massive effort to detangle it from all the Yahoo infrastructure.

"So I don't think that's going to happen. Which is too bad."

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