If you haven't heard of the business collaboration software Slack, that's about to change in a big way--for better or worse. The company just received a $120 million investment, bringing its total to $180 million. The latest round hit a $1.1 billion valuation, as the New York Times noted.
It's a better-or-worse investment because you can already hear the shrill whine of the hype engines. The Times wrote: "[V]enture capitalists believe that [co-founder Stewart Butterfield] is building an enterprise company that will lead the next 100 years of online collaboration." Not only has a list of co-founders that includes Serguei Mourachov, Eric Costello, and Cal Henderson shrunk down to the narrative persona of one person (a co-founder of Flickr), but, really, the next century of online collaboration even when there have been a line of competitive products? No one even knows what computing will look like by then, let alone what might become dominant.
When you get that level of frenzy, a company has to walk a fine line to remain a media and Wall Street darling. However, Slack is doing something right, as it expects to hit $10 million in annual recurring revenue this year from 70,000 paying users (the freemium model has 250,000 daily users) and the money reportedly has been growing by $1 million a month.
With an actual revenue stream, VCs can focus on the big innovation of Slack, which is recognition of how life is changing in corporations. Not so long ago, executives in charge of business lines would go to IT and explain what they need. It was CIOs and their teams that finally picked, procured, and implanted the software.
However, cloud and mobile computing have shaken up the old model. There have always been non-technology employees who formed virtual stealth IT departments. They'd deploy their own wireless networks, run software packages that they wanted, and otherwise subvert the natural order of things.
With mobile devices and the likes of Dropbox, Salesforce, Evernote, and an army of other productivity and specialty applications and services, it became possible for pretty much anyone with client hardware and a corporate credit card to ignore the slow (often for good reasons) response of IT departments and do as they wished.
IT and users are fighting for control. With the emerging structure of technology, users will win, without a doubt. (At least until the first big security problem with a cloud service causes huge customer data losses.)
Comprehending that changing dynamic is exactly where Slack has run a taut ship. Many collaboration systems want to provide everything, whether chatting, document sharing, or some other aspect of working together. Slack builds relationships and connections with other service providers and then lets users pick and choose what they want.
It may not last 100 years, but the shift in power is happening and will be around for an extended period. To be successful, high tech companies have to find new strategies and marketing approaches. Slack has a head start in an important area, which is why investors are showering it with money.