Where will Slack be in five years?

You can bank on at least one thing: They will still be around. At the SxSW conference in Austin, Stewart Butterfield gave a really good description of what it's like to be a $1B company. More importantly, he also painted a really positive picture of what it's like to start one. It's a big bet, a gamble, and a coin toss all in one.

First off, he described it as blowing the doors off, then doing it again, then doing it again. More than anything, that was my takeaway. You can't just start and settle. You have to start and then go high-octane, poor gas on the octane, dip the company in more gas, and then stand back and watch out for the burst of flames.

His whole attitude was summed up this way: "Every time there is a coin toss, we won it over and over again," he said with an ever-so-subtle smirk. "We want to see how far we can take it and we think now is the time to do that."

As anyone who has run a major venture knows, you can grow quickly at first and then you hit a wall. A good example of this is a gadget repair company called uBreakiFix, which has grown exponentially over the past few years. They grew fast at first and opened retail stores, but then hit a wall. When they reached a certain size, they had to start thinking about things like operations and long-term strategy, upper management and employee retention. They had to plan for training and recruitment; they had to establish some best practices.

Guess what? That costs a lot of money. It requires capital.

It doesn't help that VCs are looking to invest in a later stage, says Butterfield. There are so many mobile apps, so many sexy new cloud-infrastructure startups...and so few big performers that have any chance of taking on Google. There are a handful of halos. Many startups are, it seems, angels in pull-ups. Few go skyward like Slack or Twitter, capturing the popular imagination and raking in customers. Few become a household--or at least water-cooler--buzzword.

One of the issues, Butterfield said, is that VCs are wanting to see quick performance and do not have as much patience for slow growth. If it takes five years to grow in this climate, he says, the VC will be out of a job. He says, just in the last few months, VCs have pulled back investing and are much more leery than before.

That sounds negative, but it just means the narrative is changing. The market is prime for growth as long as you do have the funds and the investments ready. Competition, he asserted, can fuel growth because when you do start accelerating, you garner the attention you need to attract investors who are skittish about so many other small, untested, under-performing companies. The gas comes pouring in, and soon you are seeing a valuation ala Slack.

Granted, Slack is not seeing a profit yet. You'd think it would be a touchy subject, but Butterfield was extremely positive. He said Slack is close to profitability and he confirmed they have major funds in the bank (but would not say how much). They are competing with Google and Facebook. He says people are eager to call a fallout in Silicon Valley, a wasteland of crippled companies. They predict that competition is crazy. Slack competes heavily with other startups.

Interestingly, he doesn't want to open up the channels for public use.

"There is a hard membrane around that system," he says, meaning he likes that there is a brain that stays off the anatomy of the Internet in a way that's good for companies. In my view, they are going to grow that membrane so big that some of the other limbs won't matter. Email could become superfluous--why communicate with people not in your network? That's what you do on LinkedIn. Why use instant messaging or Skype? Slack lets you make calls and will soon support video. Why bother having a video-conference, when everyone is in a channel already?

I've never seen Butterfield do a panel before. I didn't realize he was so utter clear about how to run a company and, more importantly, what it takes to start one. There are coin tosses. There are times when you make a bet. But he seemed astonishingly confident. Slack is winning.

Published on: Mar 15, 2016