The Slack DPO - Acquired  ## Metadata - Author: **Acquired** - Full Title: The Slack DPO - Category: #podcasts - URL: https://share.snipd.com/episode/fe96ba8f-791f-4d89-8e32-aaa340cf541e ## Highlights - Stuart Butterfield on How He Became a Philosopher Key takeaways: (* Stuart Butterfield, the speaker, had a background in philosophy and he thought he would become a profess., * Stuart went to Cambridge in the UK and got a master's in philosophy., * Stuart then went on to get a PhD in philosophy from Cambridge.) Transcript: Speaker 1 Yeah. Definitely don't miss it. So they moved down to Victoria and they rejoin mainstream society there. David ends up, so he had built the log cabin himself. He ends up getting into real estate development and he becomes a prominent sustainable real estate developer. Really cool in Victoria. Stuart though. So he's now growing up. He gets his first computer at age seven in Victoria and becomes immediately enamored of it when, or Stuart, I should say Dharma. When he is 12, he decides to change his name to Stuart because he's probably getting teased at school at this point in time and he wants to be a little more normal. And Stuart is like the most normal name that he can think of. So he legally changes his own name at 12 to Stuart Butterfield. He ends up staying local for college. He goes to college at the University of Victoria. He studies philosophy and as you might imagine, given the lineage of his parents, he's quite smart and does very well in school and he thinks he's going to become a philosophy professor. That's his goal. He goes off to Cambridge in the UK and he gets a master's in philosophy. And I assume it was part of a PhD program that he was intending to complete. Speaker 2 For listeners who have not heard Stuart speak before, it is very apparent when you hear his speak that he has a background in philosophy. He sort of can't help but diving into the existential and the metaphysical in any topic. And I think there's a great episode with Cara Swisher on Recode Decode where he's sort of talking ([Time 0:07:54](https://share.snipd.com/snip/42ee7195-1963-4710-86bf-d7bf791cb0ac)) - The Rise and Fall of Flickr Key takeaways: • Flickr was acquired by Yahoo in 2004. • Flickr was a brief independent life. Transcript: Speaker 2 And it just starts to spiral. And this is the Google of yester, yesteryear, where rather than saying, oh, we're going to clone that and do our product, it's so cool. That's great. Then we don't have to build it. It's a year thing work. Sure, you can have some users. Man, I mean, this really is the, it's the, these are the young idealistic, don't be evil days of the internet. Or I would say the post.com crash. Speaker 1 People have seen the evil where we're going to be idealistic once again. And so, so Flickr really starts to take off. They quickly get a lot of M&A interest. So the store's plan is coming true. Google, Yahoo, ask Jeeves, remember ask Jeeves. The big three, man. Of course, yeah. People want to buy the company. Yahoo becomes the most serious and moves the fastest. And by the end of 2004, the deal is done. And Flickr is acquired by Yahoo within, you know, the. Speaker 2 I don't think I ever realized how short the independent life of Flickr was. It was, it was a brief Flickr in time. Oh boy. Good. Okay. ([Time 0:26:50](https://share.snipd.com/snip/c0b22c92-68da-4019-a1e6-da096b2daf76)) - The Human Element in a Company's Downfall Key takeaways: (* It is unlikely for a company to burst into flames., * The board of the company was right to lay off all but the four cofounders., * The way that the company handled the layoffs was humane.) Transcript: Speaker 1 It is unlikely to burst into flames. And the board is like, yeah, I mean, you're right. Like we were thinking the same thing, dude. And so the store then after that, he calls an all hands meeting from Vancouver, gets the San Francisco and New York teams and all the remote people on the phone and he just bursts into tears. And it's crying and he says, guys, it's over. You know, like nobody on the team saw this coming. They still have plenty of money in the bank. They thought they were working at this hot company. And, and here's story to say, and I'm calling it, I've lost faith. We're done. And so they lay off all but the four co-founders and they keep four employees. Speaker 2 But before they do anything, the store, it's like he's just devastated by this. They do everything they can and they get jobs for everybody else. It's going to say importantly, and we'll see this, this come back to be a huge asset for the company later, the way that they did these layouts was incredibly humane. And the way that they took, sort of took care of everyone, the sentiment leaving was, I would 100% go work for Stewart again, even though this thing completely, you know, fireball. ([Time 0:42:17](https://share.snipd.com/snip/1e33d79c-ead2-4856-b3ba-6afe5e92a4b0)) - The Importance of Being HipChat Key takeaways: • Andreessen Horowitz, which had invested in the seed round of Instagram, which became a successful company, did not invest in the series A because they were pick pleas. They were in pick pleas and backed pick pleas. • Sometimes it is driven by a technology shift, like mobile photo sharing taking off, while other times the line is less clear, and the technology may not be necessary for the business to succeed. HipChat hit the technology and cultural shifts, but did not hit the business model shift. Transcript: Speaker 1 You know, famously, Andreessen Horowitz, which had invested in the seed round of bourbon, which became Instagram. They did not invest in the series A because they were- They were pick pleas. They were in pick pleas and they backed pick pleas. Speaker 2 Man. And the interesting thing about this is sometimes it's driven by a technology. Like mobile's taking off, cameras are finally good enough. It seems like mobile photo sharing is going to be a thing. Other times, the line is less clear on the technology that it's more sort of a social moment has arrived where people are comfortable with where technology is so you can use technology That's been available for several years to make something happen where there's a cultural understanding that people are ready. And of course, I'm sure Slack and HipChat had to use like there had to be some sufficient advancement in Ajax or I don't know if people were still calling it Ajax at the time, but the ability To have web pages that refreshed without refreshing the whole page. But it certainly wasn't like the iPhone shipped and then it made possible this multi-party text communication thing. Yeah. Speaker 1 Well, I think what we've seen in our last couple episodes here on acquired and we're going to see here the really truly huge, great companies get built at the Venn diagram, intersection Of a technology shift, a cultural shift and a business model shift. And HipChat hit the technology shift and the cultural shift. They didn't hit the business model shift quite right. ([Time 0:48:07](https://share.snipd.com/snip/7e881c42-b488-4178-9ecb-493e47195d5b)) - The Effect of Slack on Employee Productivity Key takeaways: • Slack is a messaging platform that is changing the way employees work at companies. • Slack has a strong intracompany network effect, but there is no cross-company network effect. • Slack requires word of mouth to grow in popularity. Transcript: Speaker 1 So through the summer, they work with a couple, you know, friends, companies to land this messaging and they figure out they get really good explaining why because most people have Never used something like this before. What it is, why you should use it, why it helps, why it's better than email and more importantly, just making the onboarding process super, super easy and fast. So the first decent size company that they get to use it is RDO. RDO is about 120 person organization. They sign up first. It's the engineering team that starts using it, then it starts to spread and pretty quickly the whole company is using it and they're addicted. And from these RDO and a couple other companies, what happens is the companies start evangelizing and all the employees of the company start telling their friends and other companies, Hey, we've switched to this thing called Slack. It's amazing. It's changing the way we work. And that starts to build a ton of buzz. Speaker 2 And so which I'll say is interesting. It's that popping out to playbook for a second, it requires a word of mouth, not usage because there is a intra company network effect with Slack where you're inviting all your colleagues, But there's not a cross company network effect. Whereas you take the flip side of that like zoom, zoom, yeah, there's a cross company network effect because to communicate with someone at that other company, you need to click the Zoom link to join and then your user with Slack, it has to be that I'm getting so much utility out of it at my company and it's grown within my company that now I go and tell somebody at a different Company. Yeah. ([Time 0:55:53](https://share.snipd.com/snip/62a033a4-e728-4620-935c-5a40e55553db)) - Atlassian's Triumphant Sale of Slack to Microsoft Key takeaways: • Atlassian acquired all of the Slack users in one of the best deals in history. • Slack is considering a DPO for their public offering. Transcript: Speaker 1 Also stride. Speaker 2 Like, can you come up with a name that's more different than a couple letters from Slack? I mean, when that happened, the people, you know, Slack must have just been high five in one another. Like, we've won. It's over. And indeed, probably one of the smartest things Atlassian has done is they recognize that quickly too. So they sold essentially those users to Slack. In like one of the best deals in history ever negotiated, Stuart managed to get all the users. Speaker 1 What was the equity arrangement that happened? I don't remember exactly how much equity. But, yeah, Atlassian got a small amount of equity in Slack for it. Speaker 2 Yeah. I mean, that was a highly triumphant moment for a Stuart Azad. Speaker 1 And you have to imagine probably Excel help there, given that they were major shareholders in both companies. And then late 2018, following that, rumors start circling that Slack is considering a DPO for their public offering. Speaker 2 Much like Spotify or just before them, 30 years before Ben and Jerry's. Indeed. ([Time 1:07:53](https://share.snipd.com/snip/d07ca37a-6696-4bbd-9559-ef5645c9ca0f)) - The Pros and Cons of DPOs Over IPOs Key takeaways: • IPO prices are set based on order books that are built during the roadshow process. • However, another important benefit for DPOs is that if you are a company that has already raised capital privately from many of the traditional public market mutual fund hedge fund type investors, you run into a problem like what Uber faced when they were doing their IPO. Transcript: Speaker 1 IPO prices are set based on order books that are built during the roadshow process. But another important benefit for DPO. Speaker 2 Spoken like a true former investment banker. Of course. Speaker 1 Absolutely. That would depend. Another important benefit for DPOs versus the IPO process is if you are a company that has already raised capital privately from many of the traditional public market mutual fund hedge Fund type investors that would be large institutional buyers in an IPO of the new shares created, you run into a problem like what Uber faced when they were doing their IPO where all of Those sets of buyers were already shareholders in Uber. They already had the exposure they wanted to be a company. Their incremental appetite for new shares was relatively low. They wanted to be selling, not buying. And so when you do a DPO, you solve for that problem if you have it. Now of course, Uber had to do an IPO because they needed the cash. Speaker 2 Yeah, that's the other thing. So to do a DPO one, you have to not need the cash like companies like Uber and Lyft do to you need to already be a brand that doesn't need a roadshow process. ([Time 1:13:56](https://share.snipd.com/snip/ea5bb35b-51d7-4021-b1fd-fc88b703ba07)) - The Yahoo Mafia Is Strong, and They're Ready to Take on the Competition Key takeaways: (* The Yahoo Mafia is strong and all right., * The company has 800 million in cash on the balance sheet and is still growing at 82% a year., * They generated 400 million in revenue in the fiscal year ending in January of this year., ..., * Zoom is growing faster, at close to 120%, whereas Slack is growing at 80%., * However, Zoom and Slack are cousins companies with similar strengths.) Transcript: Speaker 2 The Yahoo Mafia is strong. All right. So before narratives, just some facts to know about the company from their financial position when they went public. So I mentioned they had 800 million in cash on the balance sheet. They're still growing at 82% a year. So they're close to doubling year over year now as a public company. They're generating in the fiscal year ending in January of this year, they generated 400 million in revenue. So previous year, 220 in revenue, previous year before that, just over 100 million in revenue. So company's still doubling. That's close to in line. It's a little below... Triple, triple, double, double. Yep, a little in line with Zoom. So Zoom's growing a little faster at close to 120%, whereas you've got Slack here around 80%. But it's fun to kind of keep comparing to Zoom. Zoom has a little less revenue. It's a 330 million in revenue versus Slack's 400. But they are cousin companies in a lot of ways. Absolutely. So moving into narratives. Yeah. Should we talk bowls first? Yeah. Why do people love this company going into the IPO? Speaker 1 Well, I mean, there's a lot to love. There's a whole lot to love. The dynamics, similar to what you said in the comparison to Zoom, this is a product that really Zoom and Slack represent the new wave of GoToMarket in the enterprise of products that are so good that they sell themselves. A freemium business model that is perfectly tailored to maximizing reach and acquisition ([Time 1:18:57](https://share.snipd.com/snip/0cf28200-bc3d-4479-af43-76539d4e7327))