Workplace messaging vendor Slack recently filed a confidential registration for an IPO, becoming the latest of a group of richly valued tech enterprises to look to Wall Street. Slack's filing comes under a special provision of securities laws enabling startups to begin the IPO process without disclosing details of their financing.
Slack’s Secret Filing
The statement offered no information on the date or amount of money expected to be raised. Some reports say Slack will use direct listing, a method used by Spotify, that allows insiders to sell existing shares without issuing new stock, streamlining the IPO process and avoiding big investment banking fees.
Slack, which claims some 10 million users in 150 countries, has raised more than $1 billion from investors with the latest valuing the company at $7.1 billion, making it one of the most richly valued "unicorns" — startups with private funding worth at least $1 billion.
As Slack continues its unicorn march to an $8 billion public listing — Microsoft (Teams) and Facebook (Workplace) are among the competitors vying for marketshare in the $30 billion collaboration market, while Atlassian recently dropped out of the race when it sold off HipChat to Slack.
This announcement is expected to create waves, both positive and negative, in the messaging-based industry. However, for those already established in the messaging space, the news has been welcomed. "Slack's success is a signal that asynchronous messaging is the future of digital communication," said Helpshift CEO Linda Crawford. "Whether it's sending a message to a co-worker, a friend, or a company, the channel of communication needs to cater to convenience. Asynchronous messaging is able to deliver convenience to the highest degree because both parties do not need to be online and available in order to have an ongoing conversation. They can respond at leisure via a conversational interface, and that is key."
Related Article: Teams vs. Slack: Why Microsoft Will Win the Collaboration Wars
Implementation From the Top Down?
News of Slack's impending IPO may be indicative of the headway the rapidly maturing collaboration software market is making with key enterprise decision-makers like CIOs and CTOs. Darren Chait, COO and co-founder of Hugo, points out that collaboration and project management apps have traditionally worked their way into the enterprise through "shadow IT," in which buy-in and advocacy are promoted from the bottom up.
He suggests that Slack's ability to add more than 2 million daily active users over the past eight months, though, means that enterprises may be starting to see more collaboration technology advocacy and implementation coming from the top. “This possible change in perspective among key decision-makers bodes well for the broader collaboration software market, and may indicate a tipping point among upper management in taking a more active role in improving team collaboration and related team efficiencies,” he said.
Related Article: Developer Collaboration Tools Beyond Slack
Changing Workplace Drives Collaboration
Vivek Sriram, CMO of Lucidworks, said that digital transformation is the buzzword du jour. It’s shrouded in mystery and seems incredibly complex. But the answer to why this transformation is happening is much more prosaic: the composition of the workplace is changing, technology needs to change with it. Boomers are retiring and millennials are creating the new normal. Digital natives, those who came-of-age after the web became ubiquitous, are changing how work is done. “They want the freedom and independence to work together, across geographic and linguistic boundaries, to innovate and create and change things, Sriram said.
He added that they live on Slack because it lets them engage and communicate far easier than any top-down, one-way communication mechanism like email. Slack is powerful and important because it's simple, fun and effective. “Slack causes digital transformation in more measured and meaningful ways than any hundred edicts passed on down from the C-Suite precisely because it facilitates change from the bottom in ways that is not possible to dictate from on high,” Sriram said.
Anurag Lal, CEO and president of mobile solutions provider Infinite Convergence, points out that as Slack prepares to go public, the company has approached the process differently by filing a direct listing. Instead of a standard IPO that raises money from the public, a direct listing will allow Slack to make existing shares available from their employees and stakeholders to trade within the market. This type of public listing could have two overall impacts on the company.
1. Possible Change in Slack Mindset
The direct listing could create a level of distraction within the company. Once the company goes live, there is no existing lockup period, meaning existing shareholders and employees will have the ability to immediately liquidate their holdings, which could create a different mindset within the company — we will see an increased focus on the organization’s profitability.
With the valuation predicted to be at least $7 billion, the individuals that cash out could experience a big lifestyle change, which could impact the internal functions of the company and could essentially slow down the platform’s ability to go-to-market.
2. Slack Under Scrutiny
The second change will have an even larger impact. As a public company, Slack will be under more direct scrutiny. Going public means that everything material that the company does must be reported on a quarterly basis. This requires a company to have the discipline and strategy to grow and stay profitable. For some companies, this is a seamless process due to leadership having a strong operational plan and market focus. If leaders don’t have that discipline, Slack could become a company that stumbles, like Snapchat (SNAP) and others who have not been able to perform after an IPO, which could result in a big loss of market value.
Competing With Slack
Slack’s fortunes for the moment seem assured. Distributed workforces are no longer just a trend and will only continue to increase greatly in the next few years and beyond, said David Greenberg, senior vice president of marketing at Liveops. This is evidenced by the recent spikes in enterprises starting to look to and even favor flexible and contingent workforces over traditional employment. With that, comes a need for tools that heighten virtual connection, communication and collaboration. Tools that can win over both business and consumer audiences [like Slack has], have a massive potential to grow at an explosive rate.”
It should also be remembered, though, that there are other companies on the market that clearly have expansion plans. For example, open source competitor Mattermost has just announced a $20 million series A funding and has been quietly winning major deals in the Global 2000, where engineers favor messaging platforms for compliance and security reasons that give them full source code access and unlimited customizability of their messaging. Large developer teams have a much different set of requirements for messaging, and Mattermost is targeting a very lucrative slice of the overall collaboration market that is underdiscussed.
It’s not the only company that is working this space — there are many more, any one of which could replace Slack. Uber, for example, dropped Slack and built their own messaging platform on Mattermost. Others currently on Mattermost include Amazon, Boeing, BMW, CERN, CVS, DoD (Navy, Army), Ericsson, ING, Sharp, Tesla and USAA.
Slack itself came out of a failed gaming startup called Tiny Speck. Stewart Butterfield sold the photo-sharing company Flickr to Yahoo, and while Tiny Speck didn't take off, the pair found success with the chat platform the team used internally to communicate. Who is to say that the next Slack isn’t just one funding round, or enterprise deal away.