finance fun fact

The year was 2009, and Stuart Butterfield had just raised $17 million from famed investor Andreessen Horowitz to do, of all things, build a video game. How did Stuart manage to raise this much money? Well it was because he had founded Flicker a couple years back and Flicker sold to Yahoo for around $25 million. So with this VC money in hand, Stewart and his co-founders were able to hire a team of 45 people from creatives like artists and musicians to technical folks like developers and PMs and they built this game called Glitch, whose characters and background looked like they were designed by "Monty Python crossed with Doctor Seuss on acid". It's a real quote. But despite the much fanfare on the launch, nobody actually liked the game. One person said, all you can do is aimlessly walk around and click stuff and it was "Farmville where you don't own your own farm". So yeah, roasted. It looked like this business was going to fail and they're gonna have to fire all the employees. But they did have one thing, that one thing was an internal tool that they had built for communication. I'll let Stewart take it from here... we used one of those technologies that I first discovered back in 1992, IRC or Internet Relay Chat as the foundation for how we communicated at the company. And IRC has this one fundamental concept called a channel and you send messages to the channel rather than to individuals or to groups of individuals as you do in email or most messaging systems. And that's a fundamental shift because the channel can exist before you arrive and it can exist after you leave. You can look into other channels across the system when you join the organization, you know, whether it's the next day or six months later or five years later, all of that stuff is archived and all these different channels and we slowly over the course of years built feature after feature, solved the really irritating problems, took advantage of the obvious opportunities and so fast forward now to 2012 end of the year, it was apparent that like it just wasn't gonna be viable again. It was never gonna be the kind of business that would justify the $17 million bucks of venture capital investment we had raised. But we all realize we would never work without a system like this one again. And so thought that it might be something that the rest of the world would want. And I still remember going to Andreessen Horowitz, one of our investors, this is what we're gonna do. We think a big market for this. We think over the next 10 years, that kind of at the fullness of time, this could be $100 million in revenue, this could be a billion dollar company. And I'm sure they remember this differently, like whatever. And what did their internal tool become? It became Slack. Slack, it actually stands for something too. Searchable log of all conversation and knowledge. When Slack made its public debut in August 2013, 8,000 companies signed up for the waitlist right away. And within two weeks, 8,000 became 15,000. So the team started making a pivot from video game development to enterprise communication software. By April of 2014, they raised a new round of funding and by the end of 2014, they had over 135,000 paying customers and they were growing gangbusters. Five years later in 2019, Slack went public on the New York Stock Exchange under ticker $WORK and it was at a $20 billion dollar valuation, so very high. During the pandemic, Slack's business actually did quite well because of the push for remote work. But its lofty evaluation from its IPO meant its stock price was a laggard, especially among its tech peers. So this disparity between the business performance and the stock price attracted the eyes of potential suitors, including Mark Benioff at Salesforce. And indeed in December of 2020, Salesforce agreed to buy Slack for $27.7 billion in Salesforce's largest acquisition ever. So I would say all things considered, a16z did quite well in their investment in this quirky video game studio called Glitch. Hope you enjoyed this.