In Conversation with Stewart Butterfield, CEO of Slack

Slack is a messaging app for teams, so it's used for internal communication inside of a company. Was all I ever wanted. A fighter with the fever for the thing. Was all I ever want. Was all I ever want. And the winner, best startup of the year, is Slack. Bang bang, this fire's a weapon. Bang bang. The demand has been much bigger than we would have thought, and I think we've sort of accidentally discovered something for which there's a lot of latent demand. Please welcome Alex Conrad, staff writer at Forbes, and Stewart Butterfield, CEO and co-founder of Slack.

All right, wow. Every year this place has to get a bigger, bigger venue. There are more faces here. You were one of the first one of the first speakers ever at Saastr, right? 2015?

Mm-hmm.

How— what was the crowd like then?

Um, I don't know, 'cause they got the bright lights. So about the same.

Okay. Were— were people, uh, accosting you as you tried to walk through Saastr yet, or did that only come later? Because I—

No, I think that was later.

I gotta tell you guys, um, I saw Stuart last at Web Summit in Portugal, and, uh, I ran into him backstage. We weren't— we weren't supposed to be talking together, fans were coming up to you, like business people, asking to take selfies with you, asking to pitch you ideas, and Stewart was so nice that he wasn't really good at saying no. It was really funny. I watched one guy try to pitch him an idea for about 2 minutes, and it was funny because I just thought Slack is— has fanboys and fanwomen at this conference. I didn't expect to see that. Is that a surprise for you, or is this something you've gotten used to?

I guess I've gotten used to it, but it is still a little bit of a surprise. I don't know that I could reverse engineer the whole thing and explain exactly how we got to this state, but it's obviously been the critical advantage for us. Like, there's millions of people using it, and we work really hard, and we're smart, and we're trying to figure out how to turn money into customers, but we haven't cracked that, you know, like the scaling the business through go-to-market programs. So almost all of the growth has been people liked it, they recommended it. There's like a little bit of brand affinity and that's been like super, super important for us.

Does it feel like the same company at this point? You know, you're now one of the biggest still private enterprise software companies. 3 years ago you were sort of on that trajectory, but it wasn't quite as proven. Does it feel like the same company? Does it feel like the same job?

Oh, Definitely not. So I don't remember what part, like when in 2015 the event was, but by the end of 2015, we had 80 people. By the end of 2016, it was 320. And actually, I think I'm off by a year, but it's been more than 100% growth. And in, you know, you can talk about the company in many senses. The most important and real sense if you're working there is, the people. And, um, we're about 1,000 now, and that's profoundly different than 50, 60, 80, 100. Wow.

And, uh, 6 million monthly users, right? So does, does the product have a different focus when it's, you know, when changes are happening for 6 million people versus, you know, a lot fewer?

Yes. We have to be a lot more careful now. And there's a lot more complexity and a lot more interdependencies, not just in Slack the product, but the way that it's deployed, especially at larger organizations, is people will select many dozens, sometimes like more than 100 of the apps in the app directory, and there's about 1,000. But also at the largest customers, people have built thousands of internal integrations. So it's not just like an outage affects people's daily work, although obviously that's true, but changes to API methods, deprecating them, Any kind of technical change has big ramifications and there's like a whole exoskeleton of change management.

So I can see the audience. I'm curious, do you guys mind raising your hand if you guys use Slack at your business today? Okay, it's the vast majority of hands. Almost everyone.

I was just at a conference and there was a lineup for a party and I was going to go in and people were introducing and said, "Oh, this is the CEO of Slack," and this woman said, Oh, I hate Slack. So I always do the, like, how many of you use it? How many of you hate it?

No one's going to admit it. I see one hand, one brave hand. But it is interesting, I'm sure the spread of businesses represented here, we probably have a lot of entrepreneurs, a lot of people working for bigger companies, investors, all using the same product. Is that a challenge for you, or is that in a way helpful that you've got so many different types of customers, and especially with 150 enterprise customers now?

[Speaker:JASON M. LEMKIN] Yeah, the variety is bewildering. We were actually talking about this backstage, but this is not a business application, but it is a group of people aligned around the achievement of a goal, and that's wedding planning. People use Slack for wedding planning all the time, but people use Slack at like, Capital One and Liberty Mutual and Moody's and big financial services companies. But they also use it obviously at, you know, 3, 5, 8-person startups. They also use it at farms, at multiple police departments, like detectives passing off case notes to the new detective coming on shift. They use it in dental offices, hospitals. So I think it's— to a certain extent, I guess that makes it more challenging, but in One interesting way I think it makes it a little bit easier, because it forces us to stay focused on that bottom level, what's common to all organizations, what's common to all teams, the kind of fundamental communication layer.

When you look at the copycats and challengers that have come up over the years, have you at this point kind of been able to figure out, looking back, what was your killer feature? Differentiation, or, or how, how iterative has this been, um, in terms of kind of getting that escape velocity to be the viral product that everyone in this room is using when there are a lot of other options?

Yeah, it's, um, it's fascinating. And like I said, this is more like retrospective theories and post facto analysis than, uh, we knew what we were doing all along and had a grand plan and then executed against it. But the most important thing, and we have not cracked the nut on this yet, is explaining what Slack is. I had this experience, I was at an event, and it's like, there's dinner, there's I think about 10 people at the table, it's a big round table, and there's a bunch of executives there, and I'm like 90 seconds into my explanation of what Slack is to someone, and then another person across the table who actually uses it leans across and says, it replaces email inside your company. And the person to whom I was trying to explain it was like, oh, okay.

That's—

the understanding of what it's for is much easier in an early adopter crowd. Because if you happen to have used IRC before, if you're really comfortable with messaging apps, you can kind of see what the potential might be. We have not exhausted the entire universe of people in that position. But we're moving more and more into situations where someone is like, this is another dumb thing that IT is making me do, as opposed to I am enthusiastically trying to transform our organization and improve our communication. And when we get there, I think it becomes even more critical that we're focused on just like the dead basics. And there's a big focus for this year on things like launch time and speed, reliability of the apps. It's not really sexy. We say this is gonna be a very boring year.

So how would you—

Sorry, Constance.

Well, how would you rate the average Slack user's productivity boost from using Slack? Does Slack make everyone's life better? Does it only make some people's lives better? I'm sure you guys survey your users, you try to check this. How do you feel about sort of, of the boost that people are actually getting?

I think it accentuates or accelerates everything, and I'm not gonna cuss, but there's a saying, becoming rich doesn't make you an a-hole, it just makes you more of who you already were. And so I think that's true of teams' uses of Slack. It makes them more of whoever they already were. So those parts that were really good, like if there's clarity around goals and decision-making, if there's a high degree of trust, then all of that stuff accelerated. And if there's bad habits inside the organization, those things can get accentuated as well. And I think the side effect of that can be quite positive because it forces people to deal with underlying communication issues. And this might just be my own preoccupation because where we're at as a company with 1,000 people, but the performance of the organization, the performance of the team as distinct from the performance of individuals on the team seems to be the most critical factor. Like when we think about here's some chart, doesn't matter, revenue, users, whatever, and we're here today, we think about where we're gonna be 10 years from now, like the delta in possible outcomes, which is really wide. What is gonna explain that is how well we perform at the team level. And I think that's truer and truer for more and more organizations. I just done a panel a couple of weeks ago on the, just the over, like too broad topic of disruption. And how do you deal with disruption. The critical thing seems to be organizational agility, alignment, the ability to respond to external changes. 'Cause if you imagine companies that are in a very vulnerable position, kind of like on low points of the strategic fitness landscape, even if they didn't make any bad choices themselves, but like Blockbuster or Barnes Noble in 2002, The currents of disruption are so powerful and so strong, and if the organization is brittle and unable to respond to that, they're just going to get smashed. I mean, those might be extreme examples because they're probably hard to— maybe there was some crazy Hail Mary you could have done. But that advantage is no less real for 5-person teams inside of some large company, for 10-person companies. Really for any group of people working together.

[Speaker:JASON M. LEMKIN] So one thing I can't help but think when I hear that is, at the same time that Barnes Noble gets challenged by all these giant forces, what has been the equivalent in the workplace? Because we still email 6 hours a day. I'm sure everyone here who uses Slack probably emails about as much or still a high volume at the same time. So it's not like Slack killed email, and I know that wasn't what Slack was supposed to do. But it's how some people started to conflate this, and so what is changing, or is there a fundamental shift that Slack is sort of part of?

[Speaker:JASON M. LEMKIN] I think there is a fundamental shift, and I think it has, in some organizations, completely killed many use cases for email. But, like, just, you use the single word email it indicates this is like massive, like it's almost like saying TCP or HTTP or something like that. There's so many completely distinct things that it's used for. A security password for resetting your bank password, a stream of notifications for your HRIS or your expense management system so that you know you have to go approve somebody's expense report. Obviously just communication, receiving marketing newsletters and so on and so on and so on. So for teams where the bulk of their communication is internal, and software engineers are kind of the canonical example, as distinct from salespeople where they're gonna have a lot of external communication, it can completely replace the use of email. And that doesn't happen at every company. It doesn't happen right away, but it will. And I remember I first got online in '92, so like a little over 25 years ago. And that was right at this point where the first most progressive companies were starting to replace their existing internal communication systems with email. So like those existing systems might have been literally electric typewriters, mimeograph machines, piece of paper like rolled up and stuck into cubbyholes and stuff like that. But, you know, '92 was still 3 years away from Windows 95. '95, before like personal computers were a huge phenomenon where they broke out outside of the geek sphere, that transformation, like for businesses to begin using email, took a whole generation, you know? Like there was people who aged out of the business and probably barely touched email despite the fact that it's now 2006 or something like that. And I think the advantages of Slack and systems like Slack, so to be clear, we're not gonna have 100% market share in the fullness of time. But Slack and systems like Slack have such huge advantages over the use of email that the replacement of email as a system for internal communication is just inevitable.

So 5 or 10 years from now, whatever kind of number you want to use, I'm curious, what does the ideal workflow look like to you? And how much, how much time am I spending in a software program versus is meeting with people face to face or sort of not plugged in. Am I plugged in pretty much my entire workday?

I mean, I'm plugged in my entire workday now, and probably most of the people in this room are. It doesn't mean that I'm always attending to my laptop or my phone, but that is the way interruptions happen as opposed to someone running into the room and hollering your name. People spend a lot of time in Slack, like a lot of minutes, and we don't regard that as a vanity metric in the way that an ad-based consumer service might. In fact, the general instinct is like if people spent 10 minutes less a day in Slack, maybe that would be good. I wanna digress for just a second to say that I don't think the use of Slack is distinct from real work. Communicating with people is real work. And for most companies, most projects, most organizations, only really tangentially important things are going to be accomplished by a single person. Everything significant is going to be accomplished by a team.

OK, but then let's redefine it. Let's say there's the work that my company does that pays my salary and is differentiated. And then there's the work that we do to make that happen sort of surrounding that core product. So if I'm talking in Slack about the product I'm building, it's helping me build the product, but I'm not actually coding a product or designing a new shoe or something like that, right? I mean, I'm communicating about it with my team.

Yeah, I don't agree with that, just because the, here's some things that people do in Slack. Network operations engineers doing incident response. So their service is down and they're trying to figure out why. That communication back and forth with parallelization of the investigation, some people looking at the database, some people looking at the load balancers, some people looking at the front-end servers, people reporting back, sharing their hypotheses and stuff, that's definitely work, right? Shift it completely to a really intense argument about allocation of space to spend in the Q3 marketing budget or something like that. That's definitely work as well, like making those decisions, gathering the input, communicating, getting that clarity is just as important as whatever else goes into that. So that might be like meetings with the agency and sign off on the creative and all that kind of stuff. But there's plenty of people inside the company and they tend to get paid more. I'm not saying that's true, I think that's the way the world should be, whose whole job is just communication. Like if you're a manager, that's literally the only thing you do. You read and write messages, you have one-on-ones, you know, like there's meetings. Generally there isn't any other work product besides the coordination of the team. But sorry, to go back to your original question, if you think about the role that email plays, and this is why that guy leaning across the table and saying it replaces email inside your company is, is like so perfect. It's this window you have into all of the workflows. Like it's how contracts that are going back and forth between two legal teams are addressed and how that process happens. And like I said before, the notifications that you have an expense report to approve. For a lot of companies, that is where the argument about the Q3 marketing budget allocation happens. And you have this really tiny window when you're using email, especially if you're in a 5,000, 10,000, 50,000 person company. Tiny little window into what's going on, and the switch to Slack opens that aperture really wide. But Slack's not gonna replace your CRM. It's not gonna replace your HRIS. It's not gonna replace your, your development tools. It's not gonna replace your ad server or analytics or any of the things that individual functional roles use to get their work done. And there's definitely a long-term secular trend, like going back at least 10 years at this point, but maybe a little longer. And I think that stretches out for another like 50 years, which is there's just more and more software and it gets more and more specialized and it suits more and more purposes. So we're a company, like I said, 1,000 people. We buy from like 150 different vendors. I have no way to verify this, but according to Netscope, large enterprises now buy from 1,000 different vendors. So people have this image like, you know, there's SAP, Oracle, Microsoft, Salesforce, you know, like, and then the list kind of drops off pretty quick after that. But the reality is, No, none of those companies is capturing more than like 10% of the total software spend. And in most cases, I think it's even less than that 'cause there's so much. And my favorite recent example is a tool called Office Space, which is used by the facility team to do seat planning. And seat planning, like it sounds like it's not that important if you're not on a facility team, probably never really occurs to you. But you can imagine just like the mind-numbing error-prone process of like using a drawing program program, selecting the seat, pasting it, paste, paste, paste, paste, paste, paste, select all, align horizontal, paste, paste, paste, paste, paste, distribute vertically, and then copying over people's names one at a time. Automating that saves like, I don't know, 40 weeks of, of someone's work per year, allows them to focus on things that actually require some human intelligence and creativity, and they cost maybe $2,000 or $5,000. So you'll see that over and over again in narrow and narrower niches, like for legal teams, contract management, and automated summarization, and more elaborate version control systems. And it doesn't have to be legal. It can be IT, it can be recruiting, it can be sales, it can be marketing, whatever. So in a world where that's happening, I think Slack is a great hub for collaboration. It doesn't replace any of the business logic. It doesn't replace the data store. But when I want something from Salesforce, for example, we're a Salesforce customer, I enter that from Slack. Like I'll go /accounts and then the name of a customer, hit enter, 99% of the time I get back what I wanted, which was name of the account executive, renewal date, ACV, stuff like that. But if I want more detail, I hit the button and I go off into Salesforce and I can do way more elaborate stuff. I think that'll be true for, Salesforce. It'll be true for PagerDuty. It'll be true for GitHub. It'll be true for continuous integration tools. And it just, like, it's a pointer. So people reflect off of that. And if you're in marketing, you're going to be heads down in a bunch of marketing tools. If you're in finance, you're going to be in finance tools. But the hub for all that stuff becomes Slack.

So I'm curious, how many people in the audience work with a company or have started a company that integrates with Slack right now? Okay, so a little less than half, maybe a quarter. Do you think that you guys end up kingmakers with other more specialized business software, or what happens when Slack is this sort of hub, or what might have seemed like a homepage for work a few years ago?

Yeah, that's interesting. I've never been asked that before. And I would hope not because I think that would reduce the utility of the platform. Same way that there are no kingmakers on email. It's relatively neutral. And sometimes when we talk to larger companies, I mean, just the last year we announced partnerships and did a lot of interesting work with Google, with Oracle, with SAP, with ServiceNow. I can go down the list. And sometimes partners are a little hesitant. At first, like feel like we're gonna disintermediate them or replace them or, or something like that. First of all, it's almost impossible to do anything well at all. So we already got one thing that we're trying to do well and we, and the universe of, of software is expanding exponentially. Like there's probably hundreds of companies represented here and many of them are going to be in brand new niches, like, you know, extending the, the ecosystem. But we want anyone to be able to use it for any purpose. There's 200,000 registered developers on the Slack platform, most of them doing internal integration, and if we were somehow to impede them or impose tollgates or otherwise try to capitalize on that, I think it would really bite us because the freedom and the openness openness of the platform is essential for people getting utility out of it.

I'm curious, and this might be a question on the minds of some people in the audience, how much does voice play into your strategy right now and where you see sort of work moving? We see Amazon and some of these big companies that have made home voice-based devices now looking at the workplace. Is there a way to use Slack effectively with voice in the future, or is this something you're thinking about?

I could definitely see it. It doesn't happen right now, although I'm sure that there's Alexa skills for Slack and stuff like that. It's pretty— in my own personal experience, it's pretty mundane at this point. But I do sometimes, when I'm walking down the street and I got a bunch of things going on and I'm trying to get to a meeting or whatever, I put the insertion point into the message composition thing, and then press the microphone button, and then dictate. So that's something that there was software for. 30 years ago, and now it's finally good. The interfaces for like switch channels, read me a summary, ask someone this question, post this message, I think are a little bit further away. And also in offices, obviously, it really depends on the physical configuration because voice is hard to contain. And if you're in an open office plan and everyone's just yakking to their Sidekicks, it's kind of like, you know, when you're at home watching TV and someone does something in the TV show, Alexa, blah, blah, blah, blah, and then your thing goes off. I think that would be— that'd be top. So it's a little bit harder to imagine. However, it's really, really convenient to be able to do that in the applications where it's already been successful. Like for me, cooking, setting timers, asking for conversions, stuff like that. And I don't see any reason why that wouldn't we didn't extend into business.

Cool. Um, so I am curious, um, if you were, if you were sort of starting over, would you be trying to build a platform or would you be starting with a new sort of hyper-focused product? Because, because I wonder if we hit a saturation point at some point with sort of different verticals that are, that are ripe for for multi-billion-dollar companies to emerge like Slack has?

[FOREIGN LANGUAGE] There's the intention that you have going into it, and then there's what actually happens. So I think there was definitely conversations and kind of idle speculation about Slack being a platform at the moment that we were getting started in developing it. But we definitely thought of it as a product, and now that's definitely That's definitely not true anymore, 'cause communication is a platform-like activity. I'm not sure that that distinction really drives a lot of decision-making inside the company. It's not like we, you know, someone, when we were discussing what we should do about something, says, "Tut tut tut, remember we're a platform," or something like that. I think it does push us towards, or draw us towards certain opportunities. But it really depends. I mean, to be honest, we were incredibly lucky. The timing was amazing, stuff like that. And you're— it's so hard to know in advance. So that choice up front, it's more like figure out where you can generate real value for people and pursue that. And if that ends up being a platform, good. If it ends up being a product, good. And that's, I think, one thing that we do stay focused on completely, 'cause in the long term, the measure of our success is the amount of value we deliver to customers.

[Speaker] So I can't let you go without asking about the news this morning. I don't know if you guys saw, but Slack hired its first CFO. You promoted Alan Shim, I believe. And he'd been with you guys for some time. Some of the coverage said, is this a first step or a major step towards thinking about a public offering, What is behind this move and what does it mean for Cy?

Well, I mean, I mentioned 80 people, 320, 650, 1,000, that kind of growth, the complexity increases, like the business operations and business systems complexity increases. We have a much richer product offering than we used to have. We have a whole organization built around platform specifically and developer relations. We have a relatively new customer success team, which is just plowing into some deep problems on change management in large companies. So this is just part of the trajectory, like having that structure. We added our first independent director, Sarah Fire, CFO of Square, about a year ago. I'm not trying to be coy or anything like that. There's really nothing interesting to say about an IPO. It's the most likely outcome for us. It's some period of time away from now, like more than a year, and it could be longer than that. I don't really know. But we made the decision like literally years ago that we want to begin to operate with the discipline and internal controls of a public company. That's something that we've actually been really good at.

Do you think for the entrepreneurs in the room, do you think it's better to sort of build towards that as the ultimate dream as it might have been in the past, or what do you think is sort of the best way to think about ultimate outcome?

There's a book called Barbarians at the Gate, which is about like KKR's work takeover of Nabisco and R.J.R. Reynolds and stuff like that. It's a, like a different era of business, but I remember reading that and have always having these fantasies like, hey, we don't have to IPO, we don't have to be acquired, we'll just go to a bank and we'll borrow $20 billion and we'll buy out our investors and then it'll be like management buyout and we'll just have this big debt and we'll pay it off. So I don't think that that's likely to be the outcome. And it really depends. I mean, I worked as CEO of Flickr and we sold to Yahoo. I have lots of friends whose companies acquired. It can be a great outcome for people. There's obviously a lot of interest in exploring alternatives to traditional public markets, different markets, different structures. There's some longer-term trends that we've really benefited from, like the availability of capital to private companies on a scale that was just completely unprecedented. Like, we've raised over $800 million. So, I don't know the process of IPOing and then the state of of being a public company, I'm not sure are goals that people want, but it's kind of a necessary step if you're going to scale beyond a certain point. I know for me, there'll never be another opportunity like this. Like, I can't start another company and then end up in the same state because I'm not smart enough to make this happen. And if I ever wanted to see how far we could take it, this is the time to do it.

I've seen you say at conferences in the past that if the money is cheap enough, you should take it, in terms of taking investment. Do you still feel that way, or what would be your advice in that regard?

Yeah. And when you say cheap enough, I think you have to factor in not just dilution, percentage ownership, and things like that, but the degree of control that you're giving up. If money is so cheap, it's— I mean, I haven't checked the market since we've been here, and I'm not someone who obsesses over day-to-day changes. But, and this is maybe a good closing thought because I can see the thing flashing, I've lived through, like, I was born in stagflation, the '82 Volcker 18% interest rates bankrupted my father who was a real estate developer. I graduated high school in '91. '01 in a terrible recession, worked through the dot-com crash, literally held Lehman Brothers shares over the weekend. They went bankrupt, and I didn't know that shares could go to zero, but turns out they can. And having cash available when stuff hits the fan, I think, is an incredible position to be in. And so just as a hedge, I think it makes sense.

Well, thanks for sharing your thoughts with everyone. A round of applause for Stewart.

Thank you.