David Sacks (Yammer) & Stewart Butterfield (Slack): Unicorns or Bust

A lot of stuff, a lot of fun. And mostly we want to talk about tactical stuff here. This is about scaling revenue. Right. But, David, I want to start with you to get some of your thoughts. So when was Yammer started? Like a long time ago in our time. Like 08 or something like that.

Yeah, I guess we launched the product in September. September of 08.

08. Okay. And a lot's changed, like then. Right. And things are. So a lot of things I want to chat about, but at a high level. Like, why are things scaling faster than ever from your perspective? Right.

Well, I mean, so one of the big changes obviously is mobile. I mean, it was around in 08, but it was much more of an afterthought. Yammer was really launched entirely as a web based product. If I had it to do all over again, I would have made mobile the primary way that the product worked, the specific way I think mobile translates into faster growth, is that you can slurp the address book. So we could have been way more viral, I think, had we done mobile from the beginning. In the original Yammer signup flow, we literally prompted you to type in the, you know, usernames of like the email addresses of coworkers that you could remember. It's like incredible amount of friction.

Yeah.

So if we could have gotten. And there was no way actually to get the work email address book, I mean, on the consumer side, that had already been figured out like a long time ago. Going back to like Plaxo and, you know, Facebook and all that. I don't know if people kind of remember that stuff, but no one had ever really figured out on the enterprise side because everything was in Outlook and you had to upload a CSV file, which was just never going to happen.

Yeah.

So mobile has completely solved that problem. And actually I'm not even sure why there's not more explicitly viral enterprise apps now that you can slurp the address book. Yeah. So that's a huge difference.

And so that would have been an accelerator and we can talk a little bit about that. But so we don't have to spend hours today talking about Zenefits. But it is very interesting. Right. Zenefits is growing far faster than Yammer did. Right. Yammer was an epic success. Right. What? I mean, obviously it's a great product and great market, but I think things are different. Right. I mean, things are scaling faster. Like Yammer certainly scaled faster than I scaled back in the day with Echo Sign or Aaron when he was here. But the pace of Slack and so Any just particular insights on why that is it got you back in the game? I think this hyper growth. Right.

Well, I think Zenifs is scaling faster than just about anything I've ever seen.

Yes.

So it's hard to know whether that's like some sort of broad based trend or whether it's just very specific to the mechanics of that product. And I guess what I'd say in the case of Zenefits, it's a product that every small business needs and we're selling it for free. So that combination is just pretty explosive.

So Stuart picking up on that. I mean I didn't become a Slack groupie until about three months ago when I was building some products for Saster. And then I got it right when I actually had to build software. And it's. I mean we're groupies. I'm a fanboy. I love that. It's just everywhere on all my Macs and my mobile. I love Search. But the growth's been pretty epic this year. Right. And I think in some of the press I've read you've said you don't know all the reasons why. Right. It's just taken off. Do you think? There's a bunch of things I want to talk about but do you think if we had the same Slack three years ago, would it be growing as quickly? Is it a function of the times?

I think the times play into it for sure.

Yeah.

I mean I said when I was asked, I have no fucking idea because that got a headline.

Yeah, it was a good one.

By giving you the 45 minute explanation of why I really think that would not have gotten any headlines. But there's a couple things. So mobile is one of them for sure. And mobile, it's not just that any particular feature of it, it's the fact that everyone now has this fantastic Internet connection and pretty amazing computer in their pocket all the time. Our relationship to technology has changed a lot in the last little while in a way that I don't think we've really noticed yet. Kind of like the frog and the pot of water. And it will probably be obvious in 10 years. In retrospect it'll be apparent what the specific things were. But I remember I'm pretty old. So 20 years ago I walked into my dad's office and he's a real estate developer and for the first time ever in my life I noticed that everyone at the office had a computer on their desk. Because I'm old enough, I remember when people had desks that looked like this or what you sometimes see in a movie where they had like a pad of paper and like a pen, something like this. Yeah. And like a Rolodex and stuff like that, and a telephone. And there was suddenly this transition to where the receptionist has a computer, the accountant has a computer, the architects have a computer, the planners have computers. And in a kind of analogous way, everyone uses the Internet now, which wasn't true certainly when we started Flickr late 2003. We started development early 2004. I don't think that even 50% of US homes had Internet at home at that point. And certainly a tiny minority of them, probably under 20%, had high speed Internet at home. And we forget how, like when you started Yammer, you said you should have paid more. It would have been better if you paid more attention. But you would have had to have been almost impossibly appreciated to know that at the time. Because it was 2007, early 2007, when iPhone was announced. It wasn't actually available until later. But the first version of the iPhone, people forget, was so, I mean, there was no app store. That didn't come until another eight months later. It was also as revolutionary as it was compared to what we have today. It wasn't nearly as big. Android followed after. And that really like late 2009, early 2010, that just suddenly change. And I know because we were working on a game and we started our company in the beginning of 2009 and we completely missed the boat. I mean, Even in early 2009, we didn't realize the extent to which people's discretionary computing time would shift to mobile. And it's maybe 2% laptop and desktop now and 98% mobile.

Yeah. So I want to. A lot of things I want to chat about with limited time, but I want to talk about business models because we're here about scaling revenue. So I went yesterday, the day before yesterday. What's the new Slack program? Slack for business, Slack for. What's the new.

Oh, we just introduced a new tier. So we started off with a freemium model with chat about that.

What's the new one called, though? It's Slack.

The new one is called Plus.

Slack Plus. Okay, so I go to Slack plus yesterday and to buy it, I'm like, where can I talk to a sales rep? And I'm clicking around. Contact me, talk to me. Right. So obviously we've gotten from nominal to double to, you know, to eight figures in revenue without a sales rep. Right. And we all sort of think we understand the Atlassian model. Sort of. And I think we all get the Yammer model wrong, which I want to ask David about. Right. But can you, can you get to 100 million without a sales team, do you think?

I think, well, you know, there's, we don't have anyone who has a title that's sales. And then some people would say, oh, you really have a sales team. And it's kind of ambiguous what we have. We call them account managers and there's no outbound. Almost exclusively. The people they talk to are people who already have made the decision that they want to purchase. But they work at a big enough company that purchasing is not something that you can just do. There's a vendor review approval process and security policy analysts and our in house counsel wants to mark up the toss and blah. So it's kind of almost like midwifing the sale as opposed to being a salesperson. So I think we can start.

But no one's on commission today, right? No, I'll say you have no sales team.

I believe we can have no commissions forever.

Forever.

I think we can have no outbound sales forever.

And so when I'm from Archer Daniels, man, pick your company Dow and I want to buy a thousand seats or 2000 seats of slack next year, I'm not going to talk to a sales rep and I'm just going to pay.

Less talk to one of these account managers. The difference is we won't be approaching you. And the reason you'll want to talk to us is because like most large companies today, even now there's already multiple companies teams using Slack and you want to. We originally wanted to copy Yammer in the sense that anyone can create it and then it becomes enough of a, you know, there's enough people using it that the administrators want to pay to have control over it. And we, I think we didn't quite follow the pattern properly and that kind of didn't. It didn't work for us anyway. But we now end up like a company like Adobe has 14 different paid instances of Slack. So we have a different problem which is not a whole bunch of individuals using it, it's a whole bunch of teams using it. And that's what they want to consolidate and have administrative control over all of them.

Now David, how so contrast that a little? Because my understanding of Yammer, and just maybe it's a little bit apocryphal, is that everyone looked at Yammer as this amazing freemium product that went crazy in the day, right. But as I've met more folks that Actually worked on your sales team. I think my learning, and correct me if I'm wrong, is that certainly yammer exploded as a product product. Right. Through viral usage, at least within enterprises. But then when you got bigger, when you sort of approached eight figures in revenue more, you sold to the cio. Right. I mean literally targeted the cio. Right. And went to close real deals with the CIO for a variety of reasons. Right. So. And I think some of your original vision was all freemium. Right. Very much akin to Stewart's. Right.

It was sort of a sale to it. Plus there's usually some business sponsor because it primarily buys products that make their jobs more secure, like preventing a security breach or something like that. Whereas they have responsibility for enterprise collaboration often. But that's not exactly where their incentives are aligned. So you normally need somebody in the business to push them, saying that, hey, we really like this Yammer thing. And then they would. But their budget would usually come out of the IT budget.

Yeah.

So it was actually a complicated sale in that respect.

Complicated sale.

Certainly my goal going in, or my sort of belief going in was a little bit like Stuart's is now, that we hoped never to have to do sales. And our hope was that employees would just pull, pull out their company credit card and buy it. And we could never quite make that work. It turned out that the virality was a tremendous lead gen engine and we never had to spend like a dime on marketing, but that it really took a salesperson to get the sale over the top. And I think maybe it's because of the thing that Stuart mentioned, which is we were selling all or nothing company networks and because of that you had to make this enterprise wide decision and that kind of pushed you into this like enterprise IT realm. Looking back, I think if we could have done it, I mean, I think Slack's done a whole bunch of things better than we did. And I think one of them, you know, is it might be around this idea of letting groups buy it because that can be a much more self service sale.

Yeah.

And sorry, if we had started in 2008, your question before, we would not have taken off like this for a number of other reasons. Like it was just harder. There was fewer, fewer people, especially for Slack in particular with its feature set. Fewer people messaged back then like you had a BlackBerry in 2002. I'm sure probably half the people here did. And there was Finnish teenagers who could use T9 to text, but it was not the normal case that people used messaging products at all. Even at the height of popularity of Yahoo. Messenger and AIM and msn. So stuff like that, it was still a relatively small percentage of a much, much, much smaller user base of the 150 million people using the Internet worldwide.

Yeah, and just we talked about other things, but just to dig in on that because I mean, David's point is, and I love the science of sales and the art of sales, but as founders, we'd all love to have no sales team, no matter how much we love sales. Right. Because of course it's the dream to spend all your time making the product great and sales is even the best case. It's a huge tax on your time. Right. Even with the greatest team. And what I find that people sometimes get confused on, on the Yammer and now Yammer Slack model is understanding what verticals that can work in and what it can't. And Stuart totally disabused me if I get it wrong. But notwithstanding all the blue chip logos you have, I think you've got a very sort of core software development, project management core. And I don't know that even though actually I think Yammer came out of the same place. Right. Because you and Adam kind of had the same idea. I don't think that Yammer had that same software developer core that could accelerate it. Right.

Yeah, I think you're right. And the reason for that, I don't think, is because the product is especially difficult to use or requires a lot of technical expertise, but because it's intended for internal communication. So if you take the whole US workforce, we're not going to work for retail food service, health care. So like 70% of the US workforce is not going to work for it. All of the 30% that remains the knowledge workers at one end of the continuum you have, like my favorite example is real estate agents who almost never talk to anyone who works in their same office. Maybe 3% of all of their communications, the other 97% are external, where software developers don't talk to anyone except for other software developers. Maybe there's a UX researcher and there's a marketing person who's bringing in news from the outdoor side world, but day to day they are only talking to each other and so Slack works perfectly for them. We've done well in tech, we've done well in media, we've done well in creative industries like ad agencies and stuff like that. It's not. We do see use cases in all kinds of other places, like first of all, weird companies, industrial paint and solvents or shipping and logistics. And in Some groups that don't belong to those categories, some sales, customer support, those kinds of things. But yeah, you're right, it's concentrated there.

Yeah. But the interesting thing about recurring revenue, we chatted about it earlier with Aaron Levy and Bob Tinker. In my experience, if you sort of squint, you can just barely see sort of 10x on the horizon, what the company looks like. I mean, you don't exactly know how to do it, but you know what it feels like. But I think what you're saying is the Slack customer base that we have today can get you to 10x, right? Is what you feel in the company customer base.

Yeah.

I mean, because I think some people get overly attached to freemium. I think as founders and I want your thoughts on the statement. And sometimes it's a disservice. Right. Because they think freemium can take them further than it can. Right. And sometimes they under invest.

I am totally open to the possibility that I'm being hopelessly.

No, no, in your gut, you can. You agree, David? You can kind of feel 10x. Right.

Well, I mean, so freemium worked really well for us. I mean, it certainly has limitations, but I mean, you know, I generally like it as a strategy, so, I mean, it's probably not right in all contexts, but it. I mean, it definitely worked for us. I think it seems to be working for Slack.

So.

You know, I don't know, like, I guess a good question, like, who it wouldn't work for. But I tend to be kind of a fan.

Well, let me flip it around, since you're a fan. So just because I think that it's good to dig into the yammer story because people get it wrong, right? It's a little bit wrong. So you're running Yammer. When do you realize you're going to need to hire a sales team? Right. And how did you approach that and scale it? Because, I mean, I met you probably before that. You come out of PayPal and all this, and it's a change, right? It's like now, Now I'm building an enterprise software company. Right. So how did you. And how did you learn. You're very quantitative. So how did. How did you make that decision and execute it?

Yeah, so I think it was probably like about six, six to nine months in, we realized that sales was going to be an important thing to us.

Yeah.

And I mean, the backstory to it was, like you said, we were all consumer Internet folks who were tackling this enterprise problem. We knew that we were doing business software, enterprise software. But we thought we could do it in this completely consumer way. And you know, that meant viral freemium, you know, using a B testing. We generally thought that there was, and I actually still think this is true, that there's this over compartmentalization of knowledge where, you know, if you're a consumer company, use like this set of techniques and if you're an enterprise company, use this set of techniques and really like both sides. Consumer companies I think should be much more open to sales and I think enterprise companies should be much more open to growth hacking. But in any event, in our case, the growth hacking, like I said, worked from a top of the funnel perspective, but it was not closing deals. And so we realized, you know, like I said, about six months in that we had to do something to close deals. And that's when we started building a sales team.

Yeah.

And then from there we essentially reverse engineered all the classic functions of an enterprise software company. Because once you have a sales team, you need to, you start realizing you're in competitive deal situations. So then we need like a marketing team that can enable the sales team to create like the right materials. And then we needed a customer success team to make sure that customers were successful with the product and therefore renewed. And so we ended up like rebuilding all these functions basically out of Salesforce.

And Salesforce driven culture and team. Right. And the question after that, so now you reverse engineered Salesforce at Yammer. Right, Right. And now you have a chance to take these learnings and practice them them again. Right. At Zenefits. Now it's different, but it is. I mean, Sam and Parker here, I mean there's a hundred and something, 100 sales reps, 60 SDRs. I mean it's a sales driven. So what are you going to do better this time? What are your learnings that you want from this process?

Well, so every one of these companies is really different. There's actually more similarities to PayPal with Zenefits than there are to Yammer. It's a more sort of operationally intensive company the way that PayPal was. And the sort of, it's a little, the transactions are a little bit more like PayPal. You know, it's not. Yammer was this collaboration tool and revolved around obviously people posting messages and content. And that's important. But if you lost like one message, not the end of the world world. Like with PayPal, when you're dealing with people's money, there's benefits. When you're dealing with HR information like mistakes are much more painful. You have to get it. Right. And so there's a whole, the whole out of that flows like a whole bunch of operational requirements. So Zenefits, it's actually a lot more like the PayPal story.

Got it. So the learnings from all these experiences, the revenue side, you're less focused on bringing the sort of yammer sales learnings to Zenovitz and more sort of.

Well, yeah, I mean, I think as you probably heard from Parker and Sam earlier today, I mean, like they've really figured out the sales model and that thing is just cranking and so I think the other areas are what need more attention. Got it. But the fact that like actually PayPal is, is a better reference point for Zenefits than Yammer was, I mean it kind of goes to my point about like over compartmentalization. I think that there's now this like body of knowledge that you know from, again, it's from consumer to enterprise that can be, needs to be selectively used in the right places. But these domains are just all kind of collapsing.

Yeah. So I want to talk about collapsing and then. But Stuart, let me ask you a related question. So you, you hired, I think as your CMO or VP of marketing, someone out of Salesforce. Right. So you added your enterprise DNA. Right.

Ex Salesforce and most recently CMO of Zendesk.

Zendesk. Okay. And so what did you tell us A little bit about that decision, like to bring that DNA in and how that's driven the company, what you've learned from that?

Yeah, so when I was speaking before about the difference between account management and sales, it really totally depends on your perspective. We don't feel like sales is an icky thing. We also don't feel like marketing is an icky thing like some people with software backgrounds might.

Yep.

To us marketing is critical and it's everything we do. I mean the copy that we write in the ui, the, you know, even things like the technical operations team and the speed at which pages load and all those things. I know it sounds crazy to think of that as an aspect of marketing, but the biggest thing.

Yeah.

It is what we call customer experience. So instead of making customer support a cost that we have to try to manage and you know, thinking of that role as an entry level job and kind of, you know, low paid, we sought out former engineers or technical writers, people with a higher level of expertise, and we combined customer support with functional testing inside of QA so that people could write docs and they would know what features were coming and, and the support is phenomenal. Even for the free users. And that's in my mind a marketing cost. But the thing that we were missing was any kind of knowledge of how things actually get marketed in terms of paid advertising, in terms of lead gen on the one hand and branded advertising the other. Because we thought we wanted to do both and we needed someone to be responsible for it. But there's no one in the company that had any real expertise.

Yeah.

So I mean Bill was actually unique because yes, he led online marketing for Salesforce and he's a CMO at Zendesk. He also had background doing consumer stuff in the games world. So there's like a little bit of.

Got it. It's the convergence that David talked about.

Yeah. But the thing that I think really made the difference there was it was that expertise, that background on the enterprise side combined with the idea which is rings exactly true to us that every interaction that anyone has with anyone, any experience they have with Slack, whether it's customer experience, whether it's the initial user experience, when you first run the mobile app, whether it's a bit of copy, any of those things is a marketing opportunity. And how people think of us is the sum of all of their experiences. And I think that's critical.

So in that model for Slack's goals for 2015, do you do one on ones or is that anything like that with your management team? I one on something theoretically.

I do one on one theoretically.

Okay. Well at least it's not an alien concept. Right. When Parker and Sam were here, the idea of one on ones seemed alien. But so when you meet with Bill and you talk about marketing. Right. In a. Not a sales driven, but you've got a lot, you're invested in marketing. What are sort of the KPIs, what are the goals, what are the quantitative side of things that you're looking at if there is one. Right.

We were lucky enough to have just one metric that we really pay attention to, this Daily active users. Because it's kind of product that if you're not using it every day, you're not really using it. So we can think.

And that's higher than ARR mrr, right?

Yeah, well, I mean I guess they're almost one and the same.

But marketing can drive daily active users as their core metric too. Right. Marketing doesn't have a convert goal, a lead goal, a revenue goal, it's a daily active user goal.

Yeah. Because we grew 28% in January and that's on top of a great year. And that's still not the result well, actually, we have started a very small number of tests of paid advertising that's not the result of a marketing effort. Yet again, other than making sure that people have a really good experience. 100% of our growth historically has come from people recommending us specifically on Twitter. And that's been under recognition aspect of this because people won't post on Facebook because it's not really appropriate to say, hey, we switch tools at work and I really enjoy this software. But they have no compunction doing that on Twitter. And they might have 400 followers or they might have 8,000 followers, they might have 140,000 followers. And that really adds up. We have a custom timeline of at this point, probably five or six thousand tweets of people saying just such a Slack. Love it. And every one of those might. It might only be seen by 20 people, but it might again be seen by tens of thousands.

That's pretty interesting. Let's step back because one of the things we're building recurring. We think a lot about lead sources. Right. Where do they come from? So you mean literally and I love the Twitter, but literally, Twitter, as best you can measure it, is your number one source of paying customers and users?

Yes.

Is people on Twitter saying Slack rocks. And you track that from Twitter.

Twitter and press.

And press, yeah. Okay.

Pr.

Yeah.

So I mean, like, you know, we could say if we didn't like sales, if I had the kind of personality that says, I don't know sales is gross, then we'd say, no, we don't have sales, we have account management. We could say that we don't do any marketing at all. Yes, we didn't do any paid marketing, but we did a lot of pr. We invest a lot in that. So they're all different ways of looking at the same thing.

And is that pretty evolved from your experience, David, or is it consistent? I mean, Twitter is the number one lead source, is a new one for me, but it's a cool learning for me from this session.

Well, I think Twitter, I mean, Twitter is the place that people get their news from. So like if you're. If you're sort of. And PR is a great way to get kind of. It's a great form of marketing. So I think like Twitter and PR sort of go hand in hand as a strategy. So yeah, I mean, I really like that as a sort of lead source. But then there's more specific things you can do, I guess, depending on the market you're in and things like verticals that you. Channels you can go After.

Yep. So back to your question on people. Right. And you talked a little bit about bill. Obviously, 2014 was a great year, and it sounds like January was a pretty solid month. Beyond that, any key critical hire that helped you inflect the revenue side that made a difference? I mean, I know you have the world's greatest team, as we all do, but was there something, especially on the revenue side, that kind of just made a difference and was a new experience for you?

There's a lot of little techniques, but if I had to choose just one thing that might be interesting to a broader audience.

Yeah, please.

The. Maybe two days, 48 hours before we officially launched, which is February 12th last year. So we're just coming up to our first anniversary.

Yep.

We, you know, we had thought through the billing flow and how people sign up and how they pay, and we charge per user per month, like a lot of services. And we were thinking about our biggest single customer at that time, which was Walmart Labs. And when they had settled up, they set it up so that Anyone with a walmart.com email address could sign up. That was the bit that we ripped off from Yammer.

Yep.

A little bit incorrectly applied in our case, because it's a product for teams as opposed to the whole company. So you'd have people who worked in other parts of Walmart showing up here, like some guy who works in, you know, logistics fulfillment in Bangalore or something like that, showing up at a user experience project for new concept stores or something like that. But the point is, the guy who's going to. We were asking to make the purchase decision, do you want to buy this product? They had 800 people or something like that on their team, and about 400 of them were actually using it. So the other 400 were people who had either signed up because they saw it somewhere or because they tried their Walmart email address or they hadn't spread to their team yet or whatever. So we had to make him decide. Do you want to spend an extra 400 times 80 bucks for the year for all of these people, or do you want to go and manually deactivate 400 accounts? And that's a terrible choice. You know, that's gonna. People are gonna think about that a little bit too long and then maybe not buy at all. So we instituted what we called the Fair billing policy, which is we can easily detect accounts that are inactive. And once an account is inactive, every night, we'll go through every single account and scan them if they're currently active and they're no longer using it. We'll mark them as inactive. And if they were inactive but they started using the again, we'll mark them as active again.

Got it.

And you only pay for the ones who are active.

So let's chat about that for a minute because that's interesting. And so that was. You believe that was a significant accelerator to making less friction on the revenue side of the business?

Yeah.

Right. I'm a huge believer in less friction. And of all the places you can remove the friction, the purchase decision would be a big one.

And I want to hear how that compares to Yammer, because if you talk to most folks selling SaaS to the enterprise, you'll hear a story that, you know, I sold a thousand seats. 10 deployed the first quarter, 500 by the end of the year. And then I'm hoping that the renewal comes in because no one ever uses all the seats they buy. Right. And as founders that we love our product, we love this idea of deprovisioning seats because it's what we'd like. But for many SaaS companies, it might destroy their economics. Right. I mean, I love Salesforce to death. Right. But having worked a lot of Salesforce customers, a lot of times they don't even fully deploy until the second year. Right. So if you. If you delimited or whatever the term was, those seats the whole first year acv. So but it's. But it. But that's generated enough. It's taken enough friction out of the sales process that it led to a revenue boost. Right.

Yeah.

Well, also.

And for the. Some people didn't even notice. Right. Because they had. Our average paid team size is 20 people. So a lot of them, they'll know everyone who's on the team. It'll be eight people or something like that.

Yeah.

But then one person goes on vacation for a couple weeks or one person gets fired or one person quits the fired one. Yeah. And they forget that they didn't deactivate the account.

They always do.

And then 10 days later, they get this email that says, hey, we noticed that so and so isn't using this anymore. Here's a prorated refund for all the money that you paid for this person. And that obviously didn't get us the sale in the first place, but it gets us a Whoa, that's amazing. And they'll tweet about it, tell their friends about it. They'll be very happy with. They'll be much more likely to renew. They just have a positive impression. And that positive impression obviously makes a huge Difference.

David, you're hyper quantitative and thoughtful on this. How did you think about that at Yammer? Because I'm sure at Yammer you wanted to get all the seats you could get too, right?

Right. Well, I mean, I love that idea because it removes any that Stuart implemented because it removes any perverse incentive that the admin would have to remove people from the network because they don't want to pay for these extra seats. If you have a network product where the value of the product increases with the number of people who are contributing content, then you want the network to be as big as possible. The way we did that at Yammer is that there'd be a contract negotiation and they would pay for a certain number of seats and then we would typically waive. They knew that the network would just keep growing and we didn't want there to be any deterrent to letting the network continue to go viral. So we would frequently just waive the overages for the rest of the year. And then when the renewal came around, then they would, the ASP would go up. So we kind of saw that as like a win win. But now virtually all products have networked elements to them where you have users within a company interacting with other users. And so I think this is actually a great idea to maybe. I think companies are probably afraid. I think most companies would be afraid to only charge for their active users. Because they are afraid. Yeah, they're afraid because they're afraid that they have too many inactive users and they love the idea of selling shelfware. But if you want to keep yourself honest, actually I really like the idea of only charging for active users.

Not sure most sales teams would love it. Right. That want a consistent ACV and get their quota.

Much of it has broad applicability because we're a messaging product. And again, people use it all day, every day.

It doesn't. But a great user experience has broad applicability. Right. And so trying to quantify the value of that versus the money you're losing by that is sort of founder oncs sometimes. Right. So, David, I want to ask you a follow up question to Stuart about inflection points in teams. So you joined ZenefitsNow, right. And what are the resources people that you've brought in? Right. Because you've had a chance to think about this. I mean, I'm sure you really want to twist the knobs and the dials. Right. I mean it's a great rocket ship. Right. But I think your real goal is to even help it accelerate further. So who did you bring in, like, who have you brought in? What type of team? Teams, people. If it's too early, tell me it's too early. But I'm guessing you've thought through this pretty carefully.

Yeah, I mean, so one of the. So obviously before joining the company, I had a series of conversations with Parker and one of the things that kind of came up pretty quickly is that the company didn't have a product management team. And that's because like Parker and we, one of the persons were essentially doing it all, you know, he was basically doing it all himself.

CEO is product guy. Right.

We've all lived it.

Yeah.

So which is great because I mean, Parker did a great job. But at some point, you know, with a 600 employee company, you know, at some point you might decide you want a product management team. So the first week we started building, you know that I was there, we started building a product management team.

Got it.

That led to product marketing and sort of other functions kind of along the way. Yeah.

And what did in anything, you know, whenever someone comes in the kind of role that you have, oftentimes you come in thinking you're going to do a certain thing. Right. And then you really, no matter how much diligence you do get in, you kind of realize there's a different area where you can add the most force multiplier. Right. Has that changed at all? I mean, or is it. Do you always think that professionalizing product was sort of job number one?

Well, I mean, I've only been there six weeks, so my views have definitely.

It's a fire hose though, isn't it?

Yeah, for sure.

So, yeah. I mean, I guess what I would say is like I didn't have to know that much about the company to know that like you want to have like a product management team. That's just like it's just one of those core functions that a company of any size will eventually, you know, want to have.

Yeah.

So that was kind of like a no brainer. There's some more subtle things that, you know, I've kind of picked up along the way over the last six weeks. But you know, it's probably a little more involved.

Yeah. So cool. So one thing. Curious to get both your thoughts at different levels. So one thing that about founder, sometimes we worry too much about because we can't help is competition. Right. Because it's so visceral and there's the tweets and the press release. So Slack has done. Do you think at the growth rate you have, do you think about competition at all?

No.

Is it irrelevant? Right?

Yeah, to us it's irrelevant, I think.

And what about it? More Zen level. Right. So let's say I went from hipchat to Slack, right. It is possible if I went from Hipchat to Slack, I could go to Zack someday, right? Absolutely. There's competition today, which at this growth rate is probably irrelevant. Right. And then there's sort of the Zen competition. Right. And so you spend much time of that with this growth rate. Can you even think about it?

Well, I mean, we 70 maybe as high as 80% of our customers. If we ask them, what did you use before Slack? We'd say nothing, shrug their shoulders. And if we say, okay, well, let's say you had a change in your benefits plan, you need to send an announcement to everyone in the company, what would you do? Oh, we'll send an email. Okay, what if you are going to be 10 minutes late for the meeting and you want to tell someone so they can apologize? You say, oh, then I'd send a hangout message. So it's usually not that they used nothing. They used like this heterogeneous mix of different unconnected messages.

80% of Slack, the cool kids, the hipsters, didn't use anything before they used Slack.

Well, they say they used nothing.

Oh, I see.

It's because they don't imagine internal communication tools as a category. So, like, if you're gonna start a sales team today, the first thing you would do is choose a CRM. Like, you wouldn't get started if you were gonna have engineers writing code, you wouldn't get started in until you had chosen a source control system.

Yes.

And so on. So people think of those things as existing categories. If you start a team, for some reason you don't think, okay, what are we going to use for internal communication? You just kind of start going, you set up Google Apps. If you're a new startup, you assume that you're going to get people's individual phone numbers and send them SMS or whatever. It's not a decision that you consciously make. So given that that's the case, the challenge for us is to establish internal communication tools as a product category. There are now in the bay area today, 50,000 people were using Slack or something like that. And many of those people are going to go on to join new companies or start new companies or join new teams, found new teams, and they will make the decision like, what are we going to use? Because we used to use Slack.

And it will be true if they.

Use Hipchat, as well. But that's the real challenge for us, is to establish that as a category.

Yeah. And so then I want to get back to David and then we'll probably only have time for one or two more questions. So, looking out, right, squinting out there and seeing 100 million, 200 million revenue, what does Slack want to own? Right? I mean, it's a communication tool. It's sort of an ad hoc search project management tool. What kind of company are you at? 200 million or 100. Pick whatever aspirational number you want. But it's not the same Slack today. What space do you. And then competition changes, right?

Yeah. I still think a platform for internal communication, as blah as that sounds as a category name, is probably right.

So who's an incumbent you displace in your mind, Right.

I don't think there is one yet, or it's Microsoft, but Microsoft in a super broad sense, that includes Lync and Skype and Yammer and SharePoint and Exchange and Active Directory and a bunch of other stuff. But the strategic position that we occupy when we're making 200 million bucks a year is the bottom layer of the business technology stack. Because when you use Slack, you plug in Twitter if you're interacting with your customers on Twitter, you plug in Zendesk if you use it for customer support tickets, you plug in GitHub if you're using it for source control and on and on and on. For like marketing analytics, BI, CRM, whatever. Continuous integration, testing, application performance monitoring. The 30 different services you use all plug into Slack in a way that they could not have. If you plug in 30 things in Slack, you couldn't have plugged all 30 of those things into one of the other ones.

Oh, for sure. That is great.

Yeah.

But maybe in 2016 they'll get there, right? I mean, a good engineer can build an integration these days, right?

Yeah, but you build N squared integrations, like for every service you add, you're going to have to integrate with the other 30 or 31 or 32. Whereas everything will integrate with Slack. And having one search box that searches across all of your systems is incredibly valuable.

Oh, it's valuable to me.

Yeah.

It's just I'm curious how you think about it, because the thing that's innovative today becomes tablespace a couple years down the road. I mean, the Slack, the integrations, my circleci, GitHub, it's beautiful, right? But given enough time and any team of engineers can build software, I'd say.

We don't pay attention to competition. And this might sound a little bit arrogant in the sense that if you were a musician and you were making recording a new album, you don't go and look at all the other albums that are out today and see how can you make yours better relative to that. You have some songs that you wrote, so we have some software that we wrote. At the same time, we are paranoid that someone will come up with a way to deliver 80% of the value of Slack with 20% of the complexity. That someone will find some simplifying essence, and that will be easier, and that will take the core idea and the value that people are getting and be able to deliver it.

So that's what you obsess about. The order of magnitude easier is kind of what the disruption you can't see or feel. And David, quickly, I know you run out of time. I remember when Yammer launched, I think you formally launched it at TechCrunch Disrupt or something. And then this product that sounded kind of similar, called Chatter launched. Right. I don't know if you remember that it sounded similar. So how do you think about what have your sort of Zen learnings on competition and Zenefits we talked a little bit about earlier. It's interesting. Huge amount of indirect competition, maybe bound to direct competition today. But what are your learnings through all these experiences?

Well, I would love to have no competition, but unfortunately with PayPal and Yammer, we ended up having a lot. So. I agree. The question is, well, how much should you focus on them? And I think there is a danger in becoming obsessed with them. And so, like, I would see people become obsessed with us and start copying, like, all these things, features that didn't work. They're doing all the wrong stuff. It's like, really funny, but, you know, so. But on the other hand, you can't completely ignore the situation either. So, I mean, obviously with PayPal, we are competing against ebay and they own the platform where 70% of our business came from. So, like, there was just no way to ignore that. With Yammer, I think, you know, Chatter was sort of the really threatening one. And it wasn't threatening because it was like a better product or anything. It was just because it was bundled with Salesforce. And it took them a couple of years, but they finally realized they should give it away for free. And that was a point at which we're like, you know, we think we're better, but on the other hand, now we have to compete with Free.

Free is scary.

Yeah, that's a dangerous place to be. And I guess, frankly, that's probably why I haven't created a company that hasn't, you know, sold itself.

Fear. A little bit of competitive fear. PayPal. That was clear.

Even a gammer, though, right? So maybe, you know, maybe. Yeah. I mean, honestly, like, those. Both of those dynamics really played into those decisions. So I don't know if it was the right thing or not to be, like, so worried about it, but.

But it's.

Those are good.

Yeah. Okay, cool. I would love to. I feel like we got five minutes, but we're out of time. We got to get to the crunchies. We got to get to an internal team company meeting with 2,000 employees. So I think we're out of time. But let's thank David and Stuart. This was epic. So thank you very much.

And we'll.

If you can hear me, everyone, go downstairs. We'll have drinks downstairs. They're going to break this room back up into a party. So thank you, everyone. I really appreciate all the time.

Sam.