Jan 2, 2019 · 29m · a16z
a16z Podcast | Nobody Discusses Work Software Outside of Work -- and Then There’s Slack
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In this a16z Podcast episode, host Michael Copeland interviews Slack co-founder and CEO Stuart Butterfield about Slack's origins, rapid viral growth, platform integration strategy, and impact on organizational productivity.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 1.7 Guest teaching 2.3 Guest disagreement 1.2 The host pushing back 1.5
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 6:16 Rejecting the secret knowledge premise
Stuart directly rejects the host's Peter Thiel-style premise, stating that Slack possessed no secret knowledge or hidden insight that competitors lacked, attributing success purely to execution.
Hardest push from the host ▶ 27:14 Interjecting on Microsoft threat scaleThe host interrupts Stuart mid-explanation to challenge his assumption about Office 365 market segmentation, pointing out that capturing 40% of the market could still kill Slack.
Biggest teaching moment ▶ 9:33 Reclassifying Slack from enterprise to business softwareStuart corrects the host's characterization of Slack as strictly enterprise software, educating him on the equal importance of SMBs down to small dental practices.
The host holds their own ▶ 16:05 Demanding a rational explanation of valuationThe host sets aside polite promotional framing and directly challenges the guest to justify Slack's multi-billion dollar private market valuation on rational economic terms.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Solving Organizational Transparency and History | 1 | 2 | 1 | 0 | The host asks a straightforward prompt about what problems Slack was designed to solve internally. Stuart provides an educational explanation regarding lateral transparency across teams and accessible communication archives. The host purely listens without introducing counterarguments or citing independent research. | |
| Mobile Technology and the Evolution of Messaging Behavior | 1 | 2 | 2 | 1 | When the host asks a three-part question including what secret Slack knew that others did not, Stuart gently reframes the question by stating there was no secret knowledge, only strong execution. The host chimes in with brief personal anecdotes about retro cell phones but mostly allows Stuart to walk through the historical shift in consumer messaging behavior. | |
| Defining Business Software Across SMB and Enterprise Markets | 2 | 2 | 1 | 1 | The host attempts to categorize Slack as an enterprise software company, which Stuart reframes to business software to emphasize SMBs like dental practices. The host adds light industry context regarding media adoption and San Francisco demographics while Stuart details word-of-mouth growth and Trojan horse expansion. | |
| Valuation Drivers, Pricing Strategy, and Productivity Gains | 2 | 3 | 1 | 3 | The host pushes Stuart to explain Slack's valuation rationally. Stuart breaks down valuation mechanics, supply/demand in private tech investments, IPO risks, and productivity survey data. The conversation remains highly collaborative despite the direct questioning on valuation. | |
| The Unbundling of Software and Slack as the Platform Layer | 2 | 3 | 1 | 1 | The host asks whether enterprise software suites are a relic of the past. Stuart subtly corrects the phrasing by noting suites are no longer possible due to software unbundling, giving an extensive breakdown of internal software integration and machine-generated messages. | |
| Responding to Microsoft and Driving Customer-Centric Growth | 2 | 2 | 1 | 3 | The host raises Microsoft's launch of an Office 365 Slack competitor and interrupts Stuart's market share logic with a counterpoint about 40% market share being enough to kill a product. Stuart acknowledges Microsoft as their main threat while outlining Slack's customer-driven growth flywheel. |
Statements from this episode (16)
Butterfield: Game development is ideal practice for general software creation
“Games are harder to build. I mean, it's actually in some ways a serious answer that it's good practice for any other kind of software you might want to make for two reasons. One is because technically they're pretty challenging but probably more importantly, t…”
Butterfield: Lateral transparency across functional teams unlocks immense organizational value
“If the marketing team has perfect clarity about what's going on with sales, and can see where they're falling down, see where they need better materials, if the technical operations team can see what's going on with customer support, if the engineers can see w…”
Butterfield: Slack provides new hires immediate access to historical company communications
“We would have people start, and they would have the whole history of all communication that happened before they got there available to them, and that's in contrast to an email-based organization where on your first day, you literally have an empty inbox, and …”
Butterfield: Slack would not have taken off if launched three years earlier
“If we had started Slack three years earlier, we just, it wouldn't have taken off the way it did. It might have been a moderate success, but it wouldn't have taken off the way it did.”
Butterfield: Enterprise clients will yield higher margins and revenue for Slack
“And I think over time we will have higher margins from those customers and they'll represent a greater percentage of our total revenue versus the total users.”
Butterfield: Team messaging adoption is binary; 80 percent adoption means zero
“Yeah, and it's absolutely binary. So if we get to 80% of the team, And that's it. Then it goes to zero. It's a hundred percent or it's nothing.”
Butterfield: US and Canada comprise 47% of Slack's daily active users
“The US and Canada put together are 47% of our daily active users, roughly 30% in Europe, 20% in Asia. Japan was our number two country, both for paid seats and daily active users, until it got dislodged by the UK and Germany.”
Butterfield: Email will survive for at least three to four decades
“Email crosses organizational boundaries very well. It's how we set up this conversation. It's how people like us will set up conversations like this 10 years from now in the future. And internet, I mean, sorry, email will probably be around You know, three, fo…”
Butterfield: Slack is growing its revenue at 15 percent per month
“Our multiple has come down pretty dramatically. And it's continuing to come down because we're still growing at 15% a month.”
Butterfield: Slack costs 1/2000th of a knowledge worker's total employment cost
“We're asking them to pay about one 2000th of the total cost of employment for a knowledge worker.”
Slack relies on around 50 different SaaS vendors internally
“I look around our company, we buy software from about 50 different vendors, and this is like software as a service in five different vendors”
Butterfield: All-in-one enterprise software suites are no longer viable
“So first of all, the suite would be far too broad for anyone to do, period, and certainly for anyone to do well.”
Slack's internal team receives up to 100,000 automated machine messages daily
“So on our team, the Slack team, we have 250 people. We do about 20,000 messages a day from people. And we do another 80 to a 100,000 messages a day from machines.”
Butterfield: Microsoft is the only competitor Slack really worries about
“To be totally frank, it's the one company that I really worry about from a competitive angle.”