Slack CEO Stewart Butterfield is not interested in hiring salespeople to help his fast-growing startup, currently valued around $4 billion, sell to more large companies.
In a talk at the South by Southwest conference on Tuesday, Butterfield said Slack intends to keep relying on its viral growth, and some paid advertising, to sell its software to businesses — a strategy that has hardly ever worked in enterprise software.
“This is how we have grown so far, and we’d like to continue this forever, which is — people really like it and so they tell other people about it, and then other people start using it,” Butterfield said. “And that’s by far the best because when someone you trust tells you that this thing is good, then you’re much more likely to be inclined to use it.”
Word of mouth has helped Slack reach 2.3 million monthly active users and $64 million in future projected annual revenue in just two years. Unlike most enterprise software makers that have large teams to sell their product, Slack hasn’t hired a single salesperson.
Instead, Slack has been testing with some advertising lately, including TV spots. In November, it launched its first billboard ad campaign in four US cities.
Butterfield said paid advertising is the second-best option for selling because it’s flexible and easy to stop when needed. Hiring salespeople requires complex employment contracts and costly layoff processes, which is why he wants to stay away from it.
“In a sales driven organisation, it’s hard to rev up the speed because you have to hire more salespeople, and if you ever want to stop, you have to lay all those people off which is a horrible situation to be in,” he said.
This isn’t the first time Butterfield mentioned his plan to never hire a salesperson. In a previous interview with Business Insider, he said, “I think we can get away without having a sales team in any kind of traditional way probably forever.”
Easy to say, hard to do
Although Slack has been able to grow at a mind-blowing pace so far, it’s almost impossible to find a software maker that’s been able to sell to big companies in the Fortune 500 without hiring a dedicated outbound sales team.
Slack has been wildly successful at reaching small teams within companies. But to target big enterprises, especially those in non-tech fields, it’s hard to imagine Slack signing large software contracts a salesperson.
Some VCs argue that it’s a different game for Slack since its messaging app is used by everyone at the company, unlike other business apps that usually target a specific group within companies, making its target audience that much bigger. With the size of the internet users expanding at a record-pace, the addressable market for Slack only grows — which could negate the need for a sales team.
There is some precedent: Atlassian, which was founded in 2002 and went public in 2015, succeeded in selling its bug-tracking (Jira) and chat app (HipChat) to plenty of large companies without a sales team. However, as venture capitalist Tomasz Tunguz from Redpoint noted when Atlassian went public, while Atlassian says more than half the Fortune 500 are customers, no single customer accounts for more than 1% of the company’s total revenue. That means no customer pays Atlassian more than $3.5 million a year. Those aren’t exactly huge enterprise contracts, then.
For Slack to follow that route, it will have to keep making a lot of little sales over a lot of years.
Either way, Butterfield seems committed to bucking the trend by not relying on sales people and only spending on little advertising.
“The good thing about advertising is that it’s very scalable, you can just add more money and then you get more results, and then when you want to stop, you can just stop,” he said. “The last [best option] would be sales.”
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