Business collaboration app Slack confirmed on Thursday that it raised $US160 million at a $US2.8 billion valuation. That means it more than doubled its value since last October, when it raised $US120 million at a $US1.12 billion valuation.
When we asked Slack CEO Stewart Butterfield about the wild growth in valuation, he simply attributed it to the current VC environment.
“I’ve been in this industry for 20 years and this is definitely the best time,” Butterfield told Business Insider. “It’s a wonderful, crazy environment for raising capital.”
To be sure, Slack isn’t just any kind of startup. Many call it the fastest growing business app ever. Since its official launch in February 2014, Slack has seen unbelievable growth, racking up 750,000 daily active users, a 50X jump in just 18 months.
Among those 750,000 users, Slack claims 200,000 are paid seats, which means they’re paying $US6.67 or $US12.50 per user per month. That’s about $US20 million a year in revenue run rate just from the first two Standard and slightly upgraded Plus plans.
Butterfield told us there are more than 9,000 teams spread across thousands of companies worldwide, including a number of very large companies who enroll in a customised “enterprise” contract. Due to the nature of big enterprise companies, those contracts usually involve more complicated legal and approval processes. Butterfield says a more robust “Enterprise” plan will be launched later this year (priced between $US49 to $US99 per seat a month), as already mentioned on its website.
Another impressive stat is that Slack has only seen a 2% churn rate, meaning 98% of all the paid customers have been renewing their contracts with Slack.
Butterfield didn’t specify where he intends to spend the new influx of capital, merely saying, “it gives a lot of options.” Butterfield said those options include possibly more acquisitions, or more spend on sales and marketing, the typical route more enterprise software companies take once they reach a certain size. He says a large chunk of the money he raised in October is still sitting in the bank.
“It gives us a real, significant amount of money that might make a huge difference for us down the road, even if we don’t have a concrete plan to spend it today,” he said.
But Butterfield was also quick to point out that today’s easy money environment is nothing close to what we saw back in the late-90s dot-com boom period. A lot of the billion dollar startups these days are generating big sales, running a real business, while growing at an unprecedented rate. “If you look at Uber, Airbnb, or Dropbox, they’re growing revenue way faster than anyone has historically, in a matter of years versus decades.”
He also said the macro environment won’t really have a significant impact on Slack as a business. “Slack is not the first thing you usually give up. At $US0.22 a user per day, it’s very valuable,” he said. And even if something totally unexpected were to happen, Butterfield says he now has enough capital to protect himself from any kind of downturn.
“That’s another reason to have several hundred million dollars in the bank right now, because it doesn’t really matter to us whether there’s a change in the macro environment with respect to how much venture capitalists would value Slack,” he said.
And that means we might be seeing another round of funding in the near future, as long as Slack continues to grow and the market keeps improving, as Butterfield said, “I’m not committing to anything, but if the market continues to improve the way it has been over the last 6 months or the last year, then we might be able to raise money again in the future.”
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